In 2008, Congress passed the National Guard and Reservists Debt Relief Act and it was signed by the President into law on October 20, 2008. This new law became effective on December 19, 2008. The point of the law is to exempt National Guard and Reservists from all forms of means testing during the time of active duty or homeland defense activity and for a 540 day period thereafter, qualifying reservists of the Armed Forces and members of the National Guard who are called to active duty for at least 90 days, or who perform homeland defense activity for at least 90 days. This is very important to qualifying individuals as the means testing is used to determine one’s qualification to file a chapter 7 bankruptcy.
Oftentimes, when activated, the service member’s monthly income will decrease. However, the means test for bankruptcy qualification takes into account the service members previous six months income that is often higher and prevents that service member from filing for chapter 7 relief. This exemption can help avoid being forced into a non-feasible chapter 13 plan in which an individual must pay the creditors.
Bankruptcy and means testing can be very complicated and tricky if you are not familiar with the law. If you are having financial difficulty, please contact our office nearest to you and take advantage of our free initial consultation to discuss the possibility of bankruptcy relief for you.