Senate Approves Bipartisan National Guard & Reservist Debt Relief Extension Act

“Considering the sacrifices our National Guardsmen and Reservists are making on our country’s behalf overseas, it is only fair and right that we help them during the bankruptcy process,” said Congressman Cohen, who spoke on the House floor about the measure. “Our measure would extend a bankruptcy provision that is set to expire later this year that enables Guardsmen and Reservists to bypass the ‘means test.’ In these tough economic times, veterans returning from Iraq and Afghanistan face a risk of financial distress. This is especially so for members of the National Guard and Reserves, many of whom disrupted their civilian lives to serve their country in war zones and homeland defense activities.”

“Every day, service members in the National Guard and military reservists place their lives on the line to protect our country,” said Congressman Forbes. “While we are quick to acknowledge their sacrifice on the battlefield, too often we overlook the financial sacrifices made by these service members and their families when their civilian careers are put on hold in service of our nation. Such sacrifices include incurring the extra cost of running a second household where their duty station is located or working for a lower income while they are activated rather than receiving their usual civilian salary. One way to recognize this sacrifice is to support continued bankruptcy relief for members of the National Guard and Reservists, who are not immune from the ongoing fiscal and housing crises. That is why I am proud to co-sponsor the National Guard and Reservist Debt Relief Extension Act of 2011.”

“Our veterans leave their families and their jobs to go oversees to protect us,” said Congressman Rohrabacher. “The least we can do is protect them from the potential long term economic hardship their service to our country may cause. This legislation is a way for our country to pay off a moral debt to the men and women who fight to keep us safe which is why it’s so important to ensure continuity of that financial protection.”

“It would be an indignity for our National Guardsmen and Reservists to receive no help dealing with bankruptcy after many took a pay cut when called to active duty and face tough financial burdens due to extended deployment,” said Congresswoman Schakowsky. “I am glad we are taking the steps to extend the protections I authored with Representative Rohrabacher which passed with bipartisan support in the 110th Congress. This is a small token of our appreciation and gratitude for their service and sacrifice to our country.”

“While our men and women in uniform have been placing their lives on the line, and while their families have made significant personal sacrifices, too many creditors have been using unethical and illegal tactics to squeeze them, take their homes, and drag them into court,” said Congressman Nadler. “This legislation will simply lift the administrative burden of the so-called ‘means test’ added to the Bankruptcy Code in 2005, without in any way sacrificing accountability or the obligation to repay as much of their debts as they are able. Bankruptcy is the safety net for families who are at the end of their financial rope. It is not too much to ask that we make the process a bit less burdensome for families that have already given so much to the nation.”

Almost six years ago, the Bankruptcy Abuse Prevention and Consumer Protection Act was signed into law. Among the many changes it made was the establishment of a “means test” to determine a debtor’s ability to repay debts. Under this test, a Chapter 7 bankruptcy case is presumed to be an abuse of the bankruptcy process if it appears that the debtor has income in excess of certain thresholds.

The National Guard and Reservists Debt Relief Act of 2008, Public Law No. 110-438, created an exception to the means test’s presumption of abuse for members of the National Guard and Reserve who, after September 11, 2001, served on active duty or in a homeland defense activity for at least 90 days. The exception is also available for 540 days after the servicemember leaves the military. This exception, however, is set to expire later this year. The National Guard and Reservist Debt Relief Extension Act of 2011 would extend the exemption until December 2015.

This modest but important exception to the means test will allow qualifying members of the National Guard and Reserves to obtain Chapter 7 bankruptcy relief without having to go through the substantial and sometimes onerous requirements of the means test. Since 9/11, more than 500,000 members of the National Guard and Reserve have been called to active duty in Iraq and Afghanistan, with many having served multiple tours of duty. Often, these citizen soldiers are asked to disrupt their civilian lives with little notice to serve their country in active war zones, and, like other veterans returning from war zones, they often have difficulty readjusting to civilian life.

The House Judiciary Subcommittee on Commercial and Administrative Law heard testimony in the 110th Congress indicating that an estimated 40 percent of all Guard members are in some sort of financial hardship and that 26 percent of National Guard members had money problems related to their deployment into war zones.

This means test exception is a modest but meaningful way for the Nation to recognize the often tremendous sacrifice made by National Guard and Reserve members who have served in Iraq and Afghanistan and may be suffering financial hardship, in the tradition of the G.I. bill, the Servicemembers Civil Relief Act, and numerous other provisions of law Congress has enacted to benefit military veterans.