Bankruptcy and Pay

Start Here If You Are New to Bankruptcy and Pay

A Marine in financial distress files for bankruptcy under Title 11 U.S.C.Title 11 U.S.C. Chapter 7 (liquidation, "fresh start") or Chapter 13 (3-to-5-year repayment plan). The bankruptcy court issues an automatic stay halting most pre-petition debt collections from pay. The DFAS Office of General Counsel Garnishment Law Directorate is the designated agent for service of process for all military bankruptcy notices. Child support and alimony garnishments continue regardless of bankruptcy. The bankruptcy framework intersects with the Servicemembers Civil Relief Act protections.

This page walks you through bankruptcy and pay from your seat as a General Marine. By the end you will know.

• Chapter 7 vs. Chapter 13 distinctions
• The automatic stay protection on pre-petition debts
• Child support and alimony garnishments continue regardless
• Chapter 13 wage earner plan and DFAS withholding orders
• The DFAS Garnishment Law Directorate routing
• Servicemembers Civil Relief Act interaction
• Post-petition debts not protected by the stay

Every fact on this page comes from DoD 7000.14-R Volume 7ADoD 7000.14-R Volume 7A Chapter 50 (January 2026), Title 11 U.S.C.Title 11 U.S.C. (Bankruptcy Code), Title 31 U.S.C. section 3713Title 31 U.S.C. section 3713, and the Servicemembers Civil Relief Act.

What Bankruptcy Is

Per Chapter 50 paragraph 1.1, the chapter prescribes the policies followed when a Marine files a petition of bankruptcy under Title 11 U.S.C.Title 11 U.S.C. Chapter 7 or 13.

Bankruptcy is a federal legal process that allows individuals overwhelmed by debt to seek financial relief. The two most common chapters for Marines are.

• Chapter 7. Liquidation bankruptcy. Most non-exempt assets are sold to pay creditors, and most remaining unsecured debts are discharged.
• Chapter 13. Repayment plan bankruptcy. The Marine retains assets and follows a 3-to-5-year court-supervised repayment plan funded through pay deductions.

DFAS as Creditor

Per Chapter 50 paragraph 2.1.1, the law waives the U.S. Government's sovereign immunity for purposes of compliance with payroll deduction orders issued by bankruptcy courts. DFAS honors bankruptcy withholding orders.

This means a Marine cannot avoid DFAS-related debts simply by being a Service Member. The federal government is treated as a creditor like any other in bankruptcy proceedings.

The Automatic Stay

Per Chapter 50 paragraph 2.1.2, an indebtedness owed to the United States that was incurred prior to the bankruptcy filing date is a "pre-petition debt." Collecting pre-petition debts by offset from the Marine's pay account is authorized only through the day prior to the date the bankruptcy petition is filed.

Stay Effective Date

The automatic stay takes effect on the date the bankruptcy petition is filed with the court. Continuing deductions from the Marine's pay AFTER the filing date is improper and violates the stay.

Refund of Improper Deductions

Amounts withheld after the date the bankruptcy petition is filed must be refunded to the Marine. If DFAS continues to deduct after the filing, the Marine notifies DFAS through the Garnishment Law Directorate to halt and refund.

Exceptions to the Automatic Stay

The automatic stay does NOT preclude continued deductions for.

• Court-ordered support obligations (child support, alimony).
• Divisions of retired pay under prior court orders.
• Specific carve-outs as ordered by the bankruptcy court.

These continue regardless of the bankruptcy filing.

Pre-Petition vs. Post-Petition Debt

Per Chapter 50 paragraph 2.1.4.

Pre-Petition Debt

Debt incurred BEFORE the bankruptcy filing date. Subject to the automatic stay. Generally discharged at the end of the bankruptcy proceeding (with limited exceptions).

Post-Petition Debt

Debt incurred AFTER the bankruptcy filing. NOT discharged by the bankruptcy. Liability continues. The Marine is responsible for post-petition debts even after bankruptcy completion.

