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5 Things Veterans Need to Know about Debt Lawsuits

— March 2, 2022

Before a creditor can obtain a default judgment, the plaintiff is required to file an affidavit with the court establishing if the defendant is an active servicemember.

Military servicemembers and veterans experience the same financial hardships as any other American. Unexpected accidents, loss of a spouse, business failure, unemployment – these are common life events that cause veterans to incur debt. 

When debt reaches a certain point, it can be difficult to overcome or bounce back. Unfortunately, that opens the door to debt collection efforts and debt lawsuits. 

Veterans need to know, however, that debt lawsuits do not mean the end of their financial security. There are actually several laws that protect veterans, as well as methods of defending against a debt lawsuit. 

 5 Things Veterans Need to Know about Debt Lawsuits

Here, we discuss 5 things that veterans need to know about debt collection lawsuits and how they can overcome the challenges of debt. 

1. Veterans Have Rights if They Are Sued

Servicemembers on active duty and veterans have certain rights under the Servicemembers Civil Relief Act (SCRA). The rights of servicemembers and veterans who recently ended their active duty include:

Before a creditor can obtain a default judgment, the plaintiff is required to file an affidavit with the court establishing if the defendant is an active servicemember. They must provide evidence in support of their statement. 

  • Military servicemembers and veterans who have not appeared in court are protected from default judgments until the court appoints an attorney to represent them. 
  • Under certain conditions, courts can issue a stay on debt lawsuits for at least 90 days. 
  • If a judgment is obtained, the case can be reopened if the servicemember is active, or is within 60 days of ending their service. 

2. A Debt Collector Cannot Take Your VA Benefits

Generally, Social Security and Veteran’s benefits are exempt and cannot be seized in a debt lawsuit. If the creditor obtains a judgment against you, then they can garnish your bank account, but there are very particular protocols for not garnishing VA benefits. For example, the bank or credit union must assess the account and identify payments from Social Security, VA benefits, and other exempt types of income. 

Once they identify these, they must then ensure that the veteran has access to that amount of money, even if the account is being garnished. This ensures that veterans have access to funds that are exempt, which allows them to utilize their VA benefits for cost of living. 

3. There are Laws to Protect Veterans from Medical Debt

In 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act went into effect. In May 2019, a section of the law amended the Fair Credit Report Act. The goal – to provide protections for military veterans facing certain medical debts. More specifically, veterans would receive protections from debts from:

  1. Non-VA (Veterans Affairs) providers when care was authorized;
  2. Medical debt that the VA wrongfully charged

The amendments require that certain information be excluded from the veteran’s credit report. The amendments also prevented nationwide credit reporting agencies (Equifax, Experian, etc.) from including certain medical debts on credit reports until the debt is at least one year old.

Medical Records are Often Incorrect & Missing Information
Photo by Erik Mclean from Pexels

To help protect veteran’s credit, credit reporting agencies must remove information about medical debts that are listed as “charged off”, “delinquent”, or “in collections” once the debt has been paid. It also established better methods of disputing incorrect information on the credit report. 

4. Bankruptcy Can Stop Debt Collectors and Help Resolve Debt

Military servicemembers may qualify for bankruptcy under the same guidelines as civilians. Chapter 7 and Chapter 13 are the more common forms of bankruptcy, but which type is best depends on the individual’s situation. There are several benefits to filing for bankruptcy for veterans:

  • Free credit counseling and bankruptcy courses;
  • Bankruptcy may be complete in 4-6 months; 
  • Most, if not all, debts can be discharged;
  • Veterans can keep their property while completing bankruptcy; 
  • Filing bankruptcy stops debt collection activities, even if a debt collection lawsuit has been filed;
  • Once debts are discharged, veterans have a clean slate to rebuild their credit and financial security.

 5. A Debt Defense Lawyer Can Fight on Your Behalf

Being sued is a stressful experience. Veterans should know that they don’t have to face this battle alone. A debt defense lawyer can help veterans understand and protect their legal rights, and find options for suitable debt relief. Debt defense law firms like Daic Law help veterans explore options for defending against a debt lawsuit, such as: 

  • Establishing whether or not the veteran actually owes the debt;
  • Investigating for any errors or omissions in the paperwork;
  • Determining if contracts or credit agreements are valid;
  • Determining if the statute of limitations has expired;
  • Investigating if the debt collector provided proper notice;
  • Investigating if the debt collector applied all applicable payments, credits, or offsets;
  • Questioning if the plaintiff (creditor) can prove that they have been assigned the debt properly. 

These potential defenses may seem complicated, but a skilled debt defense lawyer can help veterans fight for their rights and work to achieve an outcome that helps them regain financial stability. 

Veterans Deserve Help Resolving Debt

An unfortunate reality is that many veterans struggle to support themselves and get the care they need. Veterans Affairs healthcare providers are notorious for improper billing and coverage, and not assisting veterans in getting care. Many veterans also live on a fixed income, which makes it difficult to overcome challenges like medical bills, a change in income, or other major life events. 

Veterans deserve every protection and opportunity to protect their legal rights. Debt lawsuits are stressful, but they don’t have to end in heartache. With the right legal help, veterans can rest assured that their case is heading in the right direction.

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