Research, weigh consequences before filing bankruptcy

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HURLBURT FIELD, Fla. --  If a member is unable to pay his or her debts, they may be entitled to file for bankruptcy under Chapter 7 or Chapter 13 of the Federal Bankruptcy Code. 

The goal of the federal bankruptcy law is to relieve an honest debtor of his debts, thereby providing him or her with an opportunity for a fresh start financially. The bankruptcy law also benefits creditors by providing an orderly means by which they may be paid all or a portion of what they are owed either through liquidation of the debtor's property or through a court-approved repayment plan.

The most urgent question military members usually have is whether filing for bankruptcy will affect their military career. The answer - it depends.

In general, the Air Force takes a neutral position with regard to a member's filing for bankruptcy. However, if the reason the member is filing is due to financial irresponsibility, then they may be subject to discipline for being financially irresponsible. Of course, a member would never be disciplined merely because they filed for bankruptcy. Furthermore, filing for bankruptcy could impact the member's security clearance if they have one, or it could affect their ability to obtain one.

In addition, with regard to obtaining future employment at a state or federal agency, employment applications for such positions often require applicants to state whether they have ever filed for bankruptcy. Although filing for bankruptcy will not bar personnel from future civilian government employment, it may affect their chances of obtaining such employment. While members certainly have a right to file for bankruptcy if they choose, they should consider the potential negative consequences. The judge advocate general typically advises their clients not to file unless there are absolutely no other means by which they can meet their financial responsibilities.

Bankruptcy must be filed on a bankruptcy petition in the bankruptcy court in the federal district where the member has either maintained a residence or a domicile for the majority of the last 180 days preceding the date of filing. After filing, the bankruptcy court will have control over the proceedings regardless of where the member's property or creditors are physically located. Members must remember that bankruptcy is a complicated matter and it requires the assistance of an attorney. There are also filing fees involved, so if applicants have no money at all, they may not be able to file for bankruptcy.

Once a bankruptcy petition is filed, an automatic stay takes effect and protects the debtor and his property from certain creditors' actions. This means that with regard to all debts covered by the bankruptcy, creditors may not take any action to collect payment or repossess any property which is collateral for a debt. A stay allows for the orderly administration of the bankruptcy case.

Another common concern is the issue in which debts are dischargeable in bankruptcy. All debts that were incurred before the petition was filed and aren't considered non-dischargeable are dischargeable by bankruptcy court after the terms of Chapter 7 or Chapter 13 have been met. If a debt is non-dischargeable, then the member will still be required to pay these debts after their bankruptcy proceeding is over. Whether the member files under Chapter 7 or 13, the following debts are never dischargeable: certain taxes; alimony and child support; certain student loans; damages resulting from operation of a vehicle while legally intoxicated; debts from a previous bankruptcy for which a discharge was not granted; debts not listed in any of the debt information provided to the bankruptcy court; and debts for fraud, embezzlement or larceny.

If the member qualifies to file under Chapter 7, meaning they earn less than the income cap required or they qualify under the means test, then the court will liquidate their property to pay the member's creditors. Even if this money is not enough to pay the member's debts, all of the debts incurred before the petition was filed will be discharged. 

In Florida, the following property is exempt from the liquidation process: personal property valued at no more than $1,000; one motor vehicle valued at no more than $1,000; work-related tools; furniture, clothing, books and medical health equipment used for the health of the person and not for his profession; proceeds from a pension or retirement fund of any person supporting another person; and a home if it is used as the primary residence.

After the creditors have been paid the proceeds of the liquidation, all of the debts that arose prior to the filing of the petition will be discharged, with the exception of the non-dischargeable debts under Chapter 7.

While a Chapter 7 bankruptcy wipes away all debts, a Chapter 13 bankruptcy merely allows members to enter a debt repayment plan. Under this chapter, members must repay their creditors all or most of what is owed, but they are allowed to pay over a longer period of time. Another difference is that under Chapter 13, members usually get to keep their property. After the member has complied with the payment plan, all of the debts that arose prior to the filing of the petition will be discharged, with the exception of the non-dischargeable debts under Chapter 13.

Any member who is considering filing for bankruptcy should see a legal assistance officer before hiring an attorney or attempting to file any paperwork with the bankruptcy court. Although legal assistance attorneys may not represent Air Force members in a bankruptcy court or assist in filing paperwork, the legal assistance officer can explain the general procedures of a bankruptcy proceeding.

Legal assistance hours are on a walk-in basis from 8-10 a.m. Mondays and Wednesdays. For more information, call 884-7821.