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Military and Debt

by Contributor

Anyone who is serving in the military needs to be aware of how debt can negatively affect their military career. Most people by now should understand that the military will pull a credit report on anyone who is applying for a security clearance, and that the security clearance can be denied if the person is carrying too high of a debt load. If your MOS (job) depends on obtaining that clearance and it is denied, you could be involuntarily reclassed into a different job that doesn’t require a clearance… hope you like cooking if that is your situation!

What some don’t know is that you can actually be discharged from the military for too much debt. I saw it happen to a Desert Storm vet back when I was a private in 1999. Once the commander got the letter of indebtedness, and it was determined the soldier couldn’t pay it, they proceeded to revoke his security clearance for it. Since our MOS required a Secret level clearance, he had the choice of being involuntarily reclassed or separated under Article 134 of the Uniform Code of Military Justice (UCMJ). He chose separation over becoming a cook.

Years later, as a sergeant I had to write one of my soldiers up for being in debt that he couldn’t pay. I had to take him to budgeting class, since the bad debt was a repossessed car, and he ended up with extra duty and and a repayment plan drafted up by our commander.

Anyone who has ever served knows that the military pay is less than generous when compared to the civilian equivalent. So it becomes imperative to operate your household on a budget in light of the negative consequences of debt! Here is the excerpt of Article 134 that the specialist was discharged under, and that I wrote up my soldier for:

Article 134 – (Debt, dishonorably failing to pay)

Elements.

(1) That the accused was indebted to a certain person or entity in a certain sum;

(2) That this debt became due and payable on or about a certain date;

(3) That while the debt was still due and payable the accused dishonorably failed to pay this debt; and

(4) That, under the circumstances, the conduct of the accused was to the prejudice of good order and discipline in the armed forces or was of a nature to bring discredit upon the armed forces.

Explanation. More than negligence in nonpayment is necessary. The failure to pay must be characterized by deceit, evasion, false promises, or other distinctly culpable circumstances indicating a deliberate nonpayment or grossly indifferent attitude to-ward one’s just obligations. For a debt to form the basis of this offense, the accused must not have had a defense, or an equivalent offset or counterclaim, either in fact or according to the accused’s belief, at the time alleged. The offense should not be charged if there was a genuine dispute between the parties as to the facts or law relating to the debt which would affect the obligation of the accused to pay. The offense is not committed if the creditor or creditors involved are satisfied with the conduct of the debtor with respect to payment. The length of the period of nonpayment and any denial of indebtedness which the accused may have made may tend to prove that the accused’s conduct was dishonorable, but the court-martial may convict only if it finds from all of the evidence that the conduct was in fact dishonorable.

Lesser included offenses. None.

Maximum punishment. Bad-conduct discharge, forfeiture of all pay and allowances, and confinement for 6 months.

As you can see, excessive debt can have a severe impact on your career. It will also have a negative impact on your personal life.

This is a guest post from Ana, the author of the blog Debt-Free Revolution. Ana is “an Army wife, an Iraq veteran, a college student, a mom, family CFO, and a “Pizza Delivery Expert” a.k.a. a Domino’s pizza delivery driver to get her family out of the chain of debt!”


Published or updated October 13, 2011.
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{ 48 comments… read them below or add one }

1 Lynnae @ Being Frugal

I had no idea! One more reason not to go into debt!

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2 Ryan

Lynnae,

The military takes the actions of its members very seriously, and poor financial health is not only a bad reflection on the military, but it can hinder operational readiness as well.

Personal financial problems can get in the way of deployments and troop movements, because the military will not usually send someone where they are needed if there is legal action against them.

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3 Pinyo

Great post. I knew it’s tough, but I didn’t know it can be this hard/harsh.

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4 Ryan

Hi Pinyo,

Punishment and getting kicked out of the military is really a worst case scenario. Most supervisors and military leaders try to work with their troops before disciplinary action is taken. However, sometimes the situation is just too far out of control to be dealt with.

The military does try to provide education and financial training, but in my opinion, it is limited at best.

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5 Mario

According to the post excessive debt is punishable by UCMJ but what if the debt was caused by entering military service. If the situation is to far out of control and you make every effort to pay is it still considered dishonorable and subject to discharge?