DFAS coordinates with the Garnishment Law Directorate before any collection action on post-petition debts to ensure the action does not violate the bankruptcy framework.

Proof of Claim

Per Chapter 50 paragraph 2.1.3, upon notice or actual knowledge of a bankruptcy petition where the Marine has listed the U.S. Government as a creditor, the military pay office files a Proof of Claim with the bankruptcy court.

• Chapter 13. Proof of Claim is filed for all Chapter 13 filings.
• Chapter 7. Proof of Claim is filed if requested by the bankruptcy trustee.

The Proof of Claim is filed on Official Form 410.

Chapter 7 Bankruptcy

Chapter 7 is liquidation bankruptcy.

Process

The Marine files a petition listing assets, debts, income, and expenses. A bankruptcy trustee is appointed. Non-exempt assets are sold (most personal property is exempt under federal or state exemption rules). Creditors are paid from the proceeds. Remaining unsecured debts are discharged at the end of the proceeding.

Effect on Pay

The automatic stay halts pre-petition debt collection from pay. The Marine continues to receive normal Active Duty pay during the proceeding (no wage garnishment for a Chapter 7 filing in most cases). Child support and alimony continue.

Discharge

Most unsecured debts (credit cards, medical bills, personal loans) are discharged. Some debts are NOT dischargeable, including.

• Federal student loans (with limited exceptions).
• Tax debts within specific time periods.
• Child support and alimony.
• Debts from fraud or willful injury.
• Specific Service-related debts (e.g., for fraudulent enlistment).

Chapter 13 Bankruptcy

Per Chapter 50 paragraph 2.3.

Process

A Marine files a petition with the court to enter into a "Chapter 13 Plan." The Marine submits a proposed repayment plan to the bankruptcy court that provides for sending all or a specified amount of future income to the bankruptcy trustee.

When the plan is confirmed by the court, its provisions are binding upon the Marine and all creditors regardless of whether they are affected by the plan or included in the plan.

Wage Earner Plan

The bankruptcy court typically orders the employer (DFAS for a Marine) to pay a specific amount of the Marine's income to the trustee named in the order. The Marine's pay is subject to payment to the trustee under the Chapter 13 plan.

DFAS Compliance

Per Chapter 50 paragraph 2.3.4, the payment by DFAS of part of the Marine's pay in response to a court order issued under a Chapter 13 Wage Earner Plan does not conflict with Title 31 U.S.C. section 3713Title 31 U.S.C. section 3713 (Priority of Government Claims). Compliance with the court order gives the Government a valid acquittance against the Marine.

Government as Both Employer and Creditor

Per paragraph 2.3.5, if the United States is both employer and creditor when the Marine files a Chapter 13 Plan, the Government's priority under Title 31 U.S.C. section 3713Title 31 U.S.C. section 3713 may be asserted in the absence of a judicial determination to the contrary. This is done through a filing of the Proof of Claim by the appropriate pay office.

Plan Duration

Chapter 13 plans run 3 to 5 years. The Marine makes monthly payments to the trustee during this period. At the end of the plan, remaining qualifying unsecured debts are discharged.

DFAS Garnishment Law Directorate

Per Chapter 50 paragraph 2.2, all Bankruptcy Notices and Chapter 13 withholding orders should be submitted to.

DFAS Office of General Counsel Attn. Garnishment Law Directorate P.O. Box 998002 Cleveland, OH 44199-8002 Toll Free Fax. 1-877-622-5930 Commercial Fax. 216-367-3675

This office is the designated agent for service of process for all military bankruptcy notices and bankruptcy withholding orders.

Required Information

Bankruptcy orders must include the Marine's full name AND full Social Security number for proper identification.

Stay Effective Upon Filing

The bankruptcy notice is effective when filed with the court. The provisions of the automatic stay are effective on that date unless otherwise determined or terminated by the bankruptcy court.

