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Military: Special Considerations

Military Bankruptcy: Special Considerations

Special Considerations In A Military Bankruptcy

By John G. Merna

Unlike civilians filing bankruptcy, military service members have unique considerations when they fall into financial distress and consider filing a military bankruptcy.  While the list here is by no mean exhaustive, I put it together to make service member realize that with the right attorney even the most complicated military hurdles can be navigated.

Protections & Vulnerability Of Military Members

While Congress has attempted to provide military service members protection through the passage of the Servicemembers Civil Relief Act (SCRA) in 2003, military member are more vulnerable to collection activities in many instances than civilians.  Here are a few examples:

  • Aggressive Collectors: Many of the lender military servicemembers frequent specialize in lender to the military for several reasons.  Servicemembers have a low risk of job loss, exceptional benefits which provide disposable income, ability to pay by allotment, employment pressure to pay indebtedness and a risk of job loss when they don’t.  Perhaps one of the greatest fears of a soldier or sailor is to have a creditor call their command.  Such a call will not only subject them to the discomfort of a verbal reprimand it can also lead to much more sever sanctions including separation from service.  These creditors can be stopped and we have an exceptional track record in communicating with your command to reduce any negative career impact.


  • Allotments:  Payment by allotment of rents, vehicle payments, personal loans, etc. are a standard in the military.  The convenience and easy by which DFAS rules allow such voluntary deductions from a soldiers or sailors LES was premised on making it easy for him/her to focus on the mission instead of bill paying.  The financial community has taken this benefit and twisted it to their advantage.  Young servicemembers choked by allotments show up in my office weekly.  These allotments can be stopped and the debt wiped out.


  • NEX & STAR Cards:  These special credit cards are both provided by the Navy Exchange Service.  As a n0n-appropriated fund organizations of the federal government, The Navy Exchange and the Army and Air Force Exchange Service (AAFES) have special powers that civilian creditors do not have.  They can garnish the debt from your pay without suing first in a court of law.  They have the ability and knowledge of how to contact your command when you are in default.  Despite their special status, NEX and AAFES can be wiped out.


  • Security Clearances: In addition to the normal issues a servicemember faces, a soldier or sailor that holds a security clearance, whether it is a confidential, secret, or top secret clearance even top secret with special access has additional consideration.  I discuss this issue on a separate link which can be visited here.


  • Reenlistment Bonuses:  Reenlistment bonuses are considered assets in a bankruptcy case just like furniture or a car.  The payments that are still due to you need to be protected in the bankruptcy or they will have to be surrendered to the bankruptcy trustee.  How they can be protected depends on which state law you are using.  For this reason an experience military bankruptcy attorney is a necessity.


  • Credit Unions: The vast majority of military servicemembers, retirees and DOD civilians favor using military affiliated credit unions to do their banking.  The most common credit unions in this area are Navy Federal Credit Union, Langley Federal Credit Union, ABNB Federal Credit Union and Pentagon Federal Credit Union.  There are several civilian credit unions that are common to the area also including Chartway Federal Credit Union, Virginia Credit Union and a multitude of city and organization specific credit unions.  Credit unions unlike banks have special powers, the power of offset & the power of cross-collateralization .  If you fall behind on your payments they may deduct the payment from your account without prior notification and when you file bankruptcy they may seize any funds in your account.  Additionally, any unsecured loans including a credit card are secured by any interest the credit union has in collateral such as a vehicle.  These are complicated issues which an experience military bankruptcy attorney from The Merna Law Group can help you with.


  • JAG or Legal Officer:  Unfortunately, neither the Judge Advocate General’s office (JAG) nor your legal officer can assist you with a civil action such as bankruptcy or divorce.

Remember – These are just a few of the more common special issues faces by military servicemembers considering bankruptcy.





Archive As: Military Bankruptcy: Special Considerations

by John G. Merna




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