Typically, when someone files for Chapter 7 Bankrtupcy they must pass what is referred to as a Chapter 7 means test. But many former service members ask how bankruptcy work for veterans and is the process the same for them? The answer to this question is that along with the other benefits one receives from serving our great country, they also have a special benefit when it comes to filing for Chapter 7 bankruptcy.
If you are a disabled veteran whose debts were incurred while you were active duty or conducting activities relating to homeland defense you are exempt from the Chapter 7 means test. Under bankruptcy law, if an individual’s income is too high in relation to their income then they must either wait to file or file a Chapter 13 repayment bankruptcy instead. However veterans don’t have to perform the bankruptcy means test. In order to be exempt from the Chapter 7 means test an individual must have at least a 30% disability or have been discharged because of a disability from active duty. A second exemption that veterans receive under the US bankruptcy code is the pre-bankruptcy credit counseling. As long as you are in a military combat zone, you are exempt from having to take the required consumer credit counseling necessary before filing Chapter 7 bankruptcy.
While there are more stringent criteria for Reservists or National Guard members, there are certain situations where they too, may be exempt from having to qualify for the Chapter 7 means test. It’s important to seek the counsel of an experienced bankruptcy attorney in Sacramento to learn more about the protections afforded to those serving in the military under US bankruptcy law. Because filing for bankruptcy could affect your security clearance, it’s important to know exactly how a Chapter 7 bankruptcy will affect your outstanding debt and your profession.