We help many military service members in Hawaii and are familiar with their particular income, expense, and debt challenges. There are two favorable treatments that the law provides to service members in allowing them a free pass from being subjected to the famous “means test” that determines a presumption of abuse in filing for Chapter 7 bankruptcy. Congress parceled out these exceptions for Disabled Veterans, Reservists, and National Guard members called to active duty or required to perform homeland defense activities from being automatically disqualified from filing Chapter 7 bankruptcy, just because they failed this economic balancing test. This “means test” was incorporated into the bankruptcy code in 2005 as a “means” to determine if the debtor was committing all of his disposable income to repay creditors, or whether a discharge of his/her debts would be a fair remedy in their particular circumstances.
First, if you were a Reservist or National Guard member called up and on active duty or performed a homeland security defense activity for at least 90 days, and these 90 days were after September 11, 2001, then you have until 541 days after your active duty service to receive this special treatment. This pass on what can often be an unfair and superficial test will last until December 18, 2015, unless Congress acts again to extend the deadline.
Second, if you are a disabled veteran whose indebtedness occurred primarily during a period while you were on active duty or a homeland defense activity, then you also are exempt from having to face the gauntlet of the means test. If either of these scenarios applies to you, there still may be other elements in your case that could prevent you from filing Chapter 7, but those factors would have to be evaluated by an experienced attorney who specializes in the bankruptcy arena.
Whether you are/or were in active duty in the past, or don’t otherwise qualify under these provisions, you still can be a candidate for Chapter 13 bankruptcy relief. Chapter 13 is still a very powerful vehicle for restructuring your debts into a low consolidated monthly payment that you can afford.
Former or current military personnel, if you’re buried under a mountain of debt, give us a call today to explore your debt relief options.