The National Guard and Reservists Debt Relief Act of 2008, Public Law 110-438, comprises federal legislation extending bankruptcy protection for three years to National Guard members and reservists called to active duty after September 11, 2001, for at least 90 days. It was signed by President George W. Bush on October 20, 2008 and became law December 19 of that year.
Introduced by Senator Durbin
The National Guard and Reservists Debt Relief Act of 2008, S 3197, was introduced June 25, 2008, by Senator Richard Durbin, an Illinois Democrat, and two co-sponsors. It was referred to the Senate Judiciary Committee. An amended bill unanimously passed the Senate on September 30, 2008. It unanimously passed the House on October 3.
Bankruptcy Exemption Extended
The new law extended bankruptcy protection by exempting active duty National Guard members and reservists from the "means test" normally required to file for Chapter 7 bankruptcy protection, instead of Chapter 13. The Chapter 7 means test compares income (minus certain expenses) to outstanding debt, and does not apply to disabled veterans.The exemption applies to bankruptcy cases filed for three years beginning December 19, 2008. It lasts during the person's active duty deployment (90-day minimum) and for 540 days thereafter.
Law's Expected Impact
The Congressional Budget Office expected the new law to allow some National Guard members and reservists to file for Chapter 7 bankruptcy protection who otherwise might not have been eligible. The lower fees paid by those filing Chapter 7 (versus Chapter 13) were projected to be offset by the additional federal taxes they could pay.
Congressional Report Mandated
The new law mandated a Comptroller General report to Congress on what percentage of National Guard members and reservists used the extended bankruptcy protection, how many qualified based upon their current service and how many are in bankruptcy because of their armed forces service. The report is also to include effects on the bankruptcy system and creditors, and how National Guard members and reservists incurred debt.
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