Durbin Bill to Help Guard and Reserve Members Facing Bankruptcy Becomes Law

Press Release

Durbin Bill to Help Guard and Reserve Members Facing Bankruptcy Becomes Law

President Bush signed the National Guard and Reservists Debt Relief Act into law yesterday, exempting service members from the strict entry criteria they might face when seeking bankruptcy protection. The law will help National Guard and Reserve members who are struggling financially receive bankruptcy assistance upon returning from deployment. U.S. Senator Dick Durbin (D-IL) was the law's chief author in the Senate and Rep. Jan Schakowsky (D, IL-9) the lead sponsor in the House of Representatives.

"Veterans from the wars in Iraq and Afghanistan are coming home to a weak economy, low paying jobs and families hit hard by the housing and gas crises," Durbin said. "We owe it to those who serve our county to do everything we can to help them get back on solid financial ground when their tour of duty is over. This law cuts the red tape our servicemembers face if they need to file for bankruptcy and levels the playing field for veterans."

The 2005 Bankruptcy Abuse Prevention Act changed the U.S. bankruptcy code, making it significantly harder for individual debt to be discharged in bankruptcy. The changes to the law require filers to pass a rigorous means test to assess whether the 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 who no longer receive the higher pay that active duty provides but are still evaluated as if they do. The new law exempts returning Guard and Reserve members from this means test, giving them a window of time to get their finances in order and to file for bankruptcy protection if needed.

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 than $25,000 a year - if they are able to find a job at all. Nearly 18% of recently returned servicemembers are unemployed.

The new law also requires the Government Accountability Office (GAO) to report on the financial hardships our veterans face after returning from war.

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