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6 Ryan

Mario, Yes, excessive debt is still punishable by the UCMJ, even if it was caused by your entering into military service. The best recommendation I can give you is to try to get on top of things as soon as possible. If you aren’t able to cover your debts, I would begin talking with your supervisor and First Sergeant ASAP. The sooner you get them involved, the more willing they will be to work with your situation. Good luck, and thanks for serving.

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7 Nick

I work at a bank in the loan dept.,and I have a customer who took out a loan to purchase a vehicle. He stopped paying for the vehicle and it was reposessed. I tried to explain to him the remaining balance after the vehicle was sold. At first he pretended to have interest in the repayment to make good with the bank. Now he flat out refuses to repay the loan saying that he feels he shouldnt have to pay this back. After looking over his file, I found out he was in the U.S Army. He completely refuses to cooperate and now he doesnt even answer his phone, Im guessing he is screening his calls to avoid discussing his bill.
Is there any way to find out who his supervisor or commanding officer is if they are refusing to put forth efforts in repayment of funds borrowed. What would be the best way to report this kind of negative behavior? to whom would this be of concern?
Thank you
Nick

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8 Ryan

Nick,

I would start by sending a certified letter to him to have that on file and inform him he is legally responsible for the remaining balance of the loan and this is negatively affecting his credit (though I’m sure this has been done). You may also let him know that if he doesn’t comply you will bring this to the attention of base authorities. Keep in mind, his commander can order him to pay it, but I’m not sure he can legally force him to pay it. But the commander can enforce military punishment, which may concince the soldier to pay.

On his loan paperwork, check to see it he listed his unit, brigade, or any other information regarding which organization he is in. If he did, go on the internet and find the number to that unit’s First Sergeant or commanding officer and give them a call (start with the First Sergeant).

As I mentioned, this won’t guarantee results, but it will get you in the right direction. Good luck.

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9 Jarhead

Unfortunately I am faced with Marines unable to pay debt on if not a daily at least a monthly basis. In my 13 years I have had 2 Marines both grossly in debt. One consistently used multiple check cashing (pay day advance) places and would be overdrawn on his account 2 days after payday and the other constantly just overdrafts his account in excess of $400 dollars between paychecks. I did all I could for these guys to include taking care of their finances for them. Hopefully they have gotten better and can become productive citizens once they are out.

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10 Jagdog

Just correcting one fact in your narrative…

There is no such thing as being “separated under Article 134 (UCMJ)”. Article 134 is the general punitive article in the MCM, Manual for Courts-Martial. It is used in Article 15s.

You’re thinking of when a Soldier is chaptered out of the military, or Administratively Separated. If the Soldier has enough misconduct, i.e. they have failed to repay SEVERAL debts and have established a pattern of doing so no matter what the unit did to help them, then they could be chaptered under Chapter 14-12(b): Pattern of Misconduct. This is out of AR 635-200, Administrative Separations.

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11 Ryan

Thanks for the correction, Jagdog.

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12 Matt

Im looking to join the military and i an still paying my car loan off. i still owe around 5 grand. would that be ok if i joined and just continued to pay or would i have to pay that off first?

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13 Ryan

Matt, you don’t have to be debt free when you join the military, but you may not be able to join if you are in the process of a bankruptcy or other legal proceeding. The main issues the military has with debt come when the military members either choose not to pay their debts, or are simply not able to because they have too much debt. There shouldn’t be a problem joining the military when you have a car loan that is almost paid off.

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14 anon

Hi,

My husband is a CPO and is currently in NRD San Francisco as a recruiter. He pretty much abandoned me 6 mths ago, left with no avail. He left all debts, house, responsibilities. His main reason was that I never got along with his daughter. I was dumb founded after he left me so I searche for reasons why would he leave his life in LA. So I found out he has been lying to me. He has a mistress, I discovered emails. Then I saw pix on facebook with another woman. Then I found out he has an escort service accounts, browsing through adult websites. So he has not contacted me or anything about our debts. He felt kinda guilty and started giving me 500/mth..But we are in so much debt that it was not even enough. I lost our home, car, and now I’m being sued for our debts. I just want to know if I can take legal action against him? Who should I contact?

