NEW YORK (MainStreet) — According to a Department of Defense study, approximately 1% of all service members file for bankruptcy within 12 months of entering or exiting the military. This is approximately twice the rate of the general population. Predatory lenders and bad circumstances can combine to make coming home from active military service a nightmare. Still, with a little bit of attention paid up front, you can avoid being a victim or ruining your credit while defending your country.
Read the Servicemembers Civil Relief Act
You don't have to actually read the whole act, but you should be familiar with the basic provisions of the Servicemembers Civil Relief Act. "If you have a few small credit issues when you were deployed, you need to look at this law," says Ellie Kay, a family financial expert and wife of an Air Force pilot.
The act provides a number of protections, especially for debts you acquired before you enlisted. Specifically, the law protects you against existing credit card debt, mortgage payments, pending trials, taxes and termination of your lease. "A landlord can't decide to terminate your lease while you're deployed," says Kay. "Your family can't be evicted from housing when you're on active duty for rents less than $1,200 per month."
Mike Sullivan, director of education with Take Charge America, notes that "most of the time it's a matter of ignorance. Soldiers' rights are pretty well protected." He points out that as long as you notify the right people before you deploy, it's much harder to get into debt trouble. The problem arises when you either don't notify the right people or run up new debts after deployment.