Lawmakers Step Up To Help Armed Service Members Filing Bankruptcy
Filing bankruptcy may soon be easier for National Guard members and armed service reservists who experience financial hardships while serving in war zones.
On June 21, the House approved legislation by a voice vote that would exempt members of the National Guard and reservists who have served at least 90 days in Iraq or Afghanistan from the Chapter 7 bankruptcy test that has been required since the Bankruptcy Abuse Prevention and Consumer Protection Act took effect on October 17, 2005.
The bill, H.R. 4044, is sponsored by Democrat Rep. Jan Schakowsky of Illinois.
Schakowsky saw the need to provide some degree of financial relief for reservists and members of the National Guard who find themselves struggling financially because of their deployment. Republican Rep.
Dana Rohrabacher of California co-sponsored the bill and criticized the Republicans for not taking any action before now to help active duty reservists.
Rohrabacher said that Schakowsky had presented a similar bill in 2005, at the same time that the bankruptcy overhaul law was being considered and GOP leaders misinformed the party that the bill was redundant because it was covered in the Bankruptcy Abuse Prevention and Consumer Protection Act.
The 2005 bankruptcy law exempts disabled veterans from means testing when filing bankruptcy, but does not provide any exemption for National Guard members and reservists.
In 2005, Republicans had the majority in the House and Rohrabacher said that Republican leaders refused to let the Democrats have even one success, even if it meant denying the service men and women in financial distress any help with filing bankruptcy, according to a report by the Associated Press.
The House Judiciary Committee reported that between September 11, 2001 and November 30, 2007, approximately 450,000 National Guard members and reservists were deployed into war zones in Iraq and Afghanistan.
The committee cited estimates that up to 25 percent of those service members who have been deployed may suffer financial difficulties and setbacks as a result of their reduced income while in active service.
The legislation to exempt deployed National Guard members and reservists now must be passed by the Senate, taking armed service members one step closer to having an easier time when filing bankruptcy.
The means testing mandated by the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 applies only to Chapter 7 bankruptcy.
Consumers who file Chapter 7 bankruptcy have their debts completely dissolved unless they are financially able to repay some of it.
Under Chapter 13 bankruptcy, debtors are required to make monthly payments to the bankruptcy trustee for distribution to the creditors to repay the debts.