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15 mercy

hi i just have a question, my husband is in the army. and he owes money from a relative. now they were trying to contact my husbands unit to get it over with, but for now we are in financial trouble because the army is taking away money from us from an advance pay we owe. now can my husband get in trouble and get kicked out cz we cant pay there relatives in time? and he owes like 4G .. thanks

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16 Ryan

Mercy, your husband most likely won’t get kicked out of the military for being late on a loan – getting kicked out is usually reserved for the worst cases. but that doesn’t mean he will avoid any repercussions. My recommendation is to contact your husband’s family and work out a payment arrangement that will repay them the money your husband borrowed and still work with your bills. It’s good for his career and more importantly, it’s the right thing to do.

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17 Casey

Not completely on topic, but kind of…
My son’s father owe’s child support to me (he is currently over $20K in arrears due to not paying until it was court ordered when our son was already 2 years old) and it has been taken directly from his military retirement pay…until this month. I just found out from DFAS that his pay is currently suspended, but they won’t tell me why since we are no longer married. Said it could be due to government debt, being unable to locate him (him never informing them of change of address), or many other things. What can I do? I need the money to pay for my son’s incidentals. There is an established court order requiring him to pay and that is how the deduction from pay began. If they have suspended his pay due to paying back other debts, shouldn’t the primary concern for the government be for the welfare of his child? Who should I contact? What should I do? I am so lost at this point…HELP!

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18 Yazy

My sister joined the Air Force six months ago and just completed boot camp and now 2 weeks ago she went to her base. She owes $100,000 in student loans. She called Wells Fargo to consolidate and she was told she would need a co-signer.I don’t know what to do, I’m 30 years old and I only make 27,000 a year, I have good credit but I barely get by. The problem is my sister told me if she doesn’t get it consolidated she will get kicked out of the Air force.Is this true?

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19 Ryan

Yazy, It’s tough to say whether or not you sister would get kicked out of the military for student loan debt. Debt issues must be extreme for a military member to be kicked out of the service and they are handled on a case by case basis. I cannot recommend cosigning on a loan because doing so also makes you responsible for the loan. Should your sister default on the loan, you would be legally liable for the rest of the loan, and $100,000 in debt would be crushing and could potentially damage your finances for decades (student loans cannot be relieved via bankruptcy). Here are some military student loan forgiveness programs which your sister may or may not be eligible for. She should also look into the Servicemembers Civil Relief Act which could potentially help her lower her interest rates on her student loans, and she should also investigate student loan deferment programs which may help ease the burden right now, though it will not eliminate the loans entirely.

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20 SAL

Several years ago I went through a divorce and the agreement was that the home would go to my ex wife. I am still on the note but it is required that she make two attempts per year to re-finance. Now that she is moving and is having issues with the home she has stated to me that she is just going to let it go. It is going to greatly ruin my credit. The divorce decree does state that she is responsible for payments on the house and everything associated with it as it was awarded to her. Can her 1st Sgt or Commander enforce a garnishment of wages from her? This happened once before with one of the vehicles she was awarded and she refused to make payments and they enforced the payment. If so does anyone have any air force regulations associated with this?

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21 Ryan

Hi SAL, I don’t have a solid answer for you. I highly recommend getting a lawyer to work with you on this case, as it could have major implications on your credit and financial future. Best of luck.

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22 shannon

My boyfriend , and I have discussed marriage seriously. However this was before now. He just started A school for Nukes, and we weren’t looking into getting married right this moment. We both wanted to finish school first, and every thing, but I’m worried if my debt from doctors bills, might effect his security clearance. I need to pay the debt any way, but should I rush this and ask for help from him and my parents? I mean would this actually kill our chances of getting married? I realize it’s my fault for letting this get as bad as it is, but I don’t want to have him lose out on a good finacialy stable job and life over my mistakes.

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23 king

when i was younger i got my first bank card when i ran out of money i gave the card to my mother to hold for me until i got another job and could continue to put money in the account. She used my card mistakenly and ran up a few hundred dollars in overdraft fees. My account was subsequently closed out and I never got the oppotunity to pay the bank off before this happened. In total i would say i owe less then a 500 dollars and no collection agencies have ever been in contact with me. The only reason i even found out about this is because when i tryed to add money to the account the atm told my my account had been closed. I then proceeded to talk with the teller who told me i couldn’t reopen my account with there bank even if i were to pay them back for the full amount. Im worried that this will keep me from getting my security clearance for my mos in the army can you please give me your thoughts on the matter. thank you

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24 Ryan

Joseph, The military does a thorough background check, and one mark against your credit won’t necessarily prevent you from receiving a security clearance. The military is concerned with people whose finances are in such a poor condition that it is a red flag. For example, people who cannot afford to pay their bills each month might be more likely to sell state secrets so they can meet their bills. Just be truthful when filling out the questionnaire and in any interviews and see where it leads. Best of luck, and thanks for your service!

