As a member of the United States Armed Forces, you enjoy certain benefits while filing for bankruptcy that is not available to civilians. However, there also includes a certain drawback. Here is all the essential information you need to be aware of regarding bankruptcy for military personnel.

Servicemembers' Civil Relief Act

Actively duty service members are provided many legal protections against civil action through the Servicemembers' Civil Relief Act (SCRA). As long as you are on active duty, any legal action relating to bankruptcy proceedings will be postponed by the court. In should be noted that this protection is separate from a bankruptcy automatic stay period and doesn't impact its duration.

Means test exclusion

To qualify for a Chapter 7 bankruptcy, a debtor has to pass a means test. In some cases, disabled veterans, reservists and National Guard members may be exempted from the test whiling filing.

Disabled veterans

Meeting certain conditions, disabled veterans can qualify for Chapter 7 Bankruptcy without having to pass a mean test. The requirements for the exemption are as follows:

1. The debt must have been primarily incurred while the debtor was on active duty or engaged in a homeland defense activity.
2. Have a disability rating of at least 30% or had been discharged from active duty as a result of the disability.

Reservists and members of the National Guard

Reservists in the Armed Forces or members of the National Guard who have been on active duty or engaged in a homeland defense activity for 90 or more days may qualify for an exemption from the means test. This remains true for the duration of the active duty and 540 days afterward. However, once the period ends, you will be required to take the means test no later than 14 days after if the time had already not expired in this regard.

Filing for bankruptcy may affect your security clearance

A downside for military personal filing for bankruptcy is that it may affect their security clearance. However, this is not automatic and differs on a case-by-case basis. There are a lot of factors involved that influence whether filing for bankruptcy will affect your security clearance. Such factors can include your performance report, your relationship with your superiors and the total amount of debt that you have. Sometimes, filing for bankruptcy may actually be beneficial as it will be viewed by your superiors as a positive step towards financial responsivity.

Before filing for bankruptcy, it is always recommended that you ensure that it is not going to have an adverse effect on your security clearance. A bankruptcy lawyer can be an aid in this regard as well as help you arrive at a more favorable outcome at the end of the process. For a free consultation with an experienced lawyer, book an appointment with us online or call 512-640-3340.