Active-duty military personnel and disabled veterans not only have the same rights as civilians when it comes to bankruptcy but also have a few additional rights and options open to them.
The Servicemembers’ Civil Relief Act
The SCRA allows courts to stay or postpone bankruptcy adversary proceedings against military members who are on active duty. These protections are separate from and in addition to the automatic stay that bankruptcy provides and generally prevent the entry of default judgments in civil suits and bankruptcy adversary proceedings.
Special Means Test Provisions Applicable to Veterans
Additionally, disabled veterans have a special circumstance (unrelated to the SCRA) regarding Chapter 7 bankruptcy. If their debts were incurred primarily white on active duty or performing a homeland defense activity, they do not have to complete the Chapter 7 means test that everyone else is required to do.
To be qualified as a disabled veteran, the disability must either be rated at 30% or more, or the veteran must have been discharged or released from active duty due to a disability incurred or aggravated in the line of duty.
For individuals who are members of the National Guard or a reserve unit of the Armed Forces who were called to active duty or performed a homeland defense activity for a period of at least 90 days after September 11, 2001, a Chapter 7 means test exclusion applies while on active duty and for 540 days following. This particular provision is only applicable to the individual on active duty—a joint-filing spouse who is not in the military would still be subject to the means test.
Special Considerations for Members of the Military with Debt Issues
For those with security clearances, a large amount of debt or official bankruptcy filing could affect said clearance. However, those situations are usually looked at on a case-by-case basis.
For example, a large amount of debt with no way to repay or service that debt could conceivably leave the servicemember vulnerable to intelligence-gathering efforts. Though filing for bankruptcy is not ideal, it demonstrates that the servicemember is taking steps to get his or her finances under control and eliminate potential vulnerabilities he or she might have.
At Natural State Law, we’re proud to work with Arkansas military members and provide them with appropriate, accurate, and professional guidance. Whether you’ve just returned from active duty or have long since left the service, know that there’s a reputable law firm ready to help answer your bankruptcy questions. Call us today at (501) 916-2878 to schedule a free consultation.