[House Report 116-170]
[From the U.S. Government Publishing Office]

116th Congress    }                                    {        Report
                        HOUSE OF REPRESENTATIVES
 1st Session      }                                    {       116-170




 July 23, 2019.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed


    Mr. Nadler, from the Committee on the Judiciary, submitted the 

                              R E P O R T

                        [To accompany H.R. 3304]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 3304) 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.


Purpose and Summary..............................................     1
Background and Need for the Legislation..........................     2
Hearings.........................................................     5
Committee Consideration..........................................     5
Committee Votes..................................................     5
Committee Oversight Findings.....................................     5
New Budget Authority and Tax Expenditures and Congressional 
  Budget Office Cost Estimate....................................     5
Duplication of Federal Programs..................................     6
Performance Goals and Objectives.................................     6
Advisory on Earmarks.............................................     6
Section-by-Section Analysis......................................     6
Changes in Existing Law Made by the Bill, as Reported............     6

                          Purpose and Summary

    H.R. 3304, the ``National Guard and Reservists Debt Relief 
Extension Act of 2019,'' would extend the temporary 
authorization exempting certain qualifying reserve component 
members of the Armed Services and National Guard members from 
the Bankruptcy Code's means test for four years. This 
bipartisan measure was introduced by Representative Steve Cohen 
(D-TN), together with Representatives Ben Cline (R-VA), 
Madeline Dean (D-PA), and Tim Burchett (R-TN) as original 

                Background and Need for the Legislation


I. Overview of financial challenges faced by servicemembers and 

    According to a 2018 lifestyle survey of servicemembers and 
veterans, financial issues was the top lifestyle stressor.\1\ 
In fact, 62 percent of the more than 10,000 individuals 
surveyed reported that they experienced stress because of their 
current financial situation.\2\ Similarly, the National 
Foundation for Credit Counseling found in its survey of 
military personnel that ``[n]early 9 in 10 active service 
members and 84% of spouses or partners have worries about 
personal finances.''\3\ That survey also found ``service 
members today are twice as likely not to be able to pay all 
their bills on time than they were in 2014 (34% vs. 16%), and 3 
in 10 spouses or partners of service members (29%) say they do 
not pay their bills on time. About 1 in 10 (11% vs. 3% in 2014) 
say they currently have debts in collection.''\4\ As one 
financial advisor explained, ``Almost half of service members 
are under the age of 25, and a high percentage are married with 
children. They don't get paid a lot and they must deploy 
repeatedly to difficult places, many times where their lives 
are on the line.''\5\
    \1\Blue Star Families Military Family Lifestyle Survey Results, 
ServingTogether, https://servingtogetherproject.org/blue-star-families-
military-family-lifestyle-survey-results/ (last visited June 3, 2019).
    \3\Press Release, Nat'l Foundation for Credit Counseling, Harris 
Poll Shows Military Service Members, Spouses and Partners Rely on the 
Gig Economy to Supplement Household Income (May 21, 2019) [hereinafter 
NFCC Survey], https://www.nfcc.org/press/harris-poll-shows-military-
supplement-household-income; see Sharon Epperson et al., Military 
Families Say This Is Their Top Concern, CNBC (May 25, 2019, 10:00 
a.m.), https://www.cnbc.com/2019/05/24/for-military-families-financial-
    \4\NFCC Survey, supra note3.
    \5\Dick Powers, Opinion, Military Families Find Money Matters 
Complex, NBC NEWS (May 23, 2019), https://www.nbcnews.com/veteran-
    Servicemembers can also experience financial distress once 
they leave active service. The U.S. Department of Housing and 
Urban Development, according to its 2017 report, estimates that 
40,056 veterans are homeless on any given night.\6\ In 
addition, approximately ``1.4 million other veterans, 
meanwhile, are considered at risk of homelessness due to 
poverty, lack of support networks, and dismal living conditions 
in overcrowded or substandard housing.''\7\
    \6\Press Release, U.S. Dep't of Housing & Urban Dev. Exchange, 
Homelessness Declines in Most Communities of the U.S. with Increases 
Reported in High-Cost Areas (Dec. 6, 2017), https://
    \7\Background & Statistics--FAQ About Homeless Veterans, Nat'l 
Coalition for Homeless Veterans, http://nchv.org/index.php/news/media/
background_and_statistics (last visited June 3, 2019).
    Although the 2003 Servicemembers Civil Relief Act\8\ 
affords certain protections from creditor collection efforts 
for a servicemember who is no longer in active duty status for 
90 days,\9\ this temporary relief is inadequate in certain 
instances and, as a result, these former servicemembers must 
sometimes seek bankruptcy protection under chapter 7. With 
respect to servicemembers who seek chapter 7 relief shortly 
after leaving service, the means test presents particular 
issues. Servicemembers on active duty may receive higher 
compensation in the form of combat pay, while they incur fewer 
    \8\Pub. L. No. 108-189, 117 Stat. 2835, 2842 (2003) (codified in 
scattered sections of 50 U.S.C. app.).
    \9\See, e.g., 50 U.S.C. app. Sec. 522(a)(1) (2019).

