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.
Subscribe to a Credit Monitoring Service
For the most part, credit monitoring servicing are a waste of money. They don't do anything you can't do yourself for free by pulling your credit reports. However, Kay suggests that you subscribe to a credit monitoring service while you're deployed abroad. She has eight presentations on finance coming up in the next four months on six bases with the USAA. "You can have that delivered to your email or your spouse's or whoever has your power of attorney," she says. If anything goes wrong with your credit cards or other bills, you'll have someone to take care of things for you. You won't come home to a tangled web of identity theft.
Pick a Power of Attorney You Trust
You need someone on the ground in the States to take care of your financial affairs for you. To do that, you have to sign a legal document giving them power of attorney to handle your affairs. Kay quickly notes that it's not always a spouse that will take that over for you. "Sometimes your spouse is the one getting you into trouble."
Your spouse isn't necessarily getting you into trouble out of malice. Sometimes they're just easy pickings for predatory lenders and collection agencies. So pick the right person to handle your affairs while you're overseas.
Use On-Base Resources
Whenever you run into problems, Kay says the first person you should talk to is the base financial officer. They go under different names in different branches of the service. The Airman and Family Readiness Center is the air force's version, while the army has Army Community Services. "There's usually a legal officer in the chain of command on base," says Sullivan. This officer can provide you with assistance, as well as advice. Sullivan recommends you start out by getting whatever help you can on base before you seek civilian counsel.
The Courts Will Be on Your Side
"It's also true that most lenders do not like the publicity of looking like they're taking advantage of service people," says Sullivan. "Sometimes just asking can get you out of these circumstances." Sullivan notes that "there's a remarkable support for the American military in this country.
"Even if you get into trouble, the courts are usually pretty friendly in these cases," says Sullivan. "If you accuse a lender of being in violation of federal law, judges tend to be very sympathetic to servicemen."
Kay notes that there's more than just your finances at stake. Your military career could also be on the line. "Financial readiness impacts military readiness," she said. "More and more military members are losing their clearances because of financial issues. It's not just young folks, it's senior enlisted and officers too. They're losing really good people."
--Written by Nicholas Pell for MainStreet