Durbin-Leahy Bill To Help Guard And Reserve Members Facing Bankruptcy Headed To Senate Floor Bill Cuts Red Tape For Returning Service Members

A bill to help National Guard and Reserve members who are struggling financially to receive bankruptcy assistance upon returning from deployment was voted out of the Senate Judiciary Committee yesterday, clearing the way for its consideration by the full Senate. The National Guard and Reservist Debt Relief Act, introduced by Sen. Dick Durbin (D-Ill.), and cosponsored by Judiciary Committee Chairman and National Guard Caucus Co-chair Sen. Patrick Leahy (D-Vt.), will exempt service members from the strict entry criteria they might face when seeking bankruptcy protection.


“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 those who serve our county help as they come home and try to get back on solid financial ground. Cutting the red tape our service members face if they need to file for bankruptcy is critical."


“We owe a great deal to the men and women who serve in the Guard and Reserve,” said Leahy.  “This legislation will ensure that individuals who have served and who return to a lower paying civilian job will receive the assistance they need to get a fresh start should they need to turn to the bankruptcy laws.  I hope the Senate will quickly pass this bill; National Guard members and Reservists who have served so faithfully deserve no less.”


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 Durbin-Leahy bill would exempt 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 service members earn less than $25,000 a year – if they are able to find a job at all. Nearly 18 percent of recently returned service members are unemployed.


The bill would also call for a Government Accountability Office (GAO) report on the financial hardships our veterans face after returning from war.


A companion bill passed the House of Representatives with bipartisan support in June.


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