Guardsmen and reservists facing bankruptcy will continue to get a reprieve, should an extension to a debt-relief act be approved for another four-year period.
Rep. Steve Cohen (D-Tennessee) introduced the National Guard and Reservist Debt Relief Extension Act in May alongside cosponsors Reps. Ben Cline (R-Virginia), Madeleine Dean (D-Pennsylvania) and Tim Burchett (R-Tennessee), after championing its extensions in 2015 and 2019.
Under the act, service members are not required to participate in a means test, which determines a debtor’s eligibility to file for Chapter 7 bankruptcy instead of Chapter 13. Chapter 7 discharges debts and the filer does not have to repay creditors. Chapter 13 is a reorganization plan where the debtor repays creditors over several years based on income.
The means test takes into consideration income, expenses, household size, time frame of the calculations and deductions. It also looks at the debtor’s past six months of income compared to the debt owed to determine the bankruptcy route.
“I hear from our service members that this reform has been life-changing, and I am proud to have pursued it,” Cohen said.
Cohen helped introduce the National Guard and Reservist Debt Relief Extension Act of 2015, and again in 2019.
“Members of the armed services who have honorably served our country deserve a presumption that their bankruptcy filings are legitimate,” Cohen said in a May news release. “Too many of our service members fall on hard times, often targeted by unscrupulous pay-day lenders near camps and bases. We can safely assume that their financial problems are real and should be lawfully discharged in bankruptcy.”
John Goheen, director of communications for the National Guard Association of the United States, said the Guard and reserve “deserve the same respect and appreciation [as active duty] from the American people and Congress.”
Goheen also said the bill “has been able to positively affect many lives because it can protect service members from lenders that do not have their best interest at heart.”
As recently as February, the Consumer Financial Protection Bureau issued a $10 million penalty to TitleMax for violating the Military Lender Act “by extending prohibited title loans to military families and, oftentimes, by charging nearly three times over the 36% annual interest rate cap,” a news release stated.
In 2005, under the Bush administration, Congress established the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which established the means test for debt filers.
The National Guard and Debt Relief Act was first introduced in 2008 by Sen. Dick Durbin (D-Illinois) as a temporary exception for guardsmen and reservists regarding the means test.
“Changes to the bankruptcy code in 2005 intentionally made it more difficult to file for Chapter 7 debt relief,” Cohen said.
The extension act has passed every time it has been reintroduced. As of early July, the most recent action taken on the measure was to refer it to the House Committee on the Judiciary.
“I worked with colleagues to craft the National Guard and Reservists Debt Relief Extension Act because I don’t think our service members should have the validity of their need to seek bankruptcy questioned with the onerous means test the 2005 legislation requires,” Cohen said.
impacted people financially from business closures to job losses, Epiq Bankruptcy statistics show that COVID-19 relief aid helped and the amount of bankruptcies actually dropped.
But as that aid ends, bankruptcies have increased in 2023 compared to the 2022 .
For more information on the National Guard and Reservist Debt Relief Extension Act, visit Congress.gov.
This article was written by Zoe Waring.
Disclaimer: This article was prepared by the author in her personal capacity. The views do not necessarily reflect official policy, opinion, or position of their employer.Read comments