[DOCID: f:hr726.110]
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110th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 110-726
======================================================================
NATIONAL GUARD AND RESERVISTS DEBT RELIEF ACT
OF 2008
_______
June 20, 2008.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Conyers, from the Committee on the Judiciary, submitted the
following
R E P O R T
[To accompany H.R. 4044]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the bill
(H.R. 4044) to amend the Bankruptcy Abuse Prevention and
Consumer Protection Act of 2005 to exempt from the means test
in bankruptcy cases, for a limited period, qualifying reserve-
component members who, after September 11, 2001, are called to
active duty or to perform a homeland defense activity for not
less than 60 days, having considered the same, reports
favorably thereon with amendments and recommends that the bill
as amended do pass.
CONTENTS
Page
The Amendments................................................... 2
Purpose and Summary.............................................. 3
Background and Need for the Legislation.......................... 4
Hearings......................................................... 7
Committee Consideration.......................................... 7
Committee Votes.................................................. 8
Committee Oversight Findings..................................... 8
New Budget Authority and Tax Expenditures........................ 8
Congressional Budget Office Cost Estimate........................ 8
Performance Goals and Objectives................................. 9
Constitutional Authority Statement............................... 9
Advisory on Earmarks............................................. 10
Section-by-Section Analysis...................................... 10
Changes in Existing Law Made by the Bill, as Reported............ 11
The Amendments
The amendments are as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1 SHORT TITLE.
This Act may be cited as the ``National Guard and Reservists Debt
Relief Act of 2008''.
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 ``if the debtor is a disabled veteran'' and
inserting the following:
``if--
``(i) 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) while--
``(I) the debtor is--
``(aa) 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
``(bb) 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; and
``(II) 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.''.
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)--
(1) a case shall be considered to be substantially 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 the provisions of law amended (and
as amended) by this Act if more than 33 percent of the
aggregate amount of the debts in such case is incurred as a
direct or indirect result of such service,
(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.
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 the 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.
Amend the title so as to read:
A bill to amend title 11 of the 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.
Purpose and Summary
The Bankruptcy Abuse Prevention and Consumer Protection Act
of 2005 (the 2005 Bankruptcy Act) was signed into law by
President George W. Bush on April 20, 2005.\1\ The 2005
Bankruptcy Act is the most comprehensive overhaul of bankruptcy
law in more than 25 years, particularly with respect to
consumer bankruptcy. These consumer bankruptcy amendments
included, for example, the establishment of a means testing
mechanism to determine a debtor's ability to repay debts. Under
this test, a chapter 7 bankruptcy case is presumed to be an
abuse if it appears that the debtor has income in excess of
certain thresholds.
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\1\Pub. L. No. 109-8, 119 Stat. 23 (2005).
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H.R. 4044, the ``National Guard and Reservists Debt Relief
Act of 2008,'' would exempt certain qualifying National Guard
members and reserve component members of the Armed Services
from the means test's presumption of abuse. This bipartisan
legislation responds to the fact that some who serve in the
National Guard and the Reserves encounter financial
difficulties during or in the wake of their service and that
they merit relief from the additional proof requirements of the
means test.
Background and Need for the Legislation
BACKGROUND
Chapter 7 is a form of bankruptcy relief by which an
individual debtor may discharge his or her personal liability
for certain debts in exchange for relinquishing the debtor's
nonexempt assets to a bankruptcy trustee for liquidation and
distribution to creditors. A discharge under chapter 7
contrasts with the ``conditional discharge'' of chapter 13, a
form of bankruptcy relief by which a debtor commits to repay
some portion of his or her financial obligations in exchange
for retaining nonexempt assets and receiving a broader
discharge of debt than is available under chapter 7.