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25 amber

my husband is in the air force he has been in for 3 years now we were two months behind on are 07 dodge charger srt8 due to family illness and death. we contacted the bank to inform them we would pay them back with our tax return on feb 10.the bank came and picked it up on feb 25 , we had not yet received our taxes but made one full payment to them feb1.since they picked it up they plan to auction it in 10 days. of course we will have to pay the remaining balance we owe 25,150. my husband informed his first shirt of the issue, due to the bank not informing first shirt its not taken official yet. We are waiting for the auction to see what the remaining balance is. We plan to pay it and have 1000 saved to due so. we are very concerned though that with all the role backs that he will now be in hot water and may not pass his security clearance and wont be able to re-enlist. we are looking for advice

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26 Ryan Guina

Amber, the best advice I can give you right now is to have your husband visit with his First Sergeant and try to set up some financial counseling for the two of you. Most bases offer something via the family center or MWR. Just having some debt isn’t always enough to deny a security clearance, even with a repossessed car or other bad mark on your credit. If your family is able to meet your remaining financial obligations and you are working on improving your finances, then those actions will go a long way toward being able to remain in the military. Right now the best thing you and your husband can do is begin working on ways to improve your finances.

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27 Damarise

How is it that a soldier can get away with not paying the full amount of child support, in which the court determined as fair based on the income of both parties? Are there any reprocussions that a soldier faces when he is over $10,000 behind in child support payments?

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28 Ryan Guina

Damarise, if there is a court order, then the soldier is legally required to pay the amount. I recommend contacting the attorney who represented you in the initial proceedings. If the soldier is found to be in arrears, then it may be possible to have wages garnished or have an allotment set up which will automatically send the correct amount of money from the paycheck each month before it is sent to the military member. But in most cases you will need the soldier to either set this up voluntarily, or get a court order for it to happen.

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29 Dre

I am on Navy DEP and will leave soon on July i filed bankruptcy this April due to failed business venture and bills/credit catch on us we basically living on paycheck to paycheck . I informed this to my recruiter my court date is on May an will wait to get discharged of all my debt. If i go to bootcamp will i be discharged eventjought i told my recruiter and put it in our records? My rating or job doesnt need security clearance. I am trying to fix this before i ship out.

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30 Ryan Guina

Dre, having a bankruptcy doesn’t automatically preclude you from military service. If it is in your record, then you have done everything you can to make the military aware of your situation. Hopefully you will be able to start a fresh way of life in the military. Best of luck in your military career!

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31 Candice

I have a friend who is a PFC combat engineer for the marines and has recently gotten in trouble for trying to help his mom pay some of her rent, his higher ups keep telling him that he and his mom are greedy and that they will punish him if he gets into debt for helping her. I just wanted to know what kind of punishment would they do if he would go into debt?

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32 Ryan Guina

I don’t see how it makes him greedy to try and help someone, but that is neither here, nor there. To answer your question, debt in and of itself is not generally a problem if you are in the military. The problem happens when it interferes with what the military refers to as “readiness” or the ability to be ready to meet all military obligations at a moment’s notice. Debt becomes a problem if it interferes with his ability to make his normal payments on everything else, if he is constantly borrowing money to make ends meet (payday loans, or credit cards), starts bouncing checks, or if it causes undue stress or other problems (such as not being able to get to work because of a vehicle repossession, getting kicked out of an apartment for non-payment, etc.).

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33 Deborah

hi, I’m in the army and right now I’m in AIT and I’m in debt about $800.00 and I wanted to know what could I do to get out of that, like who could I go and see and talk to, and will I get punished for this debit because it was an accident?

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34 Ryan Guina

Deborah, you shouldn’t get in trouble for having $800 in debt unless you neglect to make your payments and it interferes with your ability to perform your job. In general, it’s not bad to have debt while in the military. The problem comes when you owe too much money and are unable to meet your monthly obligations, or you stop making payments. As long as you make your payments on time, there shouldn’t be any problems with your current loan situation.

