Activated Guards and Reservists Exempted from Bankruptcy Means Test if Eligibility Tests Met
By Jill Michaux, Kansas Bankruptcy Attorney on Oct 26, 2008 in General Bankruptcy Information, Means Testing
Some military servicemembers facing financial crisis will not have to run the means test gauntlet to file for bankruptcy relief under the National Guard and Reservists Debt Relief Act signed into law this week.
S. 3197, passed unanimously by the U.S. House of Representatives and Senate, and signed by President George W. Bush, exempts debtors who are activated with the Armed Services Reserves or National Guard for military duty or homeland security defense from the means test. The bankruptcy petition must be filed before 540 days (18 months) from the end of at least 90 days of active duty.
“The bill responds to the fact that some who serve in the National Guard and the Reserves encounter financial difficulties and that they should not be subject to the additional proof requirements of the means test,: according to Maureen Thompson, Legislative Director of the National Association of the Consumer Bankruptcy Attorneys.
Thompson credits NACBA Board Member Ed Boltz of Durham, N.C., and NACBA Military Liaison Jim Wherry of Ft. Wainwright, AK, for their work as resources to the bill’s Congressional sponsors about the circumstances facing servicemen and women.
Here is how the new code section 11 U.S.C. 707(b)(2)(D) is expected to read:
(D) Subparagraphs (A) through (C) shall not apply, and the court may not dismiss or convert a case based on any form of means testing
(I) if the debtor is a disabled veteran (as defined in section 3741 (1) of title 38), and the indebtedness occurred primarily during a period during which he or she was
(I) on active duty (as defined in section 101 (d)(1) of title 10); or
(II) performing a homeland defense activity (as defined in section 901 (1) of title 32); or
(ii) with respect to the debtor, while the debtor is-
(I) on, and during the 540-day period beginning immediately after the debtor is released from a period of active duty (as defined in section 101 (d)(1) of title 10) of not less than 90 days; or
(II) performing, and during the 540-day period beginning immediately after the debtor is no longer performing, a homeland defense activity (as defined by section 901(1) of title 32) performed for a period of not less than 90 days;
if after September 11, 2002, the debtor while a member of a reserve component of the National Guard or a member of the National Guard, was called to such active duty or performed such homeland defense activity.
Federal law defines “homeland defense activity” as an “activity undertaken for the military protection of the territory or domestic population of the United States, or of infrastructure or other assets of the United
States determined by the Secretary of Defense as being critical to national security, from a threat or aggression against the United States.” 32 U.S.C. § 901(1)
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