As originally enacted in 1978, the Bankruptcy Code provided
that a chapter 7 case could only be dismissed for ``cause.'' In
1984, it was amended to permit a court to dismiss a chapter 7
case for ``substantial abuse.''\2\ This provision, codified in
section 707(b) of the Bankruptcy Code,\3\ was added ``as part
of a package of consumer credit amendments designed to reduce
perceived abuses in the use of chapter 7.''\4\ It was intended
to respond ``to concerns that some debtors who could easily pay
their creditors might resort to chapter 7 to avoid their
obligations.''\5\ In 1986, section 707(b) was further amended
to allow a United States Trustee to move for dismissal.\6\
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\2\Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub. L.
No. 98-353, Sec. 312, 98 Stat. 333, 335 (1984).
\3\11 U.S.C. Sec. 707(b) (2007).
\4\6 Alan N. Resnick & Henry J. Sommer, Collier on Bankruptcy
Sec. 707.LH[2], at 707-61 (15th ed. rev. 2007).
\5\Id. at Sec. 707.04, at 707-25.
\6\Bankruptcy Judges, United States Trustees, and Family Farmer
Bankruptcy Act of 1986, Pub. L. No. 99-554, Sec. 219, 100 Stat. 3088,
3101 (1986). The United States Trustee Program is responsible for
overseeing the administration of bankruptcy cases and private trustees.
28 U.S.C.A. Sec. Sec. 581-89a (2007). The Program is overseen by the
Executive Office for United States Trustees, which provides policy and
management direction to United States Trustees. The Program operates
through a system of 21 regions nationwide, except for North Carolina
and Alabama. Bankruptcy Judges, United States Trustees, and Family
Farmer Bankruptcy Act of 1986, Pub. L. No. 99-554, 28 U.S.C.A. Sec. 581
n. (2007). With respect to North Carolina and Alabama, the bankruptcy
system is administered by a bankruptcy administrator appointed by the
Judicial Conference. Id.
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As amended by the 2005 Bankruptcy Act, section 707(b)
permits a court, on its own motion, or on motion of the United
States trustee, a private trustee, a creditor, or another party
in interest, to dismiss a chapter 7 case for abuse if it was
filed by an individual whose debts are primarily consumer
debts. Alternatively, the chapter 7 case may be converted to a
case under chapter 11 or chapter 13 on consent of the debtor.
The Act replaces the prior law's presumption in favor of the
debtor with a mandatory presumption of abuse under the Act's
means test provisions,\7\ which presumption can be rebutted
under limited circumstances.\8\
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\7\As amended, section 707(b) of the Bankruptcy Code requires a
court to presume that abuse exists if the amount of the debtor's
remaining income, after certain expenses and other specified amounts
are deducted from the debtor's current monthly income (a defined term).
11 U.S.C. Sec. 707(b)(2)(A)(I) (2007).
\8\11 U.S.C. Sec. 707(b)(2)(B) (2007). Where the mandatory
presumption of abuse does not apply or has been rebutted, the court, in
order to determine whether the granting of relief under chapter 7 would
constitute an abuse, must consider: (1) whether the debtor filed the
chapter 7 case in bad faith; or (2) whether the totality of
circumstances of the debtor's financial situation (including whether
the debtor seeks to reject a personal services contract and the
financial need for such rejection) demonstrates abuse. 11 U.S.C.
Sec. 707(b)(3) (2007).
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The Act's means test provisions establish an income/expense
screening mechanism for the purpose of determining a consumer
debtor's ability to repay debts. If a chapter 7 debtor has the
ability to repay debts and has no special circumstances, the
filing of the debtor's case is presumed to be an abuse and
therefore subject to dismissal or conversion. The means test
takes into consideration the debtor's income and various
specified expenses, some of which are determined under Internal
Revenue Service expense standards.\9\ The debtor's income, for
purposes of the means test, is typically determined by
calculating the amount of average monthly income the debtor
received during the 6-month period preceding the filing of the
bankruptcy case.\10\
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\9\11 U.S.C. Sec. 707(b)(2)(A) (2007).
