The thought of filing for bankruptcy can cause you fear and anxiety. Much of that probably comes from misinformation you have heard about bankruptcy.
The truth is that bankruptcy can be extremely helpful and relieving. If you are in the military, you may also receive certain benefits during the process.
You may not have to take credit counseling
Usually, a mandatory part of the bankruptcy process is taking a financial management course to ensure you gain the knowledge and skills to help avoid this situation in the future. There a few exceptions to this rule. One of them is that you do not have to take credit counseling before receiving a discharge of debt if you are on active duty in a combat zone. The only other permissible reasons are if you are disabled or incapacitated or if there are no adequate courses available.
You may not have to take the means test
Chapter 7 bankruptcy requires meeting a certain income level. If you have a disability rating of at least 30%, you do not have to pass the means test to qualify for Chapter 7.
The court cannot make a default judgment in your absence
If you are away on military service, you obviously cannot appear in court. Due to the Servicemembers Civil Relief Act, a judge cannot automatically make a default judgment in your case. You have the right to legal representation and time to communicate with your attorney. Civil proceedings must wait 90 days if your defense requires your presence or if your lawyer cannot contact you.
Creditors must have a court order for non-judicial foreclosures and vehicle repossessions
Perhaps the reason you are considering bankruptcy is to prevent a foreclosure. Know that the SCRA also protects you against creditors foreclosing without a court order, not only during service, but also up to a year afterward. If your military service has affected your ability to pay the mortgage, a judge can stay a foreclosure or even modify your payment amount.
Your car is also safe from repossession without a court order if your deposit or first payment occurred prior to beginning military duty.