CONGRESSWOMAN ELISE STEFANIK
On Tuesday, November 29, 2011, the House is scheduled to consider H.R. 2192, the National Guard and Reservist Debt Relief Extension Act of 2011, under a suspension of the rules, requiring a two-thirds majority for passage. H.R. 2192 was introduced by Rep. Steve Cohen (D-TN) on July 8, 2011, and was referred to the House Committee on Education and the Workforce. The committee held a mark-up session on July 13, 2011, and ordered the bill reported by voice vote.
Under current law, National Guard members and active reservists are exempt from meeting certain income requirements to qualify for Chapter 7 bankruptcy protection. That exemption expires after the beginning of fiscal year 2012. H.R. 2192 would extend that exemption through 2016.
According to the committee report, H. Rept. 112-256, since 2005, the Bankruptcy Code has contained a “means test” that examines whether individual debtors have the financial ability to commit some portion of their monthly income to the repayment of their creditors. If a debtor has the ability to repay, his filing of a chapter 7 bankruptcy case is presumed to be “substantial abuse” and his case may be dismissed.
Compared to a chapter 13 bankruptcy case, in which a debtor with the means to repay creditors obtains a discharge from prepetition debts generally after adhering to a 3- to 5-year repayment plan, a debtor in a chapter 7 case obtains a discharge relatively quickly and without the repayment condition. Thus, many debtors prefer to file a chapter 7 case if they are able and have no non-exempt assets of significant value.
In April 2008, the Subcommittee on Commercial and Administrative Law of the House Committee on the Judiciary held a legislative hearing on H.R. 4044, the National Guard and Reservists Debt Relief Act of 2008, which highlighted the unique financial hardships that military reservists and members of the National Guard face upon their return from active service.
Following that hearing, Congress passed a version of that legislation (the `NGRDRA'), which exempts certain members of reserve components of the Armed Forces and members of the National Guard from the means test.
Pursuant to its terms, the Act took effect on December 19, 2008, which was 60 days after its enactment. The Act was temporary; it expires on December 19, 2011.
The Congressional Budget Office (CBO) estimates that implementing this bill would have no significant impact on the federal budget. Enacting H.R. 2192 would affect direct spending and revenues; therefore, pay-as-you-go procedures apply. However, CBO estimates that any net effects would be insignificant for each year.