Laws that Help Servicemembers
Debt is a stressor that no one should have to deal with. However, for military members the stressors of debt are not only unwanted but can also be extremely dangerous when dealing with it during deployment or mobilization. Soldiers have enough worries such as their follow Soldiers and their families at home.
This is why the US has laws that are designed to relieve the burdens of debt on US Soldiers. These laws are encompassed in the Servicemembers Civil Relief Act (SCRA) and the US. Bankruptcy Code.
Servicemembers Civil Relief Act (SCRA)
The SCRA provides a number of protections for military members while on active duty. These protections are also cover Reservists and National Guard members while on active duty. When it comes to debt these protections include a 6% cap on interest rates. Under the SCRA, a military member can cap the interest rate at 6% for all obligations entered into before beginning active duty if the military service materially affects his or her ability to meet the obligations. This can include interest rates on credit cards, mortgages, and even some student loans, to name a few.
Additionally, all proceedings against military members are stayed while they are serving on Active Duty. If you are served with a complaint indicating that you are being sued for some reason, you can obtain a “stay” or postponement of those proceedings if your military service materially affects your ability to proceed in the case.
The SCRA also protects Servicemembers from default judgments and evictions among other things.
Us Bankruptcy Code
When a person files for Chapter 7 bankruptcy relief, they must pass the means test. For disabled veterans, however, they may not have to pass the means test. Disabled veterans (rated at least 30% disabled or discharged due to disability suffered in the line of duty), whose debts were incurred primarily while on active duty or performing homeland defense activity, are not required to pass the means test to file Chapter 7 bankruptcy.
Reservists and National Guard
Additionally, Reservists and National Guard members might be able to file for Chapter 7 bankruptcy without having to pass the means test if they served on Active duty for at least 90 days after September 11, 2001 while on active duty and for 540 days afterwards.
Speak to a Bankruptcy Attorney
Filing for bankruptcy while serving in the military may have some repercussions. This should be discussed with a bankruptcy attorney. As a prior Servicemember and bankruptcy attorney, there are a number of issues and questions when dealing with debt while in the military. This includes the effect on security clearances, unit morale and cohesion as well as the ability to accomplish the mission.