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National Guard and Reservist Debt Relief Extension Act of 2015

On Wednesday, December 16, 2015, the U.S. House voted 419-1 to approve a bill that would extend a bankruptcy provision that exempts National Guard members and Reservists filing bankruptcy from having to qualify under a “means test” prior to filing for Chapter 7 relief. The Chapter 7 Means Test is a formula designed to keep households with higher income from filing Chapter 7 cases. The presumption is that higher income households have the ability to pay their creditors a percentage of what is owed through a Chapter 13 bankruptcy filing. However, there are exceptions where the Means Test does not prohibit higher earners from qualifying to file for bankruptcy relief under Chapter 7 (see for Means Test information).

The bill would extend the exemption until 2019 and would exempt members of the Guard and reserve who, after September 11, 2001, are called to active duty or to perform a homeland defense activity for at least 90 days, and remain eligible for an exemption during the 540-day period following such active duty or homeland defense activity service.

"These veterans who have returned from Iraq and Afghanistan disrupted their civilian lives to serve our country in war zones and homeland defense activities and could face a risk of financial distress," said Rep. Steven Cohen [D-TN]. "It is only fair that we help them during the bankruptcy process."

The Means Test is a complex formula with many exceptions. Knowing how to use the Internal Revenue Service and Census Bureau Cost of Living Allowances and applying this information to the Means Test can be the difference between obtaining the immediate relief needed versus a prolonged reorganization. Reach out to our office with questions on qualifying for a Chapter 7 and exploring options open to you and your family.