[House Report 112-256]
[From the U.S. Government Publishing Office]
112th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 112-256
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NATIONAL GUARD AND RESERVIST DEBT RELIEF EXTENSION ACT OF 2011
_______
October 18, 2011.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Smith of Texas, from the Committee on the Judiciary,
submitted the following
R E P O R T
[To accompany H.R. 2192]
[Including cost estimate of the Congressional Budget Office]
The Committee on the Judiciary, to whom was referred the
bill (H.R. 2192) to exempt for an additional 4-year 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, having
considered the same, report favorably thereon without amendment
and recommend that the bill do pass.
CONTENTS
Page
Purpose and Summary.............................................. 2
Background and Need for the Legislation.......................... 2
Hearings......................................................... 3
Committee Consideration.......................................... 3
Committee Votes.................................................. 3
Committee Oversight Findings..................................... 3
New Budget Authority and Tax Expenditures........................ 3
Congressional Budget Office Cost Estimate........................ 4
Performance Goals and Objectives................................. 5
Advisory on Earmarks............................................. 5
Section-by-Section Analysis...................................... 5
Changes in Existing Law Made by the Bill, as Reported............ 5
Purpose and Summary
Since 2005, the Bankruptcy Code has contained a ``means
test'' that examines whether individual debtors have the
financial ability to commit some portion of their monthly
income to the repayment of their creditors.\1\ If a debtor has
the ability to repay, his filing of a chapter 7 bankruptcy case
is presumed to be ``substantial abuse'' and his case may be
dismissed.\2\ Compared to a chapter 13 bankruptcy case, in
which a debtor with the means to repay creditors obtains a
discharge from prepetition debts generally after adhering to a
3- to 5-year repayment plan, a debtor in a chapter 7 case
obtains a discharge relatively quickly and without the
repayment condition.\3\ Thus, many debtors prefer to file a
chapter 7 case if they are able and have no non-exempt assets
of significant value.
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\1\11 U.S.C. Sec. 707(b)(2).
\2\Id. Sec. 707(b)(1).
\3\Compare 11 U.S.C. Sec. 1328(a) (granting discharge to chapter 13
debtor ``as soon as practicable after completion by the debtor of all
payments under the plan''), with 11 U.S.C. Sec. 727 (granting discharge
to debtor without any precondition). A bankruptcy court generally waits
until the statutory period for filing a complaint objecting to
discharge or a motion to dismiss the case for substantial abuse has
lapsed, usually about 4 months after the petition date.
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In April 2008, the Subcommittee on Commercial and
Administrative Law of the House Committee on the Judiciary held
a legislative hearing on H.R. 4044, the National Guard and
Reservists Debt Relief Act of 2008, which highlighted the
unique financial hardships that military reservists and members
of the National Guard face upon their return from active
service.\4\ Following that hearing, Congress passed a version
of that legislation (the ``NGRDRA''), which exempts certain
members of reserve components of the Armed Forces and members
of the National Guard from the means test.\5\ Pursuant to its
terms, the Act took effect on December 19, 2008, which was 60
days after its enactment. The Act was temporary; it expires on
December 19, 2011.\6\
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\4\See generally National Guard and Reservists Debt Relief Act of
2008: Hearing on H.R. 4044 Before the Subcomm. on Commercial & Admin.
Law of the H. Comm. on the Judiciary, 110th Cong. (2008) [hereinafter
2008 Hearing].
\5\National Guard and Reservists Debt Relief Act of 2008, Pub. L.
No. 110-438, 122 Stat. 5000 (2008).
\6\Id. Sec. 4.
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Background and Need for the Legislation
Reference is made to the report of the House Committee on
the Judiciary in the 110th Congress to accompany H.R. 4044.\7\
That report sets forth the substantive basis upon which Public
Law 110-438 was enacted and is incorporated herein by
reference.
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\7\See generally H.R. Rep. No. 110-726 (2008).
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Because of America's ongoing military conflicts, the degree
to which the United States relies upon its military reservists
and National Guardsmen has not significantly subsided during
the 3 years since the 2008 enactment of the NGRDRA. Between
2001 and July 2010, 776,413 military reservists have either
involuntarily or voluntarily been activated to defend American
interests abroad.\8\ The financial hardships they face upon
their return from the theater of war, described in detail by
the witnesses at the 2008 Hearing, persist in 2011.
