The Means Test is becoming even more optional.  Yesterday, the President signed into law the National Guard and Reservists Debt Relief Act of 2008.   The basic effect of this act is to make the Means Test, the centerpiece of the 2005 Bankruptcy Reform Act, inapplicable to certain members of the National Guard, Reserves or disabled veterans.

The basic effect of this act is to exempt from the Means Test requirements certain people who file for bankruptcy within 540 days of the time in which they return from active duty in a combat zone.

Quite honestly, I expect this to have very little practical application and make virtually no difference in the relief available to most returning service members.  However,  it is one more chip in the Means Test armour.

As far as I can tell, the Means Test has done very little other than to drive up the cost of filing for bankruptcy and increase the paperwork and record keeping necessary.  Once you learn how to play it, it doesn’t really change eligibility for Chapter 7 relief for more than a handful of people

There are already two large exceptions to the Means Test.  The first is that Social Security benefits aren’t included in income for purposes of the Means Test.  The second is that if the Debtor’s debts are primarily non-consumer, then no Means Test is required.  This exception is very interesting, because it doesn’t say if the Debtor’s debts are primarily business debts — it says non-consumer.  Well, taxes have been held to be  non-consumer debt.  So, now, people with failed businesses whose debts are primarily non-consumer and people whose debts are primarily tax debt and National Guard, Reservists and disabled veterans returning from a combat zone are all exempt from having to complete the Means Test.

By the way, the actual provisions of the National Guard and Reservists Debt Relief Act of 2008 are very specific and quite detailed.  Before making any conclusions about which cases it will or will not apply to, be sure to read the actual Statute.  Oh, and the Act takes effect in sixty days.

If you use this successfully, let me know.

Elaine