Whether you are a veteran that served in the past or you are currently on activity duty, you are well aware that your service to your country can come with a lot of conditions. However, you may not have considered the financial conditions that come along with service, more specifically filing for bankruptcy. To be clear, there is no rule barring you from filing, but it is important to understand that there are some distinct differences you should be aware of.
Flexible Time Clocks
When you file for bankruptcy, there is often a strict time clock that the court sets. For example, individuals generally only have a certain number of days to send in a repayment plan if they are filing for Chapter 13 protection. However, if you are actively serving, you know that your schedule can change with a moment's notice.
Fortunately, service members are protected under the Servicemembers' Civil Relief Act. While this policy offers an umbrella of different protections, as it pertains to bankruptcy, it requires the court to halt, or pause, your current proceedings for however long is necessary for you to fulfill your duty.
For individuals who file for Chapter 7 protection, there is a means test process that they must complete. With this type of protection, all the debts submitted and approved through bankruptcy are wiped clean. The goal of the means test is to ensure that the person filing for bankruptcy does not have the means to, in fact, repay some of the debt.
However, for retired or separated service members, the period in which the debts were incurred matters. If the debts submitted for bankruptcy protection were incurred while on active duty and you currently have a disability rating from the Veterans Administration, you may not be required to undergo this examination.
Security Clearance Impact
One of the most important things for active duty service members to remember is that while you have a legal right to file for bankruptcy, there is a possibility that it can impact your military career. Depending on your military service occupation, you may be required to maintain a security clearance.
Unfortunately, filing for bankruptcy can sometimes disbar a person from this clearance, and as a result, it could impact your career and standing in the military. You may want to research your security clearance requirements before you move forward so that you know what to expect.
If you have questions about your service and filing for bankruptcy, it is best to speak with an attorney to get specific information about your situation.Share