Active Duty Military and Bankruptcy

Bankruptcy. Millions of financially overwhelmed Americans seek bankruptcy protection every year from sometimes staggering debt, but what happens when the American in question is active duty military and bankruptcy is looming?

Members of active duty military do have the right to declare bankruptcy, but the alternatives and ramifications are far different from the civilian population. The Federal government has provided special protection for the military under a law called the Servicemember's Relief Act (SCRA). The purpose of SCRA is to strengthen our national defense by limiting or eliminating catastrophic financial burdens at a time when the active duty military personnel should be focused on their job as a priority.

The Servicemembers' Civil Relief Act gives active duty military a temporary suspensions from judgements and other proceedings that might adversely affect them while they are in the service. Bankruptcy is clearly in this category. Under SCRA, a member of the active duty military can receive reduced interest rates and payment forbearance on some types of loans, even if those loans date back from before their military service began. It also temporarily suspends rental evictions for members of the military and their families.

Active duty military members from all service areas are included in this protection for the entire time of their active duty and up to 90 days after they are discharged. Under SCRA the courts can protect an active duty military member by ordering a stay of wage garnishment or they can order the service member to make installment payments against a debt. The courts can also make sure the active duty military member is given their own representation and is not penalized for failure to appear or to communicate with their attorney if their military assignment prevents them from doing so.

SCRA not withstanding, an active member of the military may file for bankruptcy, but they should carefully consider the potential impact to their careers. Members of the military are expected to manage their finances appropriately and not get in over their heads with debt. Military personnel should have their focus solely on national defense, not their finances. Many jobs in the military require access to classified information. Current bankruptcy filings or past filings that were not disclosed appropriately can adversely affect a military career it is deemed that member is at risk and can no longer be trusted with classified information.

Know your rights, options and alternatives. Seek professional advice and assistance that pertains to your particular situation.