Merna Law Military Bankruptcy

Military Bankruptcy

Department of Defense policy states that “members of the Military Services are expected to pay their just financial obligations in a proper and timely manner. A service member’s failure to pay a just financial obligation may result in disciplinary action under the Uniform Code of Military Justice.”

However, most of the time the indebtedness is unavoidable, unexpected or too late to reverse. Fortunately, the DOD acknowledges your right under federal law to avail yourself of bankruptcy to resolve your financial difficulty.

Most of the time your financial situation is not a concern of the military until it is brought to the attention of your commander or your security clearance office.

Even at that point we can intervene with a bankruptcy and explain to your command and security processor to reverse the damage. Don’t wait until the military is threatening to separate you from service. Call today and meet with one of our experienced attorneys to help you take your financial stress away and let you focus on the mission and your family.

Will I lose my security clearance if I file bankruptcy?

Bankruptcy alone is not a disqualifier to retaining or receiving a security clearance.  In fact, it can save your job and clearance. Generally, an individual who is delinquent on his/her debt has a greater risk of losing their clearance.  A bankruptcy eliminates the debt or sets up a repayment plan with the creditor.

Will the creditors continue to contact my Command after filing bankruptcy?

No. We will notify them immediately upon filing to discontinue all communication with your command. Filing of bankruptcy prohibits creditors from attempting to collect on a debt.  Contacting your command would be in direct violation of your bankruptcy protection and could subject the creditor to sanctions.

Can the JAG office assist me with a bankruptcy?

No. The local JAG office can not represent you in a bankruptcy proceeding.

Can I be booted out of the military for filing bankruptcy?

No. Under the UCMJ Article 134, you can be separated from services for failure to pay your debt.  However, bankruptcy is considered a federal right, and assuming no other disciplinary issues, will generally eliminate this as a concern.

Will my Command be notified that I filed bankruptcy?

No. We do not notify your command of your bankruptcy filing.  If your pay is being garnished, DFAS will have to be notified of the filing to halt the garnishment.

Can I eliminate my STAR Card debt in a bankruptcy?

Yes. While the STAR Card has special status outside of bankruptcy by virtue of being affiliated with the military, in a bankruptcy it has no special status.  It can be eliminated without any ramifications to your military career.

Will filing bankruptcy keep me from getting promotions or affect my evaluations?

No.  In as much as your Command is not notified of your bankruptcy filing, this information is not available to them and therefore does not affect promotions and evaluations.

Does my bankruptcy filing affect my spouse if they do not file?

No. Your filing does not affect your spouse. Filings are tracked by name and social security numbers.  If your spouse chooses not to file with you their name and social does not appear on the petition.

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.

Military JAG and Security Clearances

Whether you are a military service member or a civilian contractor working on a project for the DOD, financial mismanagement can jeopardize your ability to get and keep a security clearance.  The effect of bad or delinquent debt on your clearance depends on a multitude of factors including the level of your security clearance and what led to the debt.  However, one of the most important factors is whether the indebtedness and default has been resolved.  Bankruptcy can help.

Bankruptcy Acknowledged By The Military & Contractors As A Solution

The filing of a Chapter 7 or a Chapter 13 bankruptcy is acknowledge by both the military security investigation services as well as civilian clearance investigation services as an acceptable was of resolving financial issues.  As a federal right you have protections backed up by federal law against being discriminated in many situations should you file bankruptcy.  The stigma of bankruptcy that was felt many decades ago has been proven invalid in the eyes of the federal government and specifically the military branches.  The realization was that just because people have had past financial difficulties which have been resolved, it didn’t make them a security risk.  However, the problem that does exist for those holding or applying for a security clearance is unresolved financial difficulties. The thought is that if you are under stress due to your financial situation you are more likely to be vulnerable to financial coercion in return for providing classified information.  Studies of spy cases from penetrations of military intelligence, the Central Intelligence Agency (CIA) and all levels of government point to financial coercion as one of the top motivations in cooping an individual into spying. Filing a bankruptcy not only eliminates the debt, it removes the suspicion of your vulnerability to such coercion.

Security Clearance & Bankruptcy Considerations

Losing your security clearance means losing your job in most cases.  Filing a bankruptcy means saving your job, eliminating the debt your have been stressing about, reestablishing your credit and a less stressful more financially rewarding life. The security clearance adjudication process looks at the “whole person” or “totality of circumstances” when weighing whether to issue or reissue a security clearance.  Resolving your financial issues alone does not guarantee a security clearance.  If you have multiple issues that raise concerns about your access to classified information you may still be denied a clearance. As a former CIA officer, attorney John G. Merna is personally familiar with security clearance issues and adjudication.  We have helped hundreds of service members, DOD civilians employees and civilian contractors avoid the loss of  their “tickets” due to debt. Don’t wait until the security office is processing your application or reinvestigation before you take steps to resolve your debt.

Military – Legal Assistance

As a member of our armed forces, your position and circumstances are different from those of a civilian when it comes to the legal processes in Virginia.  A few of the considerations are the affect on your job, the rule and laws that apply specifically to military personnel, security clearance considerations, and many other issues that can arise.

The experienced attorneys at the Merna Law Group have handled hundreds of cases for service members. From bankruptcy to divorce, custody, or wills, Merna Law Group is familiar with the unique requirements of military clients.

In addition to our experience, we honor your service and commitment by extending a 10% discount to all active duty service members.  To receive this discount please provide the code “wsmil10” when scheduling an appointment.


Considering bankruptcy can be a confusing and emotional process. This process is often filled with misinformation. We have helped thousands of people just like you work through that process. We are here to help you too.


Did you know, the three main causes of bankruptcy is divorce, severe illness and job loss? Many people are afraid of bankruptcy because it seems like an admission of failure. Nothing could be further from the truth.