II. The Bankruptcy Code's means test

    Although the Bankruptcy Code as originally enacted in 1978 
provided that a chapter 7 case could only be dismissed for 
``cause,'' the Code was amended in 1984 to permit the court to 
dismiss a chapter 7 case for ``substantial abuse.''\10\ This 
provision, codified in section 707(b) of the Bankruptcy 
Code,\11\ was added ``as part of a package of consumer credit 
amendments designed to reduce perceived abuses in the use of 
chapter 7.''\12\ 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.''\13\ In 1986, section 
707(b) was further amended to allow a United States Trustee to 
move for dismissal.\14\
    \10\Bankruptcy Amendments and Federal Judgeship Act of 1984, Pub. 
L. No. 98-353, Sec. 312, 98 Stat. 333, 335 (1984).
    \11\11 U.S.C. Sec. 707(b) (2019).
    \12\6 Alan N. Resnick & Henry J. Sommer, Collier On Bankruptcy 
Sec. 707.LH[2], at 707-61 (15th ed. rev. 2006).
    \13\Id. at Sec. 707.04.
    \14\Bankruptcy Judges, United States Trustees, and Family Farmer 
Bankruptcy Act of 1986, Pub. L. No. 99-554, 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. 
Sec. Sec. 581-89a (2019). 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 (1986); 28 U.S.C. Sec. 581 n. (2019). 
With respect to North Carolina and Alabama, the bankruptcy system is 
administered by a bankruptcy administrator appointed by the Judicial 
Conference. Id.
    Among its various amendments to the Bankruptcy Code, the 
``Bankruptcy Abuse Prevention and Consumer Protection Act of 
2005'' (BAPCPA)\15\ included the establishment of a means or 
needs-based testing mechanism to determine a debtor's ability 
to repay debts for the purpose of determining whether the 
filing of the bankruptcy case should be presumed to be abusive. 
As amended by that Act, Bankruptcy Code section 707(b) provides 
that 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 subject to dismissal or 
conversion to a chapter 13 case based on the debtor's income 
and various specified expenses, some of which are determined 
under Internal Revenue expense standards.\16\ The debtor's 
income, for purposes of this test, is typically determined by 
calculating the amount of average monthly income the debtor 
received during the six-month period preceding the filing of 
the bankruptcy case.\17\
    \15\Pub. L. No. 109-8, 119 Stat 23. (2005).
    \16\11 U.S.C. Sec. 707(b)(2)(A) (2019).
    \17\11 U.S.C. Sec. 101(10A) (2019).
    To satisfy this ability-to-repay analysis, a chapter 7 
debtor, with limited exception, must complete a series of forms 
requiring detailed financial information and supporting 
documentation with regard to the debtor's income\18\ and 
expenses.\19\ Specifically, for purposes of determining whether 
the debtor's bankruptcy case triggers a presumption of abuse 
under the means test, the debtor must complete a form used to 
calculate his or her current monthly income.\20\ Then, using 
the information supplied in response to these forms, the debtor 
must complete a form consisting of 43 questions requiring the 
debtor to calculate whether his or her annualized current 
monthly income exceeds the applicable median family income.\21\
    \18\Official Bankruptcy Form 106I, Schedule I: Your Income (Dec. 1, 
2015), https://www.uscourts.gov/forms/individual-debtors/schedule-i-
    \19\Official Bankruptcy Form 106J, Schedule J: Your Expenses (Dec. 
1, 2015), https://www.uscourts.gov/forms/individual-debtors/schedule-j-
    \20\Official Bankruptcy Form 122A-1, Chapter 7 Statement of Your 
Current Monthly Income (Dec. 1, 2015), https://www.uscourts.gov/forms/
    \21\Official Bankruptcy Forms 122A-2, Chapter 7 Means Test 
Calculation (Dec. 1, 2015), https://www.uscourts.gov/forms/means-test-

