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"They just slapped me with that label to get me out quicker," Schmidt said. He said superiors told him "'Everything will be great. Peachy keen.' Well, it's not."
The discharge left Schmidt ineligible for disability pay and benefits. He was also required to return more than $10,000 of his $15,000 reenlistment bonus, but he said no one explained that to him until it was too late.
"If I didn't have family, I'd be living on the sidewalk," Schmidt said.
"It's not right that they would do this to him after him going to war for us," Schmidt's mother, Patrice Semtner-Myers, said. "They threw him away. They're done with him. He's no use to them anymore so they say, 'We're done. … Thanks for nothing.'"
Schmidt and Town say Army doctors misled them about the consequences of the personality disorder discharge. Town said he was told he would receive his benefits and it would be like a medical discharge, only quicker.
In the course of reporting this story, ABC News spoke with 20 Iraq War veterans who believe they were misdiagnosed with personality disorder.
A Marine who preferred not to be named said, "Most docs won't diagnose you with PTSD [posttraumatic stress disorder] because the military has to treat you for the rest of your life."
After confrontations with his commander, Pfc. David Vann said a psychologist met with him for "10 minutes and said, 'I think you're lying about PTSD. … I think you have [personality disorder].'"
"If they cared about my well-being, they would have tried to fix it. The Army would rather … [sever] all the ties," Army Spc. William Wooldridge said.
The military would not comment on specific cases. Ritchi said, "If there was a mistake that was made, and we're a big organization, it is possible that mistakes were made, that we have the ability to go back and relook at that diagnosis and that discharge."
On the day he was discharged in the fall, Town met with Jeff Peskoff, a civilian employee in the personnel office at Fort Carson in Colorado, and learned he owed the Army $3,000 to repay his enlistment bonus.
"At some points it looked like he wanted to cry and at some point he looked like he wanted to rip my head off," Peskoff said.
Peskoff, who served 10 years in the Army, including a tour of Iraq, recently quit his job in disgust and is now speaking publicly for the first time.
"If you have a combat tour and you are getting labeled as a personality disorder, there is something wrong. &0133; It's a lie," Peskoff said. "It's a quick way to get rid of that body and bring in another body. And it's a quick way to save money."
In the span of several months, Peskoff said he processed the personality disorder discharges of Schmidt, Town and hundreds of other combat veterans he believed were actually suffering physical and psychological trauma because of the war.
"They [Army officials] are basically washing their hands of them," Peskoff said.
Fort Carson officials declined to talk to ABC News about this story. The Government Accountability Office is currently investigating Fort Carson as part of a larger study of mental health services for veterans.
Some prominent people took notice of Town's case after he was profiled in a Nation article earlier this year. Musician Dave Matthews spoke about him at a concert this spring at Radio City Music Hall in New York.