\10\11 U.S.C. Sec. 101(10A) (2007).
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To determine whether the presumption of abuse applies under
the means test, a chapter 7 debtor must complete Official Form
22, a form that requires the debtor to supply substantial
financial information and supporting documentation.\11\ The
form requires the debtor to: disclose monthly income from all
sources, determine the applicable median family income,
calculate his or her current monthly income, determine the
applicable Internal Revenue Service expense standards, identify
any other applicable expenses, calculate deductions for debt
payments, determine whether the presumption of abuse applies
based on ability to repay, and describe any additional expense
claims. The form must be signed by the debtor under penalty of
perjury. The Bankruptcy Code currently includes a limited
exception to the means test for a disabled veteran\12\ if his
or her indebtedness was primarily incurred during a period when
the debtor was on active duty or performing a homeland defense
activity.\13\
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\11\Official Bankruptcy Form 22A--Chapter 7 Statement of Current
Monthly Income and Means-Test Calculation (Jan. 2008).
\12\The term is defined by reference to 38 U.S.C. Sec. 3741(1)
(2007), which provides as follows:
The term ``disabled veteran'' means (A) a veteran who is
entitled to compensation under laws administered by the
Secretary for a disability rated at 30 percent or more, or
(B) a veteran whose discharge or release from active duty
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was for a disability.
38 U.S.C. Sec. 3741(1) (2007).
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\13\11 U.S.C. Sec. 707(b)(2)(D) (2007).
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NEED FOR THE LEGISLATION
Between September 11, 2001 and November 30, 2007, 254,894
members of the National Guard and 202,113 Reservists have been
deployed to Iraq and Afghanistan.\14\ It is estimated that
``[m]oney problems related to deployment'' may affect up to 26
percent of National Guard soldiers.\15\ For example, the
Subcommittee on Commercial and Administrative Law last May held
an oversight hearing on the second anniversary of the enactment
of the 2005 Bankruptcy Act, during which a chapter 13 debtor
described the impact of her husband's activation as a member of
the Army reserve on their family's financial circumstances.\16\
She explained that after her husband was called to active duty
and deployed to Iraq, the family income decreased by more than
$1,000 per month, which, among other reasons, caused her and
her husband to seek bankruptcy relief.\17\
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\14\Michael Waterhouse & JoAnne O'Bryant, National Guard Personnel
and Deployments: Fact Sheet, Congressional Research Report for
Congress, RS22451, at 5 (Jan. 17, 2008).
\15\Marilyn Elias, Iraq War Takes Unique Toll on National Guard,
USA Today, Aug. 20, 2007; see, e.g., Lizette Alvarez, Iraq Looms Closer
for 13,000 National Guard Soldiers, N.Y. Times, Apr.10, 2007 (``In some
cases, families face financial hardship when a soldier deploys. In
others, the soldiers wind up making more money.'').
\16\Second Anniversary of the Enactment of the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005: Are Consumers Really
Being Protected Under the Act?: Hearing Before the Subcomm. on
Commercial and Administrative Law of the H. Comm. on the Judiciary,
110th Cong. (2007) (prepared statement of Shirley Jones Burroughs).
\17\Id.
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Some servicemembers experience financial distress after
they leave active service and resume civilian life.\18\
Although the Servicemembers Civil Relief Act\19\ enacted in
2003 accords certain protections from some creditor collection
efforts for a servicemember who is no longer in active duty
status for 90 days,\20\ this temporary relief can be inadequate
for various reasons. Returning servicemembers, for instance,
can encounter difficulty obtaining employment upon their return
to civil life.\21\ According to a recent Department of Veterans
Affairs survey, ``Transitioning back into employment,
education, and/or training after completing military service
can be challenging for some military personnel[.]''\22\
Specifically, the study found an 18 percent unemployment rate
for military personnel discharged in the past 3 years.\23\ In
addition, it is estimated that up to one-fifth of
servicemembers returning from Iraq and Afghanistan ``report
symptoms of post-traumatic stress disorder or major
depression,'' and a ``little more than half of them have sought
mental health treatment,'' according to a report released
earlier this year by the RAND Corporation.\24\
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\18\See, e.g., Kimberly Hefling, VA Estimates Fewer Homeless Vets,
Wash. Post, Mar. 6, 2008 (reporting that the ``Veterans Affairs
Department estimates that on any given night last year, 154,000
veterans were homeless''); Bina Venkataraman, Help Lags for Homeless
Female Veterans--About 8,000 Women Lack Permanent Shelter. Need is
Likely to Rise as More Women Return from War, Christian Science
Monitor, July 18, 2007.
