• Jonathan R Bunn

Are military re-enlistment bonuses dischargeable in bankruptcy?

This question came up several years ago and it has resurfaced again. If you accept a military re-enlistment bonus but are unable to fulfill the term of service, is the re-enlistment bonus dischargeable in bankruptcy? Most dischargeability questions are answered within Title 11 of the United States Code - the Bankruptcy Code, which is silent on this subject. However, Title 37, Pay and Allowances of the Uniformed Services, provides at §303a for the repayment of unearned re-enlistment bonuses and further provides that:

An obligation to repay the United States under this subsection is, for all purposes, a debt owed the United States. A discharge in bankruptcy under title 11 does not discharge a person from such debt if the discharge order is entered less than five years after— (A) the date of the termination of the agreement or contract on which the debt is based; or (B) in the absence of such an agreement or contract, the date of the termination of the service on which the debt is based.

So the answer is yes and no. A re-enlistment bonus is dischargeable in bankruptcy, but not for five (5) years after one of two possible events listed in the statute. You should speak with an experienced bankruptcy attorney if you have a debt based on a re-enlistment bonus. This section of Title 37 does not follow the pattern of usual bankruptcy statutes in Title 11. Most dischargeability questions in Title 11 are based upon the date that the bankruptcy is filed, not the date of the discharge order, which is to a large degree an unknown until it is entered. The underlying benefit of bankruptcy to a consumer debtor is the "fresh start" free of past debts. If you are contemplating bankruptcy and you have a debt based upon a re-enlistment bonus, you should speak to an experienced bankruptcy lawyer to discuss the chapter and timing of the bankruptcy in light of this obscure provision in Title 37.

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