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\8\Lawrence Kapp, Reserve Component Personnel Issues: Questions and
Answers, Congressional Research Service Report No. RL30802 (2010),
available at http://www.crs.gov/pages/
Reports.aspx?PRODCODE=RL30802&Source=cli (last visited Oct. 3, 2011)
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While the Committee recognizes the unique financial
struggles of returning reservists and Guardsmen, the Government
Accountability Office (GAO) report commissioned by section 3 of
the NGRDRA suggests that the NGRDRA has provided only little
relief.\9\ Only 8% of eligible servicemembers--a total of 176
individuals--claimed the means test exemption.\10\
Additionally, only 32% of the aggregate debt reported by
servicemembers could potentially be discharged.\11\ The GAO
further reported that 10 of the 11 servicemembers it
interviewed did not attribute their debt to military
service,\12\ and that the NGRDRA has had ``no impact'' on
servicemembers' debt incurrence practices.\13\ The GAO was
``unable to identify any clear indications of abuse or
potential abuse of the exemption.''\14\
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\9\Gov't Accountability Office, Military Personnel: Observations on
the Use and Effects of the National Guard and Reservists Debt Relief
Act of 2008, 13 (2010) (finding only 8% of eligible servicemembers who
filed for bankruptcy relief under chapter 7 have claimed the means test
exemption).
\10\Id.
\11\Id. at 16-19.
\12\Id. at 20-22.
\13\Id. at 25-26.
\14\Id. at 18.
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Though the GAO concluded that the NGRDRA has had only a
modest effect, the United States is still engaged in military
conflicts around the world and at least some reservists
continue to benefit from the means test exemption. H.R. 2192
extends the exemption for a period of 4 years to December 19,
2015.
Hearings
The Committee on the Judiciary held no hearings on H.R.
2192.
Committee Consideration
On September 21, 2011, the Committee met in open session
and ordered the bill H.R. 2192 favorably reported 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. 2192.
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. 2192, 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, October 5, 2011.
Hon. Lamar Smith, 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. 2192, the
``National Guard and Reservist Debt Relief Extension Act of
2011.''
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Martin von
Gnechten, who can be reached at 226-2860.
Sincerely,
Douglas W. Elmendorf,
Director.
Enclosure
cc:
Honorable John Conyers, Jr.
Ranking Member
H.R. 2192--National Guard and Reservist Debt Relief Extension Act of
2011.
Under current law, National Guard members and active
reservists are exempt from meeting certain income requirements
to qualify for Chapter 7 bankruptcy protection. That exemption
expires after the beginning of fiscal year 2012. H.R. 2192
would extend that exemption through 2016.
CBO estimates that implementing this bill would have no
significant impact on the Federal budget. Enacting H.R. 2192
would affect direct spending and revenues; therefore, pay-as-
you-go procedures apply. However, CBO estimates that any net
effects would be insignificant for each year.
CBO expects that enacting this legislation would lead some
individuals to file for bankruptcy who would not do so under
current law. Bankruptcy filing fees collected from those
individuals would increase both Federal revenues and offsetting
receipts, because portions of such fees are classified in the
budget as revenues and offsetting receipts.
CBO also expects that, by extending the exemption, some
reservists who would apply for Chapter 13 bankruptcy under
current law would instead apply under Chapter 7. (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.)
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 a year 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, shifting cases from Chapter 13 to Chapter 7 would
slightly reduce net Federal revenues and offsetting receipts.
CBO estimates that those reductions would roughly offset 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. 2192 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 CBO staff contact for this estimate is Martin von
Gnechten. 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.
2192 extends the effectiveness of Public Law 110-438 by 4
years.
Advisory on Earmarks
In accordance with clause 9 of rule XXI of the Rules of the
House of Representatives, H.R. 2192 does not contain any
congressional earmarks, limited tax benefits, or limited tariff
benefits as defined in clause 9(e), 9(f), or 9(g) of Rule XXI.
Section-by-Section Analysis
Section 1 sets forth the short title of the bill as the
``National Guard and Reservist Debt Relief Extension Act of
2011.''
Section 2 extends the effective date of Public Law 110-438
by 4 years. Under current law, the means test exemption for
military reservists and National Guardsmen expires on December
19, 2011. Section 2 extends that date to December 19, 2015.
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 italic, existing law in which no change is
proposed is shown in roman):
NATIONAL GUARD AND RESERVISTS DEBT RELIEF ACT OF 2008
* * * * * * *
SEC. 4. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.
(a) * * *
(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] 7-year
period beginning on the effective date of this Act.
* * * * * * *