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35 shaner

So during my deployments as a medic in the army I trusted my then still wife with bills etc. To make a long story short, she ran up about 21,000$ in debt and never paid anything. I had no idea what was going on until it was WAY too late. Of course everything was in my name. Calls came to her phone, and she hid mail. I had good credit until then that’s why she was able to go so high. Im paying off debts 1 by 1 but it’s slow going. I still have a couple major accounts in collections, but how will that effect me. Its time to renew my security clearance… As stated, I have been paying off debts 1 by 1 because I simply cannot afford to pay on everything at the same time. I have no equity, so a debt consolidation loan is out of the question.

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36 John

Has anyone ever delt with child support issues, where courts base the service members child support so high b/c of including all military benefits where it exceeds 50% of base pay, and due to that, soldier is not able to pay bills.

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37 Ryan Guina

John, I haven’t dealt with this. My recommendation is to consult with a lawyer or your base legal department to go over the child support ruling to ensure they are correctly calculating your income that can be used for child support purposes.

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38 Chrys

I have a question. If you have a car loan and find out before you go into debit can give to the bank. Would that have any affect on your military career

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39 Renee'

I have a debt with 1 student loan for $1000 and I owe the bank $194 but I don’t have no credit card, and I owe my phone bill will I still be able to enlist?

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40 Ryan Guina

A small debt should not be a problem when enlisting or getting a commission. It is a good idea, however, to be current on all payments before trying to enlist. Best of luck.

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41 Kristie

I have a retired Navy personnel who wrote me a bad check for $1700.00. She has made two payments towards the bad check and has promised to make other payments that she has not been making. I am tired of giving her chances to take care of this and her not making good on the arrangements. What do I need to do to collect the rest of this money.

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42 Ryan Guina

Kristie, because this person is no longer serving in the military, the military has no involvement whatsoever. You will need to take the same course of action you would for collecting any debt. I have never had to collect a debt from someone, but I imagine there is some legal course of action you will need to take, such as contacting a lawyer or filing a claim in court. Of course, just sending a certified letter stating the legal basis for the debt and mentioning that you will file a claim in court or report the debt to the credit bureaus may be enough to get the person to make the payment.

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43 Gregory Thomas

I am currently in the process of joining the Air Force and I have a closed credit card sent to collections for $944. Will this prevent me from joining the Air Force?

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44 Ryan Guina

Hello Gregory, one poor mar on your credit may not prevent you from joining the Air Force, but it can hurt you if there are other marks on your application. My recommendation is to get this taken care of ASAP. This will show that you have made mistakes, but also taken actions to correct them. Best of luck in your AF career!

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45 mimi

Question: My ex husband is asking for help because he owes 40,000 in arrears and he has a car loan.

He said his security clearance and work is affecting this arrears. It this true that his career in the military is affecting his debts. Can he get in to trouble in the military about his Credit? And he recently got married. I don’t understand how he will provide financial support for 2 families. He owes Child support 40,000. Plus his other loans that he accumulated. Can they revoke his security clearance and cause problem to reenlist in July 2014?

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46 Ryan Guina

Mimi, it is possible his debt could cause problems with his security clearance, and if his security clearance is revoked it could cause problems with his ability to reenlist. He should seek help to reorganize his debts. The best place to go is a non-profit credit counseling service. They will help him understand his situation and give him options and a course of action to follow. Best of luck.

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47 Charina Manalo

Thank you. What about the child support arrears for 41,000 plus 21,000 for his car loan and other credit cards they could help him pay for it.

hes a corpsman he said he cant even get a passport for his child support arrears. Can those nonprofit pay the child support arrears too?

Hes reenlistment is on July.

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48 Ryan Guina

The military won’t help him pay his loans. He will need to pay his loans from his salary. The non-profit credit counseling services will only help him manage his debt payments and set up a plan to repay his debts. He will need to find a way to pay them on from his salary, or possibly declare bankruptcy if that is an option. However, bankruptcy may not be a good solution and most likely wouldn’t do anything for his child support debts or possibly other debts (depending on the situation). This is a situation that needs some individual attention, and isn’t something someone can give much more information on without speaking to him and determining the extent of his debts, his income, and other factors. If your interest is based on money he owes you, then I suggest you work out a way to meet with him to discuss this situation.

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