\19\Pub. L. No. 108-189, 117 Stat. 2835, 2842 (2003) (codified in
scattered sections of 50 U.S.C. app.).
\20\See, e.g., 50 U.S.C. app. 522(a)(1) (2007).
\21\See, e.g., Stephen Barr, Veterans Return to Bleak Job Market,
Wash. Post, Apr. 1, 2008, at D1.
\22\Id.
\23\Id.
\24\Lizette Alvarez, Nearly a Fifth of War Veterans Report Mental
Disorders, a Private Study Finds, N.Y. Times, Apr. 18, 2008. According
to the New York Times, this 500-page study ``is the first exhaustive,
private analysis of the psychological and cognitive injuries suffered
by service members.'' Id.
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Although the means test has been generally criticized for
instituting hurdles that debtors must navigate to receive
relief under chapter 7,\25\ it can present particular issues
for servicemembers who seek chapter 7 relief shortly after
leaving service. While serving in Iraq or Afghanistan,
servicemembers often receive higher compensation, in the form
of combat pay, and incur fewer expenses. When they return to
the United States, these servicemembers no longer receive
combat pay. The means test, nevertheless, requires a debtor to
calculate his or her income based on the average monthly income
that he or she received during the 6-month period preceding the
filing date of the bankruptcy case, rather than the debtor's
actual, current income.\26\
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\25\Second Anniversary of the Enactment of the Bankruptcy Abuse
Prevention and Consumer Protection Act of 2005: Are Consumers Really
Being Protected Under the Act?: Hearing Before the Subcomm. on
Commercial and Administrative Law of the H. Comm. on the Judiciary,
110th Cong. (2007) (prepared statement of Henry Sommer, President,
National Association of Consumer Bankruptcy Attorneys).
\26\11 U.S.C. Sec. Sec. 101(10A), 521(a)(1)(B)(ii) (2007); Official
Bankruptcy Form 6--Schedule I, Current Income of Individual Debtor(s)
(Dec. 2007).
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To avoid having his or her chapter 7 case dismissed for
abuse, the servicemember must demonstrate ``special
circumstances.''\27\ Although special circumstances includes
``a call or order to active duty in the Armed Forces,'' the
debtor must nevertheless demonstrate that this situation
``justif[ies] additional expenses or adjustments of current
monthly income for which there is no reasonable
alternative.''\28\ To prove special circumstances, the debtor
must:
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\27\11 U.S.C. Sec. 707(b)(2)(B)(i) (2007).
\28\Id.
(1) Litemize each additional expense or adjustment of
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income;
(2) Ldocument such expense or adjustment to income;
(3) Lprovide a detailed explanation of the special
circumstances that make such expenses or adjustment to
income necessary and reasonable;
(4) Lattest under oath to the accuracy of any
information provided to demonstrate that additional
expenses or adjustments to income are required;\29\ and
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\29\11 U.S.C. Sec. 707(b)(2)(B)(ii), (iii) (2007).
(5) Lestablish that such additional expenses or
adjustments to income cause the product of the debtor's
monthly income to be less then the threshold
substantiating abuse.\30\
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\30\11 U.S.C. Sec. 707(b)(2)(B)(iv) (2007).
