From Low Interest Rates to VA Waivers: Little-Known Military Debt Relief Programs to Help Vets Get back on Track
Over $5,000 in credit card debt? These programs for veterans and active-duty military can help
A recent study released by Armed Forces Bank revealed that 41 percent of military households owe more than $5,000 in credit card debt. That’s 13 percent higher than civilian households, and it’s something that can cause significant stress and worry for service members and their families. That’s where debt-relief and forgiveness programs specifically designed for military members can help. We share everything you need to know about these options below.
A look at debt-relief options for veterans
According to the Armed Forces Bank, many military families accumulate credit-card debt while covering the cost of frequent moves. They also take on extra childcare costs when a spouse is deployed. Over time, these expenses can snowball into thousands of dollars of debt.
The good news: If you’re one of these families, you have options.
The most common one is the Servicemembers Civil Relief Act (SCRA), which caps interest rates at 6 percent on any loans taken out before entering active duty, including credit cards and mortgages. It also provides protections against foreclosure and eviction and allows service members to terminate rental or automobile leases without penalty if they receive deployment orders or are permanently relocated to a new base.
The second option is access to a credit-counseling agency. This is available to active-duty military members and veterans. It’s an easy way to create or review a budget, prioritize debts and potentially enroll in a debt-management plan, which can help military families by waiving certain fees and reducing interest rates.
Another option is debt settlement, where you (or a debt-relief company on your behalf) negotiate with creditors to reduce what you owe. Typically, with these arrangements, you’ll pay less than what you originally owed, which can help you get back on track and feel less stressed about your finances.
Finally, if all else fails, you can file for bankruptcy. If you do that, there are two options: Chapter 7, which eliminates unpaid credit-card debt, loans and medical bills, or Chapter 13, which allows you to pay back all your debts over a 3- to 5-year period as predetermined by the court.
What to do if you are in debt to the VA
If you owe money to the U.S Department of Veterans Affairs (VA), you can submit a waiver asking them to forgive the debt, but only if it’s less than a year old.
“We can only consider waiver requests within 1 year from when you receive your first debt letter,” the VA explains on their website. “By law, we must deny waiver requests received after this time limit. We’ll explain your right to appeal in the denial letter.”
After submitting the waiver, the VA will mail you their decision. After that, you have to repay the full debt balance, repay part of the debt or repay none of the debt balance.
“If we grant you a partial waiver or deny your request, we’ll tell you how to contact us to set up a payment plan,” notes the VA. “If you get VA benefit payments and don’t set up a different payment plan, we’ll keep all or some of your benefit payment each month to pay down the debt. We’ll also tell you about your right to appeal our decision.”
The bottom line? Getting out of debt is possible thanks to these helpful resources.
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