Debt help for veterans and military families

Not for private debt like credit cards. We know of no federal program that pays off a veteran's credit cards or personal loans. Be wary of any company that says otherwise.

What veterans and service members do have are legal protections that can lower interest, limit what lenders charge, and protect you in court. There is also free counseling and legal help. Those come first, and they cost nothing.

The Servicemembers Civil Relief Act caps interest at 6% a year on debts you took on before active duty (U.S. Department of Justice, opens in a new tab), including credit cards and loans shared with a spouse. For most debts, the cap lasts while you are in military service. For mortgages it lasts one more year (50 U.S.C. 3937 (Cornell LII, opens in a new tab)).

Interest above 6% is forgiven, not just delayed, and that includes fees.

The Military Lending Act limits the cost of most credit taken out while you serve, including credit cards, payday loans and installment loans. The cap is a 36% Military Annual Percentage Rate (CFPB, opens in a new tab), which counts most fees as well as interest.

It covers active-duty members, Reserve and Guard members on qualifying active duty, and their spouses and some dependents. Veterans who have left active duty are not on that list.

The same federal collection rules apply to you as to anyone, plus some limits that matter in uniform. The CFPB explains that a collector can contact your chain of command only to find you, and cannot tell your commander (CFPB, opens in a new tab) that you owe a debt. A collector also cannot prosecute you under the Uniform Code of Military Justice.

If you are sued and do not appear, the court must first ask whether you are in military service. If you are, it cannot enter a default judgment until it appoints a lawyer for you (50 U.S.C. 3931 (Cornell LII, opens in a new tab)).

That protection does not erase the debt. Answer any lawsuit by its deadline, and talk to a legal assistance office.

The VA does. Most VA debt comes from benefit overpayments (U.S. Department of Veterans Affairs, opens in a new tab), such as disability, pension or education payments, or from VA health care copay bills. Overpayments go to the VA Debt Management Center at 800-827-0648. Copay bills go to the VA Health Resource Center.

The VA offers its own options for help (U.S. Department of Veterans Affairs, opens in a new tab): a repayment plan, a compromise offer to accept less as payment in full, a waiver that forgives the debt, or a pause for hardship. Waivers and compromise offers need a Financial Status Report, VA Form 5655.

We do not settle VA debts. Ask the VA directly; its Debt Management Center reviews these requests.

Before you pay anyone to deal with debt, try the free options. Many people who serve, and many veterans, can get legal and financial advice at no cost.

Settlement is for private, unsecured debt you cannot pay in full, even after the protections above. It usually fits when you owe $10,000 or more, are behind or close to it, and can save a set amount each month.

It does not cover student loans, mortgages, car payments, other secured loans and income tax debt, or debts owed to the VA.

It has real downsides. Your credit score will drop, creditors can keep collecting or sue while you save, and forgiven debt may be taxable. If you hold a security clearance, talk to your security office or a legal assistance office first.

You approve every settlement before it is paid, and most programs run 24 to 48 months1.