Alternatively, some debtors have tried to deal with this
problem by utilizing Bankruptcy Code section 101(10A),\31\
which allows the court itself to calculate a debtor's current
monthly income if the debtor does not file a statement of
current income as required by Bankruptcy Code section
521(a)(1)(B)(ii).\32\ In effect, this alternative would require
a debtor to file a motion to obtain the court's approval
excusing him or her from the requirement to file the income
schedule.
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\31\11 U.S.C. Sec. 101(10A)(A)(ii) (2007); see, e.g., In re Ingram,
Case No. 06-02714-8-DD (Bankr. E.D.N.C. Nov. 26, 2006).
\32\11 U.S.C. Sec. 521(a)(1)(B)(ii) (2007).
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Still other debtors try to delay filing their bankruptcy
cases in order to avoid having to pursue either of these
cumbersome procedures. Nevertheless, not all debtors have the
luxury of time, particularly if a creditor is imminently
executing on a judgment or a home foreclosure sale is pending.
On November 1, 2007, Representative Janice Schakowsky (D-
IL) with 28 original bipartisan cosponsors introduced H.R.
4044. The bill currently has 66 bipartisan cosponsors.
Hearings
The Committee's Subcommittee on Commercial and
Administrative Law held on April 1, 2008, 1 day of hearings on
H.R. 4044. Testimony was received from Representatives Janice
Schakowsky (D-IL) and Dana Rohrabacher (R-CA); Raymond C.
Kelley, National Legislative Director of AMVETS; Professor Jack
Williams on behalf of the American Bankruptcy Institute; and Ed
Boltz, Esq. on behalf of the National Association of Consumer
Bankruptcy Attorneys.
Committee Consideration
On April 24, 2008, the Subcommittee on Commercial and
Administrative Law met in open session and ordered the bill,
H.R. 4044, favorably reported, with an amendment, by voice
vote, a quorum being present. On April 30, 2008 and on June 11,
2008, the Committee met in open session and ordered the bill,
H.R. 4044, favorably reported on June 11, 2008, with an
amendment, by voice vote, a quorum being present.
Committee Votes
In compliance with clause 3(b) of rule XIII of the Rules of
the House of Representatives, the Committee advises that there
were no recorded votes during the Committee's consideration of
H.R. 4044.
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee advises that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of rule XIII of the Rules of the House of
Representatives is inapplicable because this legislation does
not provide new budgetary authority or increased tax
expenditures.
Congressional Budget Office Cost Estimate
In compliance with clause 3(c)(3) of rule XIII of the Rules
of the House of Representatives, the Committee sets forth, with
respect to the bill, H.R. 4044, the following estimate and
comparison prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act of
1974:
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 19, 2008.
Hon. John Conyers, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4044, the National
Guard and Reservists Debt Relief Act of 2008.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Leigh Angres,
who can be reached at 226-2860.
Sincerely,
Peter R. Orszag,
Director.
Enclosure
cc:
Honorable Lamar S. Smith.
Ranking Member
H.R. 4044--National Guard and Reservists Debt Relief Act of 2008.
CBO estimates that implementing this bill would have no
significant impact on the federal budget. Enacting H.R. 4044
could affect the collection of offsetting receipts (a credit
against direct spending) and revenues; however, CBO estimates
that any net effect would be insignificant.
H.R. 4044 would exempt National Guard members and active
reservists from meeting certain income requirements to qualify
for Chapter 7 bankruptcy protection. This exemption would apply
to cases filed within three years of the bill's enactment.
Under current law, a debtor's income, less certain expenses,
must fall below a certain threshold relative to the outstanding
debt to qualify for protection under Chapter 7 of the
bankruptcy code. Those who do not qualify can file under
Chapter 13. Disabled veterans are not required to satisfy this
means testing. The bill would extend this benefit to members of
the National Guard and reservists that are called to active
duty for at least 90 days.
