Military Pay And The Chapter 7 Bankruptcy Means Test

The City of New Orleans, where I practice as a consumer bankruptcy attorney, is home to all branches of the United States Armed Forces.

Federal City, which is located in Algiers, a suburb of New Orleans, is the National Headquarters of the Marine Corps Reserve and the Coast Guard.

The Naval Air Station Joint Reserve Base in Belle Chasse, a city on the Westbank of New Orleans, is also home to the Navy, Air Force, Army, and Louisiana Air National Guard, along with additional Marine Corps and Coast Guard facilities.

Because of this, I often see members of the military and their families who are experiencing debt issues and are considering bankruptcy.

Unfortunately, while there are some exceptions, like anyone else considering bankruptcy, those in the military must have income below median income to qualify for the Chapter 7 bankruptcy means test.

For the most part military pay falls into three categories.

1. Basic Pay.

Basic Pay is received by all members of the military and is based upon the members pay grade (rank).

Just like employees in the private sector, Federal withholding taxes, Social Security and Medicare are deducted from basic pay.

2. Basic Allowance for Subsistence (BAS).

BAS is rooted in the long standing tradition that the military houses and feeds its personnel.

BAS is meant to offset costs for a member’s meals but is not intended to offset the costs of meals for family members.

While BAS is treated as income, the military does deduct from the enlisted person’s pay for meals that are eaten on base and this deduction will appear on the pay stub, or, as it’s called in the military a Leave and Earnings Statement (LES).

3.  Basic Allowance for Housing (BAH).

BAH is an allowance to offset the cost of housing when the enlisted person does not receive government-provided housing.

BAH depends upon a number of factors, including pay grade and whether a individual has dependents and the cost of rental properties in the location where the enlisted person is stationed.

4.  Exceptions.

There are some instances where the means test does not apply but they are limited.

• Disabled veterans are exempted from taking the means test if the debts were primarily incurred during service on active duty or while performing a homeland defense activity.
• Members of the Reserves or National Guard who file while on Active Duty or Homeland Defense Activity for a period of at least 90 days and who file for bankruptcy within 540 days of their release from active duty are exempt from the means test.

If all else fails the enlisted person may have special circumstances that will rebut the presumption that they need to be in a Chapter 13 bankruptcy.