Service Members and Bankruptcy

Members of our armed forces (Army, Navy, Air Force, Marines and Coast Guard) are not immune from debtor problems. But their cases do require a little bit of extra analysis.

The most common question involves security clearances and bankruptcy. First off, having too much debt alone is enough to threaten your security clearance. If your CO wants to get rid of you, they will use the bankruptcy as an excuse. If they want to keep you, they want to see that your debt situation is caused by a one time problem (like a divorce) and the bankruptcy will solve it. What your CO doesn’t want to see is you have an uncontrolled problem (like a gambling or drug addiction), and the debt situation is likely to reoccur.

On a more technical level, BAS, BAH and COLA count as income in a bankruptcy. This usually isn’t a problem for enlisted servicemembers, but officers may see the BAS, BAH and COLA drive their income above the median income levels. If you live on base, the Trustees understand that all your BAH will go towards rent.

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