JOINT BASE BALAD, Iraq -- Bankruptcy is a way to "discharge" certain types of debts, meaning that you do not have to pay the debt. For service members who are deep in debt-with no way to pay the debt-bankruptcy is a powerful tool to eliminate those debts and give eligible individuals a fresh start.
Bankruptcy attorneys generally charge from $1,000 to $3,000 to handle a case. Most attorneys charge no extra fee for filing a case for a married couple. It is important to use an experienced bankruptcy attorney, as failure to file the entire case correctly could result in a loss. It is a good idea to seek out an attorney who will not charge an initial consultation. Typically, clients who file for bankruptcy have debts in excess of $50,000 and the prospect of paying $3,000 or less to wipe out those debts is very appealing.
The drawback of bankruptcy is the negative effect on your credit. Bankruptcy is the worst thing to do your credit and could result in lowering your credit score to the 400 range. This may not be much of a drawback, however since people who file for bankruptcy typically already have relatively low credit scores. A bankruptcy can stay on your record for ten years.
You can rehabilitate your credit rating in a few years with the wise use of credit, however by using and paying off a secured credit card. Within two years you may qualify for average loans and even a VA mortgage.
TIP: You can check your credit record for free, once per year, by visiting www.annualcreditreport.com. For a small fee, you can also see your credit score.
Certain debts cannot be discharged in bankruptcy. These include: Child support or alimony, federally guaranteed student loans, criminal fines (including traffic tickets), income tax debts, and most other debts owed to the government. One such debt that cannot be discharged is an Army Emergency Relief loan.
In the military, bankruptcy has one other important dimension that must be considered. Filing for bankruptcy may result in the loss of your security clearance. If you need the clearance to do your job, you could be reassigned to another job that does not require a clearance, or possibly even face being separated from the military. But you will not get an Article 15 or other UCMJ punishment for going bankrupt. Discuss this issue with your battalion intelligence officer/S2 beforehand.
You can also "reaffirm" (retain) certain debts. For example, you can decide to keep your car and reaffirm your car loan, but if you do so you must be certain that you have the ability to pay the note if you desire to "reaffirm" the loan for the car.
There are different types of bankruptcies. Without question, the best type is the Chapter 7, known as "liquidation." Other types, such as Chapter 13, are rarely as advantageous for clients. Before filing, however, you should consult with an experienced bankruptcy attorney.
You can only file bankruptcy once every eight years. Accordingly, once the process is complete, it is important to strengthen your money management skills or you may find yourself with the same problems that led to the bankruptcy in the first place.
The military offers several ways to do this, including classes on personal financial management and Army Community Service assistance; Joint Base Balad Chaplains also offer the Financial Peach University Class, which meets weekly to help with these skills.
The JBB legal assistance office is located in the Combined Legal Center at the intersection of Hawk and Pennsylvania Avenue (The barriers are painted like a castle with a blue sky above it). For further assistance, please contact the LAO at DSN 318.433.2836