by: Baran Bulkat, Attorney
If you cannot afford to make payments on your Military Star credit card, filing for bankruptcy can eliminate your obligation to pay it back. Read on to learn more about how bankruptcy can help members of the armed forces wipe out their Military Star credit card debt.
A Military Star card is an unsecured credit card issued to active duty, reserve, and retired members of the armed forces as well as Department of Defense employees working overseas. Military Star cards have many advantages including low interest rates and no annual fees. They are issued by the Army and Air Force Exchange Service (AAFES) and can be used at military exchanges and stores owned by the AAFES.
In bankruptcy, a Military Star card is considered a general unsecured debt just like your other credit card obligations. This means that it is fully dischargeable. But how your Military Star credit card will be treated in bankruptcy depends on whether you are filing for Chapter 7 or Chapter 13 bankruptcy.
To learn more, see Getting Rid of Credit Card Debt With Bankruptcy.
A Chapter 7 is primarily designed to eliminate your unsecured debts such as your Military Star card. It is commonly referred to as a liquidation bankruptcy because the bankruptcy trustee can sell any nonexempt assets you own to pay back your creditors.
To qualify for Chapter 7 bankruptcy, your disposable income must be low enough to pass a means test. When you receive your discharge, you will no longer be required to pay back the Military Star card.
To learn more, see this article on Chapter 7 Bankruptcy Basics.
Chapter 13 bankruptcy allows debtors to reorganize their debts and catch up on missed mortgage payments and pay back nondischargeable debts such as back alimony or child support. In Chapter 13 bankruptcy, you propose a repayment plan to pay back a portion of your debts.
Your Military Star credit card debt will be lumped in with your other general unsecured debts (such as personal loans and medical bills) and receive a pro rata portion of the total amount you pay towards these debts in your plan. How much you must pay these creditors depends on the amount of your disposable income and nonexempt assets. But they generally receive little or nothing in a Chapter 13. When you complete your plan, any remaining balance will be discharged.
For more information, visit our Chapter 13 Bankruptcy area.
If you are in the military, filing for bankruptcy can affect your security clearance under certain circumstances. Security clearance decisions are typically made on an individual basis. Whether a bankruptcy will hurt your security clearance can depend on your position, clearance level, job performance, and reasons for filing. As a result, talk to a knowledgeable attorney before filing your case to make sure your clearance will not be affected.
Bankruptcy can also affect your eligibility to enlist in the armed forces. If you have bad credit or a large amount of outstanding debt, you may not be allowed to join the military. Each branch has its own rules regarding enlistment eligibility. As a result, talk to a military recruiter or other knowledgeable official to determine whether bankruptcy will prevent you from enlisting.
To learn more, see Bankruptcy for Military Members.