If you have tried to settle your debts without success and feel hopelessly burdened by bills you can no longer pay, Chapter 7 bankruptcy offers a way to eliminate most or all of your unsecured debt. In order to obtain this protection, you ordinarily need to pass a “means test” — a calculation based on your income and expenses compared to the average for the county in which you live. If, after completion of the test, your income (after qualifying expenses and deductions) is too much, you would not normally qualify for Chapter 7 bankruptcy.
However, if you are a disabled veteran or military reservist, the country that owes you a debt of gratitude has afforded you a way to discharge most or all of your debts — even if you would not qualify as a civilian. Under the National Guard and Reservist Debt Relief Extension Act of 2011, you may be exempt from the means test if you meet at least one of the following criteria:
- Are a member of the National Guard or in the Armed Forces Reserve called to active duty for at least 90 days after September 11, 2001
- Were part of a homeland defense activity for at least 90 days following September 11, 2001
- Are a veteran who suffered or had a disability aggravated during the line of duty, have a disability rated at 30 percent or more and whose debts were incurred during active duty or homeland defense
Those who are not disabled veterans have a limited window of opportunity of means test exemption: The exclusion period extends just 540 days from the end of your active duty.
Are you active-duty personnel? Then you are protected by the Servicemembers’ Civil Relief Act, which allows courts to postpone acts by creditors against you while you are on active duty.