Those in the military have the same right as any to file for bankruptcy
relief and actually enjoy certain benefits over civilian debtors. On the
other hand, filing for bankruptcy can also affect your security clearance
in some situations.
Service members are offered federal protection in civil actions thanks
to the Service-member’s Civil Relief Act, or SCRA. This act allows
courts the right to put a stay or postpone bankruptcy and non-bankruptcy
proceedings being taken against military personnel while they are on active
duty. These protections are separate from the automatic stay normally
provided by bankruptcies.
Exemptions from Means Testing
Normally, those looking to qualify for Chapter 7 bankruptcy need to pass
a means test in order to disqualify those debtors who have enough disposable
income to repay part of their debts from filing for bankruptcy. Disabled
veterans, however, who have debts which were incurred mainly while on
active duty, are not required to complete such a means test to qualify
for Chapter 7.
Furthermore, National Guard members and reserve units of the armed forces
who were called up for at least 90 days after September 11, 2001 are also
excluded form a Chapter 7 means test while on active duty and for 540
days afterwards. Those who qualify must still complete the means test
form no more than 14 days after the beginning of the 540-day exclusion period.
While your security clearance will not be affected automatically by filing
for bankruptcy, it can factor into a decision regarding your clearance
along with your job performance and relationships with superiors and coworkers.
Clearance decisions are made on a case by case basis but having a considerable
amount of debt can be seen as a negative to your superiors. You should
inquire into how your clearance may be affected before you even file for
The Bankruptcy Law Firm, our Oakland bankruptcy lawyers help clients in
financial distress make important and positive decision to help manage
their debt. If you are in the military currently or a veteran,
speak with our firm for legal counsel!