Military and Veteran Debt Relief Programs
Members of the military and veterans encounter the same financial problems that other individuals encounter. A veteran or military service member may experience the loss of a spouse, an unexpected accident or illness, divorce, failure of a business, or period of unemployment just like any other person.
When a financial crisis occurs, it can be difficult to overcome the debt that often is a result of a loss of income. Even though you may get a second job and cut monthly expenses, the effort may not be enough to dig your way out of debt.
Fortunately, there are several forms of military debt relief for persons who have served our country. Debt relief for veterans may include VA debt management programs, military debt consolidation loans, and veteran debt consolidation.
However, before you choose a form of debt help for veterans or military debt consolidation, our Dallas bankruptcy attorneys encourage you to call (469) 566-0365 or (817) 426-3328 to discuss how filing for bankruptcy may be your best option for veteran debt relief.
What are Military Debt Consolidation Loans?
Military Debt Consolidation Loans (MDCL) involve refinancing the existing VA loan on your home. An MDCL is not actually debt consolidation for veterans that is directly provided by the United States government. The “cash out” refinance uses the equity in your home to consolidate debts into one monthly payment. These consolidation loans are not veteran debt relief grants, military debt forgiveness, or disabled veteran debt relief.
While a consolidation loan using your existing VA loan sounds great for several reasons, there are also disadvantages. You may be able to qualify for a lower interest rate because your mortgage is a VA loan, but you are exhausting the equity in your home. In reality, you are turning unsecured debts (credit cards, medical bills, etc.) into a secured debt (mortgage).
While credit card companies and medical providers cannot take your home, a VA mortgage lender can foreclose on your home if you are delinquent with your house payments. Therefore, you have used the equity in your home to pay off unsecured debts and placed your home at risk if your financial situation did not improve or you face another financial hardship.
What Other Forms of Financial Help for Veterans with Bad Credit Can You Find?
Other forms of veterans debt help and military debt help may include:
- Loan modifications
- Repayment plans
- Forbearance agreements
- Traditional consolidation plans
- Deed in Lieu of Foreclosure
- Settlement of military debts
The problem with the veterans debt relief options above is that they do not address the core issue — you do not have enough income to pay your living expenses and your debts. If you do not have the income to pay your debts now, you will likely not have the money to pay your debts even if you can consolidate the debts. Furthermore, the interest you may pay over the extended term of the consolidation agreement or loan may be more than you would pay under your current agreements.
Another huge problem caused by debt settlement has to do with your income taxes. When a creditor agrees to accept less than is owed on an account to settle a debt, the creditor issues a 1099 federal form to report the forgiven debt. You must report this debt as “income” for the tax year which could increase the amount of money you owe for taxes.
Is there a better way for veterans and military service members to obtain debt relief?
Bankruptcies for Veterans and Military Personnel
Military service members and veterans have the same options for filing bankruptcy like any other individual. You can file under Chapter 7 or Chapter 13, depending on your unique financial position. A benefit for veterans and service members is that some companies that offer required bankruptcy courses offer credit counseling for veterans and service members free of charge. However, filing bankruptcy has other benefits for you.
In some cases, it may be best to file a Chapter 7 to get rid of debt fast. Most Chapter 7 cases are completed within four to six months from the date of filing. Debtors can discharge most, if not all, unsecured debt while keeping their property. Creditors cannot pursue a debtor for discharged debts. Therefore, you may come out of a Chapter 7 bankruptcy case completely debt-free and free from creditor harassment.
In a Chapter 13 case, you can propose an affordable repayment plan that may allow you to get rid of your unsecured debts for a small percentage of what you owe on the accounts. In addition, a Chapter 13 bankruptcy filing can stop repossessions, foreclosures, and collection lawsuits.
When you complete your Chapter 13 plan, any remaining balances owed on eligible unsecured debts are discharged. As with a Chapter 7 case, creditors cannot take any further action to recover money owed for a discharged debt.
Filing a Bankruptcy in Texas for Veterans and Military Service Member
If you are a veteran or you are currently serving in the military, our Dallas and Ft. Worth bankruptcy lawyers can help you find an affordable solution to your debt problems.
However, make sure that you let us know you are a veteran or a service member. We want to make sure we review any debts owed to government agencies or entities, including credit card debt, during your initial consultation to determine if the debts must be treated differently from other debts. In addition, you may receive certain considerations if you are an active military service member who is subject to being deployed at any moment.
Contact Leinart Law Firm for a free consultation by calling (469) 232-3328 or (817) 426-3328. Our Texas bankruptcy attorneys serve clients throughout the Dallas-Fort Worth area.