Military personnel have the same rights as civilians to file for bankruptcy relief. They also enjoy certain advantages over civilian debtors. However, in certain situations, your security clearance may be affected by filing for bankruptcy.
The Service-members Civil Relief Act (SCRA) provides federal protection for civil actions. This law allows courts to postpone or suspend bankruptcy proceedings against military personnel who are currently on active duty. These protections are independent of the bankruptcies’ automatic stay.
Exemptions from Means Testing
- Normally, Chapter 7 bankruptcy applicants must pass a means test to be eligible. This is to ensure that those who are able to repay part of their debts through bankruptcy filings are disqualified. For Chapter 7, disabled veterans who have debts incurred while they were active duty are exempt from the need to pass a means test.
- National Guard members and reserves of the armed forces, who were called up for at most 90 days following September 11, 2001, are exempt from the Chapter 7 means test during active duty and for 540 consecutive days. The means test must be completed by those who are eligible within 14 days of the expiration of the 540-day period.
- Although your security clearance won’t be affected by bankruptcy filings, it could impact your decision about your clearance and your relationship with your superiors and coworkers.
While each case is unique, clearing decisions are made on an individual basis. However, having significant amounts of debt can be a problem for your superiors. Before you file for bankruptcy, it is important to find out how your clearing may affect.
Kostopoulos Bankruptcy Law is a Oakland bankruptcy lawyer that helps clients in financial distress to make an important and positive decision about how to manage their debt.
Summarized from an article by Kostopoulos Bankruptcy Law.
