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[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.
---------------------------------------------------------------------------
    \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.

           *       *       *       *       *       *       *

                                  
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