Durbin Introduces Legislation to Aid Guard and Reserve Members Facing Bankruptcy

Press Release

Durbin Introduces Legislation to Aid Guard and Reserve Members Facing Bankruptcy

United States Senator Dick Durbin (D-IL) introduced legislation today which will help National Guard and Reserve members who are struggling financially receive bankruptcy assistance upon returning from an overseas deployment. The National Guard and Reservist Debt Relief Act will exempt service members from the strict entry criteria they might face when seeking bankruptcy protection. This so-called "means test" is required under current bankruptcy law. The exemption could be granted for up to a year and a half.

"Veterans from the wars in Iraq and Afghanistan are coming home to a shaky economy, lower pay and families facing increasing hardship due to the housing and gas crises," Durbin said. "We owe those who serve our county every federal resource available as they come home and try to get back on solid financial ground. Cutting the red tape our service members face when filing for bankruptcy is critical."

The 2005 Bankruptcy Abuse Prevention Act changed U.S. bankruptcy code, making it significantly harder for individual debt to be discharged in bankruptcy. The changes to the law require a rigorous means test to assess whether an individual is qualified for Chapter 7 bankruptcy protection. The means test looks at an individual's income and expenses for the six month period preceding a bankruptcy filing, which unfairly penalizes National Guard members and Reservists.

Durbin's bill would exempt returning Guard and Reserve members from this means test because their income and expenses from overseas service do not accurately portray the servicemember's current financial state. In addition, many returning servicemembers have faced deployments of over a year, making the means test apply to time spent overseas when income was inflated and their expenses limited.

Despite receiving much-deserved combat pay for their overseas service, National Guard and Reserve members often take a pay cut when they leave their jobs for a deployment. It is estimated that a quarter of returning servicemembers earn less that $25,000 a year - if they are able to find a job at all. Nearly 18% of recently returned servicemembers are unemployed.

Durbin's bill would also call for a GAO report on the financial hardships our veterans face after returning from war.

Rep. Jan Schakowsky (D, IL-9) has introduced a companion bill in the House of Representatives, which passed by voice vote with overwhelming bipartisan support.

Source