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Debt and Bankruptcy for Members of the Armed Forces


As a member of the military, you may have accrued a sum of debt that feels crushing. Maybe you made a big purchase that you didn’t realize you wouldn’t be able to afford on your modest military salary, or maybe the expenses associated with relocating your family to a new base piled up. Fortunately, there are options to make your way out of debt as an active servicemember, and special protections for disabled veterans, active duty, and certain members of the Reserve and National Guard. On the other hand, filing for bankruptcy may also bring unintended consequences for military members if you are not careful. Read on to find out about the special rules surrounding debt and bankruptcy for members of the military.

Unpaid Debts can have Negative Consequences for Military Members

Under the Uniform Code of Military Justice, servicemembers are required to timely pay all debts, and can face discipline for failing to do so. If your debts are beginning to mount, and you’re unable to keep up with payments, contact Maryland consumer legal help before it gets too late. Fortunately, filing for bankruptcy is your right under the law, even as a member of the military, so you have options for dealing with the debt.

Being a Servicemember May Entitle You to Lower Interest Rates

The Servicemember’s Civil Relief Act is a federal law granting special protections to all active duty members of the armed forces and activated members of the National Guard. It allows any active duty military personnel to cap interest rates on loans received prior to beginning active duty at 6%, where your ability to pay the loan is affected by your service in the military. For example, if you’re a Maryland reservist who purchased a car and subsequently went on active duty, and you can show that you make significantly less money now than before going on active duty, you can request that the lender reduce the amount of interest to 6%. A consumer law attorney can help you do this.

Disabled Veterans May File for Bankruptcy Without Meeting Certain Requirements

If you primarily accrued your debts while serving on active duty, and you were injured during that time, you may be exempted from the Chapter 7 “means test,” where a court looks at your income and bars you from filing for bankruptcy if it looks like you have enough disposable income to pay part of your debt. To qualify for the exemption, your disability has to have been rated at 30% or led to your discharge from active duty service.

Exemptions from means testing also exist for members of the National Guard and Reserves who were on active duty for at least 90 days after September 11, 2001, for up to 540 days after that active duty ends. A Maryland bankruptcy attorney can help you determine whether you qualify for such an exemption.

Your Security Clearance May Be Affected

Finally, while you cannot be discharged from the military for filing for bankruptcy, it is possible that you may not be able to maintain your current security clearance. This will be based on an individual determination made by the military. However, not filing for bankruptcy can have the same effect, as having a large amount of debt can also jeopardize your security clearance. It is important to investigate how your clearance may be impacted by filing or not filing for bankruptcy.


Large amounts of debt can feel overwhelming, but help exists to pull you out. Contact the experienced Germantown, Maryland bankruptcy and consumer law attorneys at Haeger Law, LLC for a consultation on your possible bankruptcy claim before things spiral out of control. Call 888-463-3520 from Germantown, Clarksburg, Damascus, Gaithersburg, or anywhere in Frederick County.