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Military Benefits During Bankruptcy

Though bankruptcy is never an easy process, disabled veterans and those on active duty military could receive special exceptions or benefits when filing for bankruptcy.

What Benefits Do Active Duty Military Receive?

One benefit active duty military members can take advantage of is the Servicemembers’ Civil Relief Act (SCRA). This act provides active duty military members many legal protections against civil actions. For example, the court can stay or postpone both bankruptcy and non-bankruptcy proceedings against those on active duty. The Act also offers a 6 percent interest rate cap on debts or financial obligations for active duty military. The act can also extend to recently discharged military personnel, protecting them from court actions for up to 90 days after leaving active service duty. This can prevent default judgments, objections to debt discharges, trustee actions, and post-bankruptcy evictions or collection actions.

Disabled Veteran Benefits in Bankruptcy

Veterans who receive benefits may be able to exempt them as assets when filing for bankruptcy. Depending on the state, veterans’ benefits may be included in the income means test to determine bankruptcy eligibility. This could keep a veteran from filing for Chapter 7 bankruptcy, and force them to file for Chapter 13 instead. If a veteran is unable to file for Chapter 7 bankruptcy, he or she will not be able to discharge some debts. If the veteran is forced to file for Chapter 13 bankruptcy, a debt repayment plan will need to be approved by the court. The Chapter 7 means test does not take into account Social Security disability income received by a disabled veteran if he or she has been rated 30 percent or more under the disability compensation rules, or if the disability was incurred or aggravated while in the line of duty, resulting in a discharge from duty. Thus, any military disability compensation received in the last six months will not be included in determining income eligibility for a Chapter 7 bankruptcy, no matter the amount of compensation received. Thanks to the National Guard and Reservists Relief Act of 2008 (NGRRA), reservists or members of the National Guard may also be able to opt out of the means testing requirement for Chapter 7 bankruptcy. They must meet certain requirements, including being on active duty or participating in homeland defense activities for a continuous period of at least 90 days and filing for bankruptcy within 540 days, or 18 months, after leaving active duty. This exemption only remains applicable until December 2015.

Seek Legal Advice for Military or Veteran Bankruptcies

To ensure you are making the right choice when filing for bankruptcy, it is important to seek the advice of experienced bankruptcy lawyers like those at the Oswalt Law Group in Phoenix, Arizona. Oswalt attorneys will take into consideration your unique situation, such as military exemptions, to offer you the best choices, including bankruptcy and alternatives to bankruptcy that fit your needs.

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