Because H.R. 4044 would exempt National Guard members and
active reservists from means testing for Chapter 7 bankruptcy
filings, CBO expects that enacting this legislation would
enable some individuals to file for bankruptcy that would not
do so under current law. Fees collected from those individuals
would increase revenues and offsetting receipts to the federal
government.
CBO also expects that, under the bill, some reservists that
would apply for Chapter 13 bankruptcy under current law would
instead apply under Chapter 7. Based on information from the
Government Accountability Office and the Administrative Office
of the United States Courts, CBO estimates that National Guard
members and active reservists make up about one-tenth of one
percent of all bankruptcy filers, and that fewer than 500
people who would otherwise file for Chapter 13 protection would
file for Chapter 7 under this bill. Because filing fees for
Chapter 7 are lower than those for Chapter 13, a shift of cases
from Chapter 13 to Chapter 7 would slightly reduce the amount
of revenues and offsetting receipts received by the federal
government. CBO estimates that this reduction would
approximately equal the increase in revenues and offsetting
receipts that would result from new filers under the bill--
resulting in no significant net effect on the federal budget.
H.R. 4044 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would impose no costs on State, local, or tribal governments.
The staff contact for this estimate is Leigh Angres, who
can be reached at 226-2860. The estimate was approved by
Theresa Gullo, Deputy Assistant Director for Budget Analysis.
Performance Goals and Objectives
The Committee states that pursuant to clause 3(c)(4) of
rule XIII of the Rules of the House of Representatives, H.R.
4044 eases the burden on certain qualifying members of reserve-
components of the Armed Forces and members of the National
Guard to obtain bankruptcy relief under chapter 7 by exempting
them for a limited period, from the application of the means-
test presumption of abuse under chapter 7.
Constitutional Authority Statement
Pursuant to clause 3(d)(1) of rule XIII of the Rules of the
House of Representatives, the Committee finds the authority for
this legislation in article I, section 8, clause 4 of the
Constitution.
Advisory on Earmarks
In accordance with clause 9 of rule XXI of the Rules of the
House of Representatives, H.R. 4044 does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(d), 9(e), or 9(f) of Rule XXI.
Section-by-Section Analysis
The following discussion describes the bill as reported by
the Committee.
Sec. 1. Short title. Section 1 sets forth the short title
of the bill as the ``National Guard and Reservists Debt Relief
Act of 2008.''
Sec. 2. Amendment. Section 2 amends Bankruptcy Code section
707(b)(2), which sets out the grounds for which a chapter 7
case may be presumed to be an abuse. Section 707(b)(2)(D)
currently provides a limited exception to the presumption of
abuse for certain disabled veterans. Section 2 of the bill
amends Bankruptcy Code section 707(b)(2)(D) to exempt a debtor
from the presumption of abuse if he or she is on active
duty\33\ or is performing a homeland defense activity\34\ for
at least 90 days as a member of a reserve component of the
Armed Forces or as a member of the National Guard, if such
service commenced after September 11, 2001. In addition,
section 2 temporarily exempts such debtor for a 540-day period
following the date on which his or her service terminates.
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\33\The term, ``active duty,'' is defined by reference to section
101(d)(1) of title 10 of the United States Code. Section 101(d)(1) of
title 10 defines ``active duty'' as follows:
The term ``active duty'' means full-time duty in the active
military service of the United States. Such term includes
full-time training duty, annual training duty, and
attendance, while in the active military service, at a
school designated as a service school by law or by the
Secretary of the military department concerned. Such term
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does not include full-time National Guard duty.
10 U.S.C. Sec. 101(d)(1) (2007).
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\34\Section 1 defines a ``homeland defense activity'' by reference
to section 901(1) of title 32 of the United States Code, which provides
as follows:
The term ``homeland defense activity'' means an activity
undertaken for the military protection of the territory or
domestic population of the United States, or of
infrastructure or other assets of the United States
determined by the Secretary of Defense as being critical to
national security, from a threat or aggression against the
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United States.
