Military Personnel:

Bankruptcy Filings among Active Duty Service Members

GAO-04-465R: Published: Feb 27, 2004. Publicly Released: Mar 29, 2004.

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Derek B. Stewart
(202) 512-5559


Office of Public Affairs
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A declaration of bankruptcy is an extreme example of the failure to manage personal finances. Debtors who file personal bankruptcy petitions usually file under chapter 7 or chapter 13 of the bankruptcy code. Generally, debtors who file under chapter 7 of the bankruptcy code seek a discharge of all their eligible dischargeable debts. Debtors who file under chapter 13 submit a repayment plan, which must be confirmed by the bankruptcy court, for paying all or a portion of their debts over a 3-year period unless, for cause, the court approves a longer period not to exceed 5 years. This letter responds to the request of the Ranking Minority Member, Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia, Senate Committee on Governmental Affairs. We determined (1) the rate of personal bankruptcy filings among active duty military personnel, and how that rate compared with the rate found in the U.S. population; and (2) factors that should be considered when attempting to compare the rate of bankruptcy filings for active duty military personnel with the rate for the U.S. population.

DOD had limited data on the rate of bankruptcies among active duty military personnel. Responses to DOD's 1999 active duty survey--the most current data available--show that 1.2 percent, or about 16,000, of the 1.3 million active duty members in the survey population said that they had declared personal bankruptcy during the 12 months preceding the survey. This compares with a total of approximately 1.3 million personal bankruptcies filed in the United States in 1999. From 1999 through 2003, the number of personal bankruptcies increased from approximately 1.3 million to over 1.6 million for the U.S. population. The 23.6 percent increase in personal bankruptcy filings for the U.S. population may not readily translate into a comparable rate of increase for active duty military personnel. Loss of employment and medical-related problems (e.g., medical costs and loss of income during illness or accident) are among the major causes that contribute to personal bankruptcies in the U.S. population, but unemployment and catastrophic medical expenses are factors not confronted by active duty military personnel. In addition, Congress has authorized increased cash compensation-- increases in basic pay, housing allowance, and special pays--for active duty military personnel since 1999. For example, average annual military basic pay increases have exceeded average private-sector wage increases for fiscal years 2000 through 2004. DOD has also identified a need to improve the financial literacy and responsibility of military members. And in May 2003, DOD formally launched a financial readiness campaign to address military members' poor financial habits and increase financial management awareness, savings, and protection against predatory practices.

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