Durbin, Bayh, Landrieu Introduce Bankruptcy Amendment to Protect Military Personnel From Financial Ruin

DURBIN, BAYH, LANDRIEU INTRODUCE BANKRUPTCY AMENDMENT TO PROTECT MILITARY PERSONNEL FROM FINANCIAL RUIN

Tuesday, March 1, 2005

[WASHINGTON, DC] - As the Senate begins debate on legislation to change bankruptcy rules to favor lenders over those who find themselves in financial straits, U.S. Sens. Dick Durbin (D-IL); Mary Landrieu (D-LA) and Evan Bayh (D-IN) have introduced an amendment to protect military families from the new punitive standards.

"We have a situation today where many men and women in the military are making extraordinary sacrifices and it's costing them - not just in terms of time away from their families but in very real financial terms. It's unfair that they should come home to face this new harsh bankruptcy law," said Durbin. "We can't repay the debt we owe our soldiers and their families, but we can protect them from having to spend the rest of their lives buried in debt." "Across the country military families are facing dire financial circumstances due to longer than expected tours of duties," Senator Bayh said. "They are being penalized for their patriotism -- no one should have to choose between doing right by their country and doing right by their families. Helping protect military families from bankruptcy is the absolute least we can do to honor their service and sacrifice."

Durbin, Landrieu and Bayh say financial casualties from the war include reservists whose small businesses failed after they were called up for duty. Other victims are soldiers whose salaries dropped when they were deployed and who took out high-interest loans to fill the gap. The General Accounting Office (GAO) found that approximately 16,000 active duty members of the U.S. military file for bankruptcy each year.

The amendment, known as the G.I. Protection Amendment, has four main provisions: - First, it would protect service members from being dragged into destitution by the predatory practices of extremely high interest rate lenders. It prevents a creditor from recovering in bankruptcy amounts owed on so-called "pay day" loans secured by a personal check for future deposit or electronic access to a bank account. It would also disallow claims on a debt exceeding an effective annual percentage rate of 36 percent or based upon assignment of military retirement or disability payments, and would make such debts dischargeable in bankruptcy. - Second, because service members must live wherever duty posts them, the amendment would allow them to choose to have federal bankruptcy exemptions or those of their home state of record apply to their case. While many states do not make the federal exemptions available to their residents, such restrictions should not apply to troops posted there temporarily and with no choice in where they live. - Third, it would exempt members of the armed services, veterans, and spouses of service members who die in military service from application of the "means test" provisions of the bill. Military families and veterans are facing tough times. They should not have to endure a new right of creditors to harass them in court and subject them to an arbitrary means test. The amendment would allow them the application of current law, which gives the bankruptcy courts the flexibility to handle each case independently. - Fourth, it would save the homes of military personnel from being lost in the event of a bankruptcy. The amendment would allow members of the military, veterans, and surviving spouses of those killed in military service to claim a minimum homestead exemption of $75,000, no matter in which state they own their home. Under current law, retirement nest eggs invested in 401(k)s are protected in bankruptcy proceedings. For many military families, their homes are their retirement nest eggs and they ought to be protected as well.

The senators said some soldiers are falling deeply into debt simply because of their lengthy deployment. They gave the example of Jim and Korina Self from Lockeford, California.

The Selfs are in their mid thirties and have six children. Four years ago, they were on solid financial ground. His job as a corrections officer paid well, and her part-time work as a wedding planner helped. Then Jim, an Army veteran, decided to join the National Guard to earn extra money for retirement. He signed up just before 9/11. Immediately after the attacks, his unit was deployed for a year in another state. Korina quit her job and moved the family to be with him.

Without her income and his overtime, the family lost half its income. They started missing house payments and were falling behind on other bills. After Jim's deployment ended, Korina got pregnant with their sixth child and one of their daughters began having seizures caused by cerebral palsy. Their savings dwindled.

In January 2003, Jim Self's unit was activated again - this time, to patrol the streets of Baghdad. In an interview in the Stockton California Record, he told a reporter, "I don't want to say I regret it, because it's my country, and it's an honor to serve . . .but there are times when I think, four years ago we were making $80,000 to $90,000 dollars a year." Korina Self added, "We had a lot of little things. We had retirement. We were really planning for our future." Today, the retirement savings are gone and the Selfs are in danger of losing their home.

"Some may say soldiers and their families don't deserve the protections in this amendment because they are irresponsible or somehow morally deficient. If opponents of this amendment think members of the United States military are lacking in moral fiber, they need to look at families like the Selfs - good people, struggling to raise their kids, meet their obligations and serve their nation," said Durbin. "Or go talk to some of the G.I.s who are struggling to learn to walk on prosthetic legs so that they can go back to Iraq, or Afghanistan, and rejoin their units. Then tell me that those soldiers need a lesson in personal responsibility."

The G.I. Protection Amendment has the support of the Military Officers Association of America, the Air Force Sergeants Association, the National Consumer Law Center, the National Association for the Uniformed Services, and the Enlisted Association of the National Guard of the United States and the Adjutant General of the Illinois National Guard.

http://durbin.senate.gov/releases.cfm