32 U.S.C. Sec. 901(1) (2007).
Sec. 3. GAO Study. Section 3(a) of the bill directs the
Comptroller General to 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 effects of the amendments
effectuated by the Act. The study must address:
(1) Lwhether and to what degree members of reserve
components of the Armed Forces and members of the
National Guard avail themselves of the benefits of the
Act;
(2) Lwhether and to what degree such members sought
bankruptcy relief because of factors that were
substantially related to their service;
(3) Lwhether and to what degree such members sought
bankruptcy relief because of factors that were
materially related to their service;
(4) Lthe effects that use of Bankruptcy Code section
707(b)(2)(D), as amended by this Act, has on the
bankruptcy system, creditors, and such members' debt-
incurrence practices.
Subsection (b)(1) provides that a bankruptcy case is to be
considered to be substantially related to the service of such
member if more than 33 percent of the aggregate amount of debts
in such case was incurred as a direct or indirect result of
such service.
Subsection (b)(2) provides that a bankruptcy case is to be
considered to be materially related to the service of such
member if more than 10 percent of the aggregate amount of debts
in such case was incurred as a direct or indirect result of
such service.
Subsection (b)(3)(A) provides that the term ``effects''
with respect to the bankruptcy system and creditors means:
(1) Lthe number of bankruptcy cases in which members of
reserve components of the Armed Forces and members of
the National Guard avail themselves of the benefits of
Bankruptcy Code section 707(b)(2)(D), as amended by
this Act;
(2) Lthe aggregate amount of debt in such cases;
(3) Lthe aggregate amount of debt discharged in such
cases under chapter 7;
(4) Lthe aggregate amount of debt in such cases if and
when they are converted from chapter 7 to chapter 13;
(5) Lthe amount of resources expended by the bankruptcy
courts and by bankruptcy trustees, stated separately,
in bankruptcy cases where such members avail themselves
of Bankruptcy Code section 707(b)(2)(D), as amended by
this Act; and
(6) Lwhether and to what extent there is any indicia of
abuse or potential abuse of such provisions.
Subsection (b)(3)(B) provides that the term ``debt-
incurrence practices'' means:
(1) Lany increase in the average levels of debt
incurred by such members before, during, or after such
service;
(2) Lany indicia of changes in debt-incurrence
practices adopted by such members in anticipation of
benefitting from Bankruptcy Code section 707(b)(2)(D),
as amended by this Act, in any potential bankruptcy
case; and
(3) Lany indicia of abuse or potential abuse of such
provisions reflected in the debt-incurrence of such
members.
Sec. 4. Effective Date. Application of Amendments. Section
4(a) provides that the amendments made by the Act take effect
60 days after the Act's date of enactment.
Subsection (b) provides that the amendments made by the Act
apply to cases commenced under title 11 of the United States
Code during the 3-year period beginning on the Act's effective
date.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italics, existing law in which no change
is proposed is shown in roman):
SECTION 707 OF TITLE 11, UNITED STATES CODE
Sec. 707. Dismissal of a case or conversion to a case under chapter 11
or 13
(a) * * *
(b)(1) * * *
(2)(A) * * *
* * * * * * *
(D) Subparagraphs (A) through (C) shall not apply, and the
court may not dismiss or convert a case based on any form of
means testing, [if the debtor is a disabled veteran] if--
(i) the debtor is a disabled veteran (as defined in
section 3741(1) of title 38), and the indebtedness
occurred primarily during a period during which he or
she was--
[(i)] (I) on active duty (as defined in
section 101(d)(1) of title 10); or
[(ii)] (II) performing a homeland defense
activity (as defined in section 901(1) of title
32)[.]; or
(ii) while--
(I) the debtor is--
(aa) 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
(bb) 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; and
(II) 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.
* * * * * * *
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