VA Debt Management: Know Your Options

Navigating VA Debt Management Options

If you’re concerned because you received notification letters for overpayment from the Department of Veterans Affairs (VA), you are not alone. Mounting consumer debt and healthcare costs may also be making it difficult for you to make ends meet each month.

When savings run low and debt feels unmanageable, it may be time to explore the VA debt management options available to you.

What is VA Debt Management?

VA debt management refers to resources and programs that allow Veterans and current U.S. Military members to manage their debt and pay it off. Veterans may owe a debt to lenders, banks, or financial institutions in the form of student loans, mortgages, medical bills, and credit card debt.

Veterans may also owe debt to the Department of Veterans Affairs (VA) after receiving benefit overpayments through compensation, education benefits, or pension programs. Those notified by the Department of the Treasury or the Veterans Benefits Administration often feel overwhelmed, but support is available.

VA debt management helps address these obligations through waivers, repayment plans, consolidation, and professional support services designed specifically for Veterans.

Top 3 Veteran Debt Relief Options

Whether you accumulated debt due to a change in your income or active duty status, the U.S. Department of Veterans Affairs offers you a number of debt relief programs. Here are the top 3 options you may want to consider.

1. Debt Forgiveness and Discharge

One VA debt relief option is to request a waiver for overpayment debt. If you receive a letter for VA benefit debt, you can submit a waiver request within 30 days of the notice so they won’t withhold your benefits.

Along with a request for debt forgiveness, you’ll also need to submit documents and provide valid reasons why they should forgive your debt. Along with this, you’ll need to submit a financial status report (which is a specialized VA form) and then request an oral hearing. If your request is approved, you may not have to pay your debt.

2. Veteran Debt Payment Plans

Another VA debt management solution is to set up a payment plan once you receive a collection letter or debt notification. If you are not able to pay off the entire amount due at once, you can request a repayment plan.

If accepted into this form of veteran debt relief, you’ll be able to pay an affordable fixed amount each month until you pay off your debt in full.

3. VA Debt Consolidation and Refinancing Options

If you have a VA home loan, consider taking out a Military Debt Consolidation Loan (MDCL). This allows you to cash out so you can pay off your debt. That means that you can refinance your loan for more than the amount you owe and get access to the difference in cash.

A major advantage of an MDCL is that you’ll pay lower closing costs and interest rates compared to civilians. Additionally, an MDCL allows you to pay much lower-than-average credit card interest rates. However, since an MDCL is a home equity loan, your home will serve as collateral, meaning you risk foreclosure if you fail to make payments.

Another option is to apply for an unsecured debt consolidation loan. You can roll multiple high-interest credit cards and other unsecured debts into one. You can save a considerable amount of money on interest charges because debt consolidation loans are available at much lower interest rates when compared to credit cards.

If you have excellent credit, you may also qualify for a 0% APR balance transfer credit card. Transfer your balance from other credit cards and pay off the entire balance within this introductory promo period to avoid paying any additional interest on your current credit card balances.

Negotiating with Debt Collectors

If you are facing financial hardship and can’t make monthly payments to repay debts, you can negotiate with your lenders and with the Department of Veterans Affairs to accept a settlement. Explain your financial situation and provide them with the necessary documents to demonstrate how you wouldn’t be able to pay.

Your lenders may be more inclined to accept your settlement offer if they find it unlikely that they’ll be able to recover the amount you owe.

Veteran Debt Settlement Options

If you owe a large amount of money to the VA and are unable to clear your debt, you can send a compromise offer. Write a proposal to settle the debt for less than what you currently owe. Once they review your offer and accept the terms, you’ll have to pay the proposed lump sum amount within 30 days.

If you owe debts to other lenders for credit cards, personal loans, or any other unsecured debts, consider debt settlement. You can negotiate with lenders on your own or work with a debt settlement company. You’ll need to offer a lump sum amount to your lender to settle your account. Your lender will forgive the remaining debt if your settlement offer is accepted.

Rights as a Debtor in VA Debt Collection Procedures

The federal government has several safeguards in place to protect veterans and active service members. The Servicemembers Civil Relief Act (SCRA) includes numerous provisions, such as delaying payments and limiting interest rates to 6% on loans taken out before you join the military. Access the full text of the SCRA (PDF) for more information.

The Fair Debt Collections Practices Act also governs the practices of collection agencies. While the act does not have any military-specific provisions, it is important to remember that as a veteran, you have the same rights as civilian consumers under this act. This includes protection from unfair collection practices.

Debt Management Resources

If you are a Veteran facing financial hardship, request help immediately. The sooner you start dealing with your debt, the faster you’ll be able to find your financial footing again.

Professional VA Debt Management Services

Depending on the nature of your debts, there are several professional companies and organizations you can work with. For unsecured debts such as credit card debts, payday loans, and personal loans, work with reliable debt relief companies with a track record of helping Veterans manage their debts effectively. Ask other Veterans, family, or friends for referrals.

A professional VA debt management service can take the burden off you and help you identify the right solution to get out of debt. They’ll also negotiate with lenders on your behalf to reduce your debt, lower your interest rate, or waive fees.

Local VA Debt Management Resources

Several organizations offer programs to help alleviate the financial burden for veterans. Many of these organizations have local offices where you may be able to seek help:

• Army Emergency Relief
• Disabled American Veterans
• USA Cares
• American Legion
• Coast Guard Mutual Assistance

Additionally, you’ll also be able to find nonprofit credit counseling agencies locally that can help review your budget, income, and debt and enroll you in a debt management program.

Your Path to Financial Relief

Veterans may face a lot of financial pressure, especially when they retire from active service. Fortunately, there are many VA debt management options and government agencies to help ease your financial problems if the Debt Management Center has taken any collection action.

If you are a service member facing financial difficulties, get in touch with TurboDebt® for a free consultation. Our team will provide you with a personalized debt relief option tailored to your individual needs.