Tara Crooks's avatarTara CrooksMoney Matters Blog | ‎06-19-2011 11:00 PM

Military and Bankruptcy

Economic times are tough nowadays, there is no denying that. While the military hasn't received any direct hits to our "guaranteed" paychecks we certainly aren't immune to the fluctuations in finance. We feel the prices at the pump and in the grocery line. We still find it hard to sell our homes in an unsteady housing market. Spouses have difficulty finding jobs in areas where jobs are few and far between. And those are just a few examples of how military families can be affected.

 

Unless you've been hiding under a rock you're aware the recent pay scare that involved military pay hanging in the balance in government shutdown negotiations. On Army Wife Network the scare created a 48-hour Facebook frenzy and panic of spouses wondering "how will we make it?"

 

As a military spouse, you just cannot turn a blind eye to the fact that financial issues exist in military families. We have all heard the horror stories of the typical "payday loan" with interest rate percentages higher than the age of the soldier who took out the loan. We might have even been confronted with a family in need due to "no pay due". They need assistance, no matter the reason that got them there.

 

Whether it's your own family or a family you mentor and support you should arm yourself with the resources to handle financial situations from emergencies to bankruptcy avoidance. I've learned in my own experiences that typically those emergency situations are part of a bigger issue that if not corrected — quickly — could very well lead a military family down the road of financial destruction.

 

USAA CERTIFIED FINANCIAL PLANNER™ practitioner J.J. Montanaro says, "If a service member and spouse file bankruptcy it obviously can affect the service member's credit which in turn can affect their security clearance. But, what most don't realize is that money issues like bankruptcy can affect job performance, mental health, and focus." Bankruptcy has a far-reaching impact that touches every aspect of life. Bankruptcy ruins credit, makes it difficult, if not impossible, to keep bank accounts and credit cards, can take some valued, and valuable, possessions, and makes it difficult to get on with necessities of life such as buying or renting a home or car, getting insurance and finding a job. In fact, most financial advisors look at bankruptcy as a desperate last resort, when budgeting, credit counseling and other efforts to get out of debt have failed, and then only with the advice and guidance of an experienced bankruptcy attorney.

 

There are many agencies and resources to consult before anyone should consider bankruptcy as an option. You can find any of these by doing a basic search on the internet. What you won't find as easily are those specifically for the military community.

 

Remember, service members have certain rights under the Servicemembers Civil Relief Act. Most know this protection as the "interest rate cap" but the law also provides many other safeguards like protection from eviction, right to terminate leases, safeguards for home owners, tax relief, protection from lapse of life insurance due to nonpayment, credit protection, and the right to request a delay of legal proceedings. (Note: USAA even has a special team that processes all of the SCRA interest rate adjustments.)

 

If you just need help getting back on track J.J. recommends the National Foundation for Credit Counseling. Their offices are community based and located in all 50 states and Puerto Rico. You can talk to them in person, over the phone, or online.

 

The most important thing to remember in any financial conundrum is to avoid payday loans. There are other options out there should you qualify. Most have funds available in interest free loans and/or grants. Here are a few of the most widely known organizations:

 

 

Comments

BrianaHartzell's avatarBrianaHartzellOccasional Contributor

by BrianaHartzell ‎06-20-2011 08:46 AM
Tara, This is a fantastic article with so many helpful resources! It may sounds silly, but it seems celebrities do not think twice before filing for bankruptcy, but in the "real world" it can really hamper a military career! Thanks for great information!
Tara, This is a fantastic article with so many helpful resources! It may sounds silly, but it seems celebrities do not think twice before filing for bankruptcy, but in the "real world" it can really hamper a military career! Thanks for great information!

RitaBeal's avatarRitaBealNew Member

by RitaBeal ‎06-29-2011 01:58 PM
We must also keep in mind the skyrocketing rate of bankruptcy due to the housing market. When a military family has to PCS and cannot sell their current home or they are so far underwater selling would not even help, then bankruptcy can be the only solution. Talk to both a real estate lawyer and bankruptcy lawyer immidiately! Also contact your unit JAG to find out about career ramifications. If your bankruptcy was primarily due to inability to sell your home during PCS then it could have much lower professional impact than one due to general financial irresponsibility. We are in uncharted financial waters here, ladies, so do your research, then do some more! Knowledge is power.
We must also keep in mind the skyrocketing rate of bankruptcy due to the housing market. When a military family has to PCS and cannot sell their current home or they are so far underwater selling would not even help, then bankruptcy can be the only solution. Talk to both a real estate lawyer and bankruptcy lawyer immidiately! Also contact your unit JAG to find out about career ramifications. If your bankruptcy was primarily due to inability to sell your home during PCS then it could have much lower professional impact than one due to general financial irresponsibility. We are in uncharted financial waters here, ladies, so do your research, then do some more! Knowledge is power.

Tara Crooks's avatarTara CrooksContributor

by Tara Crooks ‎07-27-2011 12:53 PM
Rita, Very true - and a good point! If you find yourself in that sort of a situation where it's not really due to "your fault" or "irresponsibility" you should seek any help you can get. Thanks for the tip.
Rita, Very true - and a good point! If you find yourself in that sort of a situation where it's not really due to "your fault" or "irresponsibility" you should seek any help you can get. Thanks for the tip.

P.   morgan's avatarP. morganOccasional Visitor

by P. morgan ‎05-01-2013 06:29 AM
former navy if I were in this situation would have most of pay roll except 20.00 a month , the rest be allotted to the wife , if it got down to it . as everyone knows you get 3 square meals a day on a ship / land based personal . this would be me !
former navy if I were in this situation would have most of pay roll except 20.00 a month , the rest be allotted to the wife , if it got down to it . as everyone knows you get 3 square meals a day on a ship / land based personal . this would be me !

Bilbruck's avatarBilbruckNew Member

by Bilbruck ‎05-02-2013 12:49 PM
Don't expect USAA to treat you the same if you have to declare bankruptcy though. They take away your access to their main website- you are only allowed mobile access. You can no longer do deposits via mobile/or online. Any announcements that are posted that affect your access are not posted on the mobile site. It's a very disheartening experience to say the least.
Don't expect USAA to treat you the same if you have to declare bankruptcy though. They take away your access to their main website- you are only allowed mobile access. You can no longer do deposits via mobile/or online. Any announcements that are posted that affect your access are not posted on the mobile site. It's a very disheartening experience to say the least.