Insufficient Identification

When the notice does not sufficiently identify the Marine, the order is returned to the person who submitted it with an explanation of the deficiency.

Processing the Bankruptcy Order

Per Chapter 50 paragraph 2.2.5, upon receipt of an effective bankruptcy notice, the Garnishment Law Directorate.

1. Reviews the case for involuntary allotments or garnishments to terminate per the automatic stay.
2. Establishes the withholding order against the Marine's pay to comply with the Chapter 13 order within 30 days.
3. Continues withholdings until the amount specified is collected, the order is modified or terminated, or the bankruptcy case is dismissed or discharged.

Notice to the Marine

Within 30 calendar days after receipt of the order, the designated official sends notice to the Marine stating the date the withholding is scheduled to begin and the amount or percentage that will be deducted.

Dismissal of Bankruptcy

Per Chapter 50 paragraph 2.1.5, if the bankruptcy court dismisses the case, collection is permitted by offset or other collection means as appropriate and otherwise authorized.

A dismissal differs from a discharge. Dismissal means the bankruptcy case is closed without granting the relief sought. The Marine remains liable for the debts. The protections of the automatic stay end.

Servicemembers Civil Relief Act Interaction

The Servicemembers Civil Relief Act (Title 50 U.S.C. section 4001Title 50 U.S.C. section 4001) provides additional protections to Marines during deployment and Active Duty service.

6 Percent Interest Cap

Pre-service debts (debts incurred before entering Active Duty) are capped at 6 percent interest during Active Duty service. This is independent of bankruptcy and applies even if the Marine has not filed.

Stay of Civil Proceedings

A Marine deployed or otherwise unable to participate in a civil case may petition for a stay of civil proceedings under SCRA. This applies to bankruptcy proceedings as well.

Coordination with Legal Counsel

Marines considering bankruptcy should consult with the Marine Corps Legal Services Support Section and a civilian bankruptcy attorney. SCRA protections may make bankruptcy unnecessary in some cases (e.g., if the 6 percent interest cap and a deployment stay together resolve the financial crisis).

What Bankruptcy Does NOT Discharge

Specific Service-related debts may NOT be dischargeable in bankruptcy.

• Recoupment of unearned bonuses (per Chapter 2 of Volume 7A).
• Service-related fraud or willful injury debts.
• Specific Service-imposed debts.

Coordinate with the Marine Corps Legal Services Support Section before filing to understand which Service-related debts may continue.

Effect on Future Service Career

A bankruptcy filing may affect.

• Security clearance reviews. Most clearance reviews assess financial responsibility. Bankruptcy is a flag but not automatically disqualifying. The Marine documents the resolution of the financial issues.
• Sensitive billet assignments. Some sensitive billets (e.g., financial-fiduciary roles, classified custodian) require enhanced financial scrutiny.
• Retention boards (for officers). Financial irresponsibility can affect promotion or retention decisions.

The bankruptcy itself is not a UCMJ violation, but the underlying financial irresponsibility (if it caused the bankruptcy) may be subject to administrative or UCMJ action.

Verifying Bankruptcy-Related Pay Changes on the LES

A monthly LES check during the bankruptcy proceedings confirms the changes are correct.

Step 1. Pull Your LES

Through MyPay each payday during the bankruptcy proceeding.

Step 2. Verify the Stay Has Halted Pre-Petition Debt Collections

After the filing date, pre-petition debt collections (e.g., DFAS recoupment of an unearned bonus) should stop. Verify the LES no longer shows the deduction.

Step 3. Verify the Chapter 13 Withholding (If Applicable)

For Chapter 13 plans, the LES shows a withholding for the trustee. The amount should match the bankruptcy court order.

Step 4. Verify Continuing Garnishments

Child support and alimony garnishments should continue regardless of bankruptcy. Verify these line items remain on the LES.

Step 5. Resolve Discrepancies

Coordinate with the DFAS Garnishment Law Directorate at the Cleveland address. The unit Staff Judge Advocate or the Marine Corps Legal Services Support Section provides legal coordination.

