Reservist or National Guard Member Exemption from the Presumption of Abuse

Introduction

Bankruptcy laws recognize that reservists and National Guard members may face unique financial challenges when called to active duty. To protect them, Congress created a special exemption from the means test. This helps servicemembers get relief without being unfairly penalized for temporary spikes in income.

What Is the Means Test?

The means test determines whether you qualify for Chapter 7 bankruptcy or if you must file Chapter 13 repayment. It compares your income to the state median and accounts for expenses.

For most people, failing the test means you can’t file Chapter 7.But for certain Reservists and National Guard members, the law carves out an exception.

The Exemption Explained

Under 11 U.S.C. § 707(b)(2)(D)(i), you may be exempt from the means test if:

1. You are a member of a reserve component of the Armed Forces or the National Guard.

2. You were called to active duty (or performed homeland defense activity) for at least 90 days after September 11, 2001.

3. You file for bankruptcy during your active duty or within 540 days (about 18 months) after release from active duty.

This exemption is temporary but powerful — it allows you to bypass the means test entirely.

Why It Matters for Servicemembers

• Prevents unfair treatment if you received active duty pay that pushed your income above the means test threshold.

• Helps you access Chapter 7 debt relief quickly.

• Provides financial breathing room during or after deployment.

How It Works in Practice

• If you qualify, the bankruptcy court will not apply the presumption of abuse.

• You still must disclose income and expenses, but the means test calculation is skipped.

• After 540 days post-active duty, the exemption ends, and the standard rules apply again.

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Other Bankruptcy Protections for Servicemembers

• Servicemembers Civil Relief Act (SCRA): May reduce interest rates on certain debts.

• VA benefits: Generally protected from creditors and bankruptcy estates.

• State exemptions: Some states provide extra bankruptcy protections for military members.

Conclusion

If you are a Reservist or National Guard member who has served on active duty, you may qualify for a temporary exemption from the means test when filing bankruptcy. This allows you to focus on your service and recovery without being trapped by debts.

💡 Next Step: Contact Middleton Bankruptcy to determine whether you qualify and how to take advantage of this important protection.