As troops continue to pull out of out Iraq, Mesa residents may be interested to learn about recent legislation that will affect military members. The new bill allows soldiers in the National Guard and Reserves to file for Chapter 7 bankruptcy protection without undergoing a bankruptcy means test.
The bill, The National Guard and Reservist Debt Relief Extension Act, was passed unanimously by the Senate earlier this month. The House passed the bill two days before the Senate.
The bankruptcy means test is required of most Americans who wish to file bankruptcy. The test is designed to determine the ability of the filer to pay back his or her debt.
At least one senator argued that the means test should be abolished entirely. He called it burdensome, and noted that the bankruptcy system exists to offer Americans a fresh beginning.
To qualify for Chapter 7 bankruptcy protection - the most common form of bankruptcy - Americans have to pass the means test to prove they are not making too much money to file.
Chapter 7 bankruptcy is sometimes called liquidation bankruptcy. It wipes out most of your bills, and in exchange, a trustee sells some of your assets in order to pay creditors. However, you are able to keep some assets, like furniture, appliances and retirement plans. A house and car may be kept if they meet certain equity requirements.
Because Chapter 7 bankruptcy halts creditor harassment, repossession and wage garnishment - and wipes debt away - it is often referred to as a fresh start.
Source: The Hill, "Senate approves bill to aid soldiers struggling with bankruptcy," Josiah Ryan, Dec. 2, 2011