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Military Service Can Mean Special Treatment Under Bankruptcy Laws

November 12, 2010

Military service is a selfless and honorable public service.  Veterans deserve our respect and our gratitude.  Congress has passed many laws attempting to give veterans a preferred status to meet special needs that result from service to our country.  For instance, wounded veterans receive health care after discharge, and veterans often have hiring preference for jobs.


In recognition of the potential economic hardship that extended military service may impose on our reservists and national guardsmen, Congress has made a special exemption from the bankruptcy means test.  Members of the Reserves or National Guard who file bankruptcy while on active duty or within 540 days after release from active duty are excluded from all forms of means testing.  The means test is a mandatory calculation that determines whether the debtor’s income is low enough for you to file Chapter 7 bankruptcy.  


Disabled veterans are also exempted from taking the means test.  However, this exemption only applies if the indebtedness was primarily incurred during service on active duty or while performing a homeland defense activity.


Active duty servicemen and servicewomen are not excluded from the means test.  However, active duty personnel receive protection under the Servicemembers Civil Relief Act (SCRA).  The SCRA protects active duty military personnel from default judgments and evictions, and can even reduce the servicemember’s interest rates.  Active duty personnel serving in a combat zone are also excused from completing pre-bankruptcy credit counseling.


If you have served in this country’s military and are now struggling with debt, speak with an experienced bankruptcy attorney and learn how our national laws can help you in your time of need.  The bankruptcy laws broadly protect Americans overwhelmed by debt, and specifically protect certain veterans who have suffered financial hardship as a result of their service.

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