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Can The Military Still Collect Debts After You Leave The Service?

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Many people in the military do not realize that their debts to the United States government will follow them after their service if they leave while still indebted. Service members who are let go from the military due to misconduct do not realize the implications of the bonuses or other benefits that they received that have to be paid back. Uncle Sam does want his money back and will continue to pursue people even when they are out of the military.

What Is An Out Of Service Debt?

An out of service debt is a debt that a person still owes the federal government even after they leave military service. Many people find themselves indebted after the military, because they did not fulfill their end of military contracts, reenlistment contracts, or bonuses that they received. The government and the Department of Defense have an entire section dedicated to military indebtedness that processes both in service and out of service debts.

Who Handles The Collection For The Government?

The Directorate of Debt and Claims Management is a section in the Department of Defense that is responsible for collecting, monitoring, and settling debts owed by former military members, DOD civilian employees, and others. It also handles the out of service debts for all the branches of the military and other government agencies. The office will send the separated service member a certified letter stating his or her indebtedness to the government, with instructions on how to pay the debt and challenge the debt’s validity.

Is Debt Reported To The Credit Bureaus?

Out of service debts are reported to the three credit bureaus as a collection account when they are not paid and considered delinquent. The real problem arises when the government cannot get into contact with the person who owes a debt. After several attempts to locate the debtor, the government uses an outside collection agency and places negative marks on your credit report. There are also other ways that the federal government can recoup its money. The federal government has the right to seize a person’s future federal income tax refunds to repay any debt owed.

There are a few avenues that former members of the military can use to receive military debt forgiveness. Civilians and members of the military can ask for a cancelation of the debt or a waiver of remission if they feel it was made in error. Also, former members of the military may also want to look at civilian options in order to pay back their debt. There are many military debt consolidation loan programs available through private banks and lenders that may be able to help.

Hank Coleman is a Captain in the U.S. Army, freelance writer, and the founder of several personal finance websites such as Military Money Might and Money Q&A. His writing has been featured on The Motley Fool, Military.com, and many others. You can follow him on Twitter at @HankColeman.