                        NEED FOR THE LEGISLATION

    Unless otherwise exempted, servicemembers and veterans must 
complete the required forms and submit the specified paperwork 
under the Bankruptcy Code's means test. This requirement 
applies even with respect to servicemembers who have returned 
to the United States from active service and thus no longer 
receive combat pay. Under the means test, such servicemember 
would have to calculate his or her income based on the average 
monthly income that he or she received during the six-month 
period preceding the filing date of the bankruptcy case, rather 
than the debtor's actual income, which may be much less because 
of the debtor's non-combat status.\22\
    \22\11 U.S.C. 101(10A), 521(a)(1)(B)(ii) (2019); Official 
Bankruptcy Form 106I, Schedule I: Your Income (Dec. 1, 2015), https://
    The means test has two exemptions with respect to 
servicemembers and veterans.\23\ First, it does not apply if 
the debtor is a disabled veteran\24\ whose indebtedness was 
incurred primarily during a period in which he or she was on 
active duty\25\ or while the debtor was performing a homeland 
defense activity.\26\
    \23\11 U.S.C. Sec. 707(b)(2)(D) (2019).
    \24\The term is defined by reference to 38 U.S.C. Sec. 3741(1) 
(2019), 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 was for a 
    \25\As defined in 10 U.S.C. 101(d)(1) (2019).
    \26\As defined in 32 U.S.C. 901(1) (2019).
    Second, it does not apply to a member of the Armed Services 
or the National Guard who was called to active service or to 
perform a homeland security activity for more than 90 days 
after September 11, 2001. This temporary exemption applies 
while the debtor is on active service and for the 540-day 
period after he or she completes such service or activity. If 
the debtor so qualifies, he or she must complete a form 
claiming such exemption.\27\
    \27\Official Bankruptcy Form 121A-1Supp, Statement of Exemption 
from Presumption of Abuse Under Sec. 707(b)(2) (Dec. 1, 2015).
    Bipartisan legislation authorizing this temporary exemption 
was first enacted for three years.\28\ This measure also 
included a directive to the Government Accountability Office 
(GAO) to examine the impact of this exemption. Pursuant to this 
directive, the GAO found that among the 2,122 eligible 
servicemembers who filed for chapter 7 relief during the first 
year the law was in effect ``only 8 percent, or 176 eligible 
servicemembers, claimed the means test exemption.''\29\
    \28\Pub. L. No. 110-438, 122 Stat. 5000 (2008).
    \29\U.S. Gov't Accountability Office, Military Personnel: 
Observations on the Use and Effects of the National Guard and 
Reservists Debt Relief Act of 2008, GAO-10-1014R, at 13 (Sept. 30, 
2010), https://www.gao.gov/assets/100/97122.pdf.
    Subsequently, this exemption was further extended in 2011 
for an additional four years\30\ and thereafter in 2015 for 
another four years.\31\ The current extension is due to expire 
on December 19, 2019.
    \30\Pub. L. No. 112-64, 125 Stat. 766 (2011).
    \31\Pub. L. No. 114-107, 129 Stat. 2223 (2015).


    For the purposes of section 103(i) of H. Res. 6 of the 
116th Congress, the following hearing was used to consider H.R. 
3304: ``Oversight of Bankruptcy Law and Legislative 
Proposals,'' which was held on June 25, 2019 by the Committee's 
Subcommittee on Antitrust, Commercial, and Administrative 
Law.\32\ The hearing considered various legislative measures. 
Of pertinence to H.R. 3304, the following witnesses testified: 
Hollister K. Petraeus, former Assistant Director, Consumer 
Financial Protection Bureau's Office of Servicemember Affairs, 
testified in support of this legislation.\33\
    \32\Oversight of Bankruptcy Law and Legislative Proposals: Hearing 
Before the Subcomm. on Antitrust, Commercial, & Admin. Law of the H. 
Comm. on the Judiciary, 116th Cong. (2019).
    \33\See Omnibus Bankruptcy Hearing Tr. at 38-42.

                        Committee Consideration

    On July 11, 2019, the Committee met in open session and 
ordered the bill, H.R. 3304, favorably reported without 
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 no 
rollcall votes occurred during the Committee's consideration of 
H.R. 3304.

                      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 and Congressional Budget 
                          Office Cost Estimate

    With respect to the requirements of clause 3(c)(2) of rule 
XIII of the Rules of the House of Representatives and section 
308(a) of the Congressional Budget Act of 1974 and with respect 
to requirements of clause (3)(c)(3) of rule XIII of the Rules 
of the House of Representatives and section 402 of the 
Congressional Budget Act of 1974, the Committee has requested 
but not received a cost estimate for this bill from the 
Director of Congressional Budget Office. The Committee has 
requested but not received from the Director of the 
Congressional Budget Office a statement as to whether this bill 
contains any new budget authority, spending authority, credit 
authority, or an increase or decrease in revenues or tax 

                    Duplication of Federal Programs

    No provision of H.R. 3304 establishes or reauthorizes a 
program of the federal government known to be duplicative of 
another federal program, a program that was included in any 
report from the Government Accountability Office to Congress 
pursuant to section 21 of Public Law 111-139, or a program 
related to a program identified in the most recent Catalog of 
Federal Domestic Assistance.

                    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. 
3304 would extend the temporary authorization exempting certain 
qualifying reserve component members of the Armed Services and 
National Guard members from the Bankruptcy Code's means test 
for four years.

                          Advisory on Earmarks

    In accordance with clause 9 of rule XXI of the Rules of the 
House of Representatives, H.R. 3304 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 
Extension Act of 2019.''
    Sec. 2. National Guard and Reservists Debt Relief 
Amendment. Section 2 amends the National Guard and Reservists 
Debt Relief Act to further extend the temporary exemption for 
four years. The current extension is due to expire on December 
19, 2019.

         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, and existing law in which no 
change is proposed is shown in roman):


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  (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 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 [11-year] 15-year 
period beginning on the effective date of this Act.

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