Our office recently received the following question from a reader of our blog:

I am now in a full-time Air Force Reserve, with 27 years total military service time.   I will be discharged if the Air Force finds out about my financial problems.  My wife and I are carrying over $200,000 in credit card debt .  Our cash flow is negative $7,000 per month and our only remaining asset is around $60,000 stocks.  What can we do?

Our firm’s answer:  First, I think that you need to find an experienced and knowledgeable bankruptcy lawyer.  I recently filed a Chapter 13 case for a military reserve officer who was in a similar mess.  We structured the Chapter 13 as a direct pay, meaning that we did not set up a payroll deduction with the Air Force.  That case is proceeding along nicely and I expect it to be confirmed next month.

While there is no guarantee that your commanding officer will not find out, Chapter 13 trustees do not regulalry contact employers.  In my case, the military  has not been made aware of my client’s filing.  An experienced lawyer in the district where you would file can give you more specific advice.

You also need to find out if Chapter 13 is an option at all.  It may not be, but you need to find out for certain to either eliminate the option or keep it available.

You also should ask whether there is any way to protect your stock.  Every state has "exemption laws" that protect certain assets.  You don’t say where you live so I can’t comment about what you might be able to protect, but it would be a shame to use up an asset that is fully or partially protected prior to filing a bankruptcy.

If you do nothing, at some point you are going to get sued and all bets are off.  While bankruptcy is always a last resort, it can give you the power to eliminate or reduce debts and to cancel contracts.

Make sure to find a lawyer with specific experience in Chapter 13, because I think that is the type of bankruptcy you would most likely want to consider. 

Best of luck to you.