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The Mean, Mean, Means Test: One Exception to the Means Test

By Joseph McDaniel, Esq.

They say you should never watch either sausage or law being made. I believe that. And today I will discuss an example of odd lawmaking. Not terrible lawmaking, just strange. The reason I don't mind this statute is that it cuts a break for a small slice of the American Military, but only a small slice, and only for a short period of time. It gets a few of them out from under the Means Test requirement for filing a Chapter 7 Bankruptcy, but only a few, and only within a fairly narrow time frame.

And instead of this statute I'm going to discuss below, P.L. 110-438, The National Guard and Reservists Debt Relief Act of 2008, I would rather have seen a raise for our servicemen and women.

The guys and gals in our armed forces are paid far too little for my taste. Anybody who is willing to take a bullet for his Country deserves a decent paycheck.

One way to make up for a lousy paycheck would be to make it easier to file bankruptcy if you're in the military.

I would support that wholeheartedly.

But instead, Congress did a little carve-out on the Means Test that applies only to a National Guard Member or Armed Forces Reserves, and only during active duty or 540 days thereafter, and only if you serve at least 90 days.

Is that weird or what?

Let me do it again: there is a sliver of an exception to the means test, which is a temporary exception that applies only if you serve 90 days and only during active duty or 540 days thereafter, and only applies if you are a member of the National Guard or the Armed Forces Reserves.

Here is the language of the statute itself (from Wikipedia), and if the statute applies to you, great! You don't have to take the Means Test to file a Chapter 7 Bankruptcy in Arizona, or elsewhere.

Our kids in uniform deserve a good deal more than this:

AN ACT
A bill to amend title 11, United States Code, to exempt for a limited period, from the application of the means-test presumption of abuse under chapter 7, qualifying members of reserve components of the Armed Forces and members of the National Guard who, after September 11, 2001, are called to active duty or to perform a homeland defense activity for not less than 90 days.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

Contents [hide] 1 SECTION 1. SHORT TITLE. 2 SEC. 2. AMENDMENTS. 3 SEC. 3. GAO STUDY. 4 SEC. 4. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.

[edit] SECTION 1. SHORT TITLE.

This Act may be cited as the `National Guard and Reservists Debt Relief Act of 2008'.

[edit] SEC. 2. AMENDMENTS.

Section 707(b)(2)(D) of title 11, United States Code, is amended--

(1) in clauses (i) and (ii)--

(A) by indenting the left margin of such clauses 2 ems to the right, and

(B) by redesignating such clauses as subclauses (I) and (II), respectively,

(2) by striking `testing, if the debtor is a disabled veteran' and inserting the following:

`testing--

`(i) if the debtor is a disabled veteran',

(3) by striking the period at the end and inserting `; or', and

(4) by adding at the end the following:

`(ii) with respect to the debtor, while the debtor is--

`(I) on, and during the 540-day period beginning immediately after the debtor is released from, a period of active duty (as defined in section 101(d)(1) of title 10) of not less than 90 days; or

`(II) performing, and during the 540-day period beginning immediately after the debtor is no longer performing, a homeland defense activity (as defined in section 901(1) of title 32) performed for a period of not less than 90 days; if after September 11, 2001, the debtor while a member of a reserve component of the Armed Forces or a member of the National Guard, was called to such active duty or performed such homeland defense activity.'.

[edit] SEC. 3. GAO STUDY.

(a) Comptroller General Study- Not later than 2 years after the effective date of this Act, the Comptroller General shall complete and transmit to the Speaker of the House of Representatives and the President pro tempore of the Senate, a study of the use and the effects of the provisions of law amended (and as amended) by this Act. Such study shall address, at a minimum--

(1) whether and to what degree members of reserve components of the Armed Forces and members of the National Guard avail themselves of the benefits of such provisions,

(2) whether and to what degree such members are debtors in cases under title 11 of the United States Code that are substantially related to service that qualifies such members for the benefits of such provisions,

(3) whether and to what degree such members are debtors in cases under such title that are materially related to such service, and

(4) the effects that the use by such members of section 707(b)(2)(D) of such title, as amended by this Act, has on the bankruptcy system, creditors, and the debt-incurrence practices of such members.

(b) Factors- For purposes of subsection (a)--

(2) a case shall be considered to be materially related to the service of a member of a reserve component of the Armed Forces or a member of the National Guard that qualifies such member for the benefits of such provisions if more than 10 percent of the aggregate amount of the debts in such case is incurred as a direct or indirect result of such service, and

(3) the term `effects' means--

(A) with respect to the bankruptcy system and creditors--

(i) the number of cases under title 11 of the United States Code in which members of reserve components of the Armed Forces and members of the National Guard avail themselves of the benefits of such provisions,

(ii) the aggregate amount of debt in such cases,

(iii) the aggregate amount of debt of such members discharged in cases under chapter 7 of such title,

(iv) the aggregate amount of debt of such members in cases under chapter 7 of such title as of the time such cases are converted to cases under chapter 13 of such title,

(v) the amount of resources expended by the bankruptcy courts and by the bankruptcy trustees, stated separately, in cases under title 11 of the United States Code in which such members avail themselves of the benefits of such provisions, and

(vi) whether and to what extent there is any indicia of abuse or potential abuse of such provisions, and

(B) with respect to debt-incurrence practices--

(i) any increase in the average levels of debt incurred by such members before, during, or after such service,

(ii) any indicia of changes in debt-incurrence practices adopted by such members in anticipation of benefitting from such provisions in any potential case under such title; and

(iii) any indicia of abuse or potential abuse of such provisions reflected in the debt-incurrence of such members.

[edit] SEC. 4. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.

(a) Effective Date- Except as provided in subsection (b), this Act and the amendments made by this Act shall take effect 60 days after the date of enactment of this Act.

(b) Application of Amendments- The amendments made by this Act shall apply only with respect to cases commenced under title 11 of the United States Code in the 3-year period beginning on the effective date of this Act.

Full post as published by Arizona Bankruptcy Attorney Blog on November 20, 2010 (boomark / email).