As a general rule, individuals filing a bankruptcy in New Jersey, Pennsylvania and other states must complete and file a “Statement of Your Current Monthly Income,” referred to as the means test. Under this test, if you make more than the average family your size in your state, then limits may be imposed on your expenses which could result in you having to pay some or all of your debt back in a Chapter 13. The income limits in Pennsylvania are lower than in New Jersey. However, if you are in the military you may be exempt from this requirement.
If you are a veteran and have a disability, you do not have to pass the means test if the debts you are seeking to discharge were mostly incurred during the following periods: 1.) during active duty, or 2.) while performing activities related to homeland defense.
To take advantage of the means test exception, you must have a qualifying disability. You have a qualifying disability if: 1.) your disability has been rated 30% or more under the Secretary’s disability compensation rules, or 2.) you were discharged or released from active duty because your disability was incurred or aggravated while in the line of duty.
If you are a reservist or member or the National Guard, you may be able to opt out of the means testing requirement if: 1.) you were on active duty or participated in homeland defense activities for a continuous period of at least 90 days, and 2.) you file bankruptcy within 540 days (18 months) after you leave active duty.
The Servicemembers Civil Relief Act of 2003 (“SCRA”) is a federal law that provides some protection to members of the military from debt collection actions. The SCRA prevents or postpones: 1.) foreclosures and debt collection default judgments, 2.) bank attachments, 3.) evictions, and 4.) wage garnishments.
While the SCRA is usually beneficial in non-bankruptcy matters, it can also provide you with an added layer of protection while in bankruptcy. The SCRA can stay (stop or delay), for periods of 90 days or more after you have left active duty service, adversarial or contested proceedings in bankruptcy such as: 1.) default judgments on complaints to determine dischargeability, 2.) objections to discharge, 3.) trustee actions to attach your property 4.) debtor’s examinations, and 5.) post-bankruptcy evictions and collection actions, such as when a creditor is granted relief from the automatic stay.