Common Questions Marines Ask

I owe DFAS for a recouped enlistment bonus. Can I discharge it through Chapter 7 bankruptcy?

Per Chapter 50 paragraph 2.1.4, pre-petition debts are generally discharged at the end of the bankruptcy with limited exceptions. Service-related debts have specific dischargeability rules. Coordinate with the unit SJA and a bankruptcy attorney before filing.

I am paying child support through DFAS. Will my Chapter 7 bankruptcy stop the child support deduction?

Per Chapter 50 paragraph 2.1.2, no. The automatic stay does NOT preclude continued deductions for child support, alimony, or division of retired pay. Child support garnishments continue throughout the bankruptcy.

I am in a Chapter 13 Plan. How does the trustee payment work on my LES?

Per Chapter 50 paragraph 2.3, the bankruptcy court orders DFAS to pay a specific amount of your income to the trustee. The withholding shows on your LES as a deduction routed to the trustee. The amount continues for the duration of the 3-to-5-year plan.

I filed for bankruptcy 3 months ago. DFAS is still deducting for an old debt. What do I do?

Per Chapter 50 paragraph 2.1.2, continuing deductions after filing violates the automatic stay and the amounts must be refunded. Submit your bankruptcy filing documentation to the DFAS Garnishment Law Directorate at the Cleveland address. They will halt the deduction and process the refund.

Does my bankruptcy affect my security clearance?

Bankruptcy is a flag in the security clearance review but not automatically disqualifying. The investigator assesses the underlying financial responsibility and the Marine's resolution of the issues. Coordinate with your Security Manager and the unit SJA.

Can I file bankruptcy while deployed?

The Servicemembers Civil Relief Act allows a stay of civil proceedings for deployed Marines. You may file bankruptcy while deployed, but the proceedings may be stayed at your request. The 6 percent SCRA interest cap on pre-service debts may also be a more efficient solution than full bankruptcy. Coordinate with the unit SJA.

Where to Go for Help

Routing by Issue

• Bankruptcy filings, automatic stay enforcement, and Chapter 13 withholdings. The DFAS Garnishment Law Directorate at the Cleveland address per Chapter 50 paragraph 2.2.
• Bankruptcy legal advice. The Marine Corps Legal Services Support Section and a civilian bankruptcy attorney. Marine Corps Legal Aid is available for limited representation.
• SCRA protection invocation (6 percent interest cap, stay of civil proceedings). The Marine Corps Legal Services Support Section.
• Security clearance impact assessment. Your unit Security Manager.
• LES corrections for improper post-petition deductions. Submit bankruptcy filing documentation to the DFAS Garnishment Law Directorate.
• DFAS Marine Corps Pay direct contact (for general LES questions). Phone 1-888-332-7411 (DSN 312-571-9450 from overseas).

Where to Go Next on This Site

• Pay and Entitlements landing page lists all the pay topics.
• Allotments covers garnishments and the broader allotment framework.
• Pay Problems and Fixes covers the LES error recovery flow including recoupment.
• Court-Martial and NJP Pay Impact covers UCMJ-related pay actions.

Related Roles

• Leaders coach Marines on financial responsibility BEFORE the bankruptcy point. Refer Marines in financial distress to the Marine Corps Family Programs and the Marine Corps Legal Services Support Section.
• Admin at S-1 supports bankruptcy-related LES corrections through the DFAS Garnishment Law Directorate.
• Commanders endorse Marines using SCRA protections and ensure financial counseling resources are available at the unit level.

Bankruptcy provides legal relief from overwhelming debt but is a serious action with career and clearance implications. Chapter 7 liquidation discharges most unsecured debts. Chapter 13 establishes a 3-to-5-year repayment plan funded through DFAS withholdings. Child support and alimony continue regardless. The DFAS Garnishment Law Directorate is the single point of contact. SCRA protections may make bankruptcy unnecessary in some cases.