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Can Filing for Bankruptcy Stop an AAFES Garnishment?

by Erin B. Shank

A paycheck garnishment can wreak havoc with your family’s finances. Although the State of Texas has very pro-debtor garnishment rules that prohibit garnishment, those rules don’t apply to Army & Air Force Exchange Service, or AAFES, debt or a Military Star Card debt. These creditors use a federal law that enables them to garnishment or involuntary allotment on a soldier’s or veteran’s paycheck or retirement check. However, debt owed to AAFES and Military Star can be forgiven (discharged) if you file a military star card bankruptcy case. Additionally, involuntary allotments are also automatically stopped when you file a bankruptcy case. Filing for a military star card bankruptcy case may be your best option.

If you are currently in the U.S. Armed Services or previously served, you may have incurred a debt to the AAFES and/or through using the Military Star Card. Both of these service benefits sound great when offered to you; however, your debt can add up quickly. Add to that the fact that the country as a whole has experienced a recession over the last few years and it is not surprising that many current and prior servicemen and women are facing debt that they cannot repay.

Moreover, a relatively small debt can mushroom to an unmanageable debt in a relatively short period of time as interest and fees are added to the original debt. To make matter worse, unlike other creditors the AAFES and the Military Star do not have to go through the traditional process of obtaining a judgment against you before they can initiate a garnishment. You may simply realize one day that a significant chunk of your military pay is missing from your paychecks as a result of a Military Star or AAFES placing an involuntary allotment on your military pay.

The good news is that filing for protection under chapter 7 or chapter 13 of the U.S. Bankruptcy Code can stop Military Star and AAFES garnishments. As soon as a petition for bankruptcy is filed, these creditors must immediately turn off the involuntary allotment. I fax a letter to these creditors and to DFAS (the military payroll department) as soon as I file a soldier or a veteran’s case and tell them that the case has been filed and the automatic stay is now in place and they must turn off all involuntary allotments or they are subject to sanctions from the Bankruptcy Court. When a military star card bankruptcy case is filed, all efforts to collect on a debt must immediately cease.

If you file a chapter 7 bankruptcy, known as a liquidation, your AAFES or Military Star debt can be discharged – meaning it is forgiven and you are not required to pay it. Most of our clients file for Chapter 7 bankruptcy relief and never have to pay AAFES or Military star a dime on the unsecured debt owed to these creditors. If you file a Chapter 13 bankruptcy case, you will propose a repayment plan to your creditors and ask the Bankruptcy Court to garnish your pay to pay your creditors back. You are replacing the “involuntary allotment” with a “voluntary allotment” when you file a Chapter 13 case. This is why I suggest Chapter 13 as the last resort.

If you are experiencing an involuntary allotment because of debt owed to AAFES or Military Star and you live in Central Texas, please call for a free consultation so that I can help you stop this terrible collection activity. You will see immediate relief from garnishment when you file a bankruptcy case. Consult with an experienced Texas bankruptcy attorney immediately if your paycheck is being garnished for an AAFES or Military Star debt.

erin b shank

I have been practicing exclusively bankruptcy law in Texas for almost 40 years. Unlike most other law firms, my firm is exclusively dedicated to helping individuals and small businesses find a way out of their financial difficulties through the use of our nation’s bankruptcy laws.

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  • Client Companion Award | Erin B. Shank
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  • Preeminent Award | Erin B. Shank
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