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Can I File for Bankruptcy if I am in the Military?

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If they meet basic income and debt-related qualifications, anyone can file for bankruptcy at any time. Additionally, since these actions are voluntary petitions, most debtors can pull the plug on bankruptcy anytime. However, state law requires a two-year residency period to use Indiana state exemptions. Most other states have similar rules. If military servicemembers or other debtors don’t meet the state residency requirement, they must use the exemptions from another state where they lived previously. 

Furthermore, all distressed debtors have the right to partner with a Highland bankruptcy attorney and obtain a fresh financial start. This partnership is an investment at a time when money is often tight. However, this investment always pays off. An attorney does more than fill out paperwork, which is the only thing a cut-rate bankruptcy petition preparer can do. Furthermore, only a lawyer unlocks some advanced bankruptcy options, which, in many cases, save your family thousands of dollars a year.

Benefits of Bankruptcy 

The benefits of bankruptcy begin with the Automatic Stay. This federal law provision is the same for all filers, whether they are residents of Indiana or another state. Since the Supreme Court has watered down some non-bankruptcy consumer protection laws, creditors are aggressive when it comes to demanding repayment. That situation changes when distressed debtors file for bankruptcy. The Automatic Stay prohibits most creditor adverse actions, including:

  • Wage garnishment,
  • Foreclosure,
  • Collection lawsuits,
  • Repossession, and
  • Utility shutoff.

In some cases, the Automatic Stay only applies in limited situations. However, a Highland bankruptcy attorney can usually ensure maximum protection for distressed debtors.

Bankruptcy offers long-term benefits, as well, in the form of unsecured debt discharge and secured debt repayment. Generally, Chapter 7 discharges credit card debt, medical bills, and most other unsecured debts in under a year.

“Discharge” means the judge eliminates the legal requirement to pay the debt. The collateral consequences of that debt, if any, remain. For example, if the IRS files a lien on Julie’s property before she files for bankruptcy, her lawyer must address that lien in a separate legal action. 

Usually, Chapter 13 debtors have up to five years to catch up on past-due secured debt payments. Some of the aforementioned advanced bankruptcy options in Chapter 13 include lien stripping and fair market value cram-downs. Basically, if there is a difference between the property’s value and the loan balance, an attorney can substantially reduce loan payments.

Security Clearance Issues

Many servicemembers and military contractors are afraid to file for bankruptcy. They are afraid the filing will affect their security clearances.

In general, fear should not dictate life choices. Furthermore, under federal law, filing for bankruptcy may have the opposite effect on your security clearance. 

For example, if there is evidence that a debtor is trying to resolve financial problems, the DoD often does not take adverse action based on those financial problems. In other words, filing for bankruptcy might be the best way to protect your valuable security clearance.

Additionally, if things go sideways, before it takes any adverse action, the DoD must give distressed debtors notice and an opportunity to be heard. An attorney stands up for your legal and financial rights at this hearing. 

Reach Out to a Diligent Lake County Attorney 

No matter what financial problems you are experiencing, bankruptcy could be a way out. For a free consultation with an experienced bankruptcy attorney in Highland, contact Whitten & Whitten. Convenient payment plans are available.

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