The Ins and Outs of Military Bankruptcy
Bankruptcy has the ability to affect everyone of any background, and military members are no exception. Keep reading to find out how military personnel go through the bankruptcy process, and how the process differs for them compared to civilians.
What Is Bankruptcy?
First, it is important to discuss exactly what bankruptcy is. We hear the term tossed around so often in the media, but many of us don’t know what it actually is. Bankruptcy is the process by which individuals or companies overwhelmed with debt can seek relief from their financial obligations. There are many types of bankruptcy offered in the United States, but the most common are Chapter 7 and Chapter 13 Bankruptcy.
Chapter 7 Bankruptcy
Most individuals elect to go through the Chapter 7 Bankruptcy process. Through Chapter 7 bankruptcy, assets are liquidated, though the individual is allowed to hold on to certain assets. This is the simplest and fastest route, so those looking to rebuild their financial security quick might want to go through with this option.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy differs from Chapter 7 bankruptcy. In this Chapter, those who owe money are allowed to hold onto their assets but must agree to a plan to a debt repayment plan. This method of bankruptcy takes longer and is a bit more complicated than Chapter 7 bankruptcy, but is ideal for those who want to hold onto their assets and want to avoid the liquidation process.
Military Bankruptcy and the Means Requirement
Those who served in our military are able to file for bankruptcy just like anyone else. There are benefits military members can take advantage of during the bankruptcy process:
- Exemption from the Means Test. Disabled military service members are exempt from the Means test required under Chapter 7 Bankruptcy. The Means test was designed to check that those who had enough income to pay off their debts were taking advantage of the system, but disabled military veterans who incurred debt on active duty are not subject to this test.
- Reserve and National Guard Exemption. Those in the reserves or the National Guard who are called to active duty and exempt from the means test for 540 days after their service ends. The veteran in question has to have served for at least 90 days after September 11th, 2001.
Bankruptcy and Your Security Clearance
Bankruptcy, however, may affect your security clearance. While filing for bankruptcy does not automatically affect it, the reason for bankruptcy, your performance, and relationships with co-workers may change your security clearance. Make sure to check that your security clearance will not be hurt before making the choice to file for bankruptcy.
Going through the Bankruptcy Process
Fortunately, there are a variety of attorneys like the Central Texas Bankruptcy Attorney that can help you navigate the bankruptcy process as an active military member or a veteran. An attorney can answer any questions you have regarding initiating the process, any possible changes to your security clearance, and means test exemptions.