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 bankruptcy.
Kostopoulos Bankruptcy Law, 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!