In December 2003, the Servicemembers Civil Relief Act (SCRA) (50 U.S.C. App. §§ 501-597) was signed into law, replacing and expanding the previous Soldiers and Sailors Civil Relief Act. It's important to know about the SCRA in order to take full advantage of the financial and legal protections it can provide to service members, including caps on interest rates, stays of certain legal proceedings, protection from eviction, and termination of leases without repercussions.
The SCRA protects active duty service members, including National Guard and Reserve members who have been activated by the federal government. Many of the SCRA's protections also extend to family members, but this varies from section to section. Because details of the SCRA are complicated, service members and their families are encouraged to contact their nearest Legal Assistance Office if they need help meeting their financial obligations.
Key parts of the SCRA
The SCRA offers protections for service members and their families in many different areas, ranging from mortgages to life insurance. It's important to get professional advice on how the SCRA applies to individual circumstances. For example, the SCRA frequently makes certain rights available conditional upon whether your ability to meet certain obligations is "materially affected" by military service. Whether you are "materially affected" can mean different things in different situations.
Because each section of the act has different guidelines, it's important to find out the specifics if you think the SCRA can help. The following is an overview of some SCRA protections:
- Reduced interest rates. Creditors must reduce the interest rate on debts to six percent for liabilities incurred before you entered active duty. It does not apply to debt incurred while you were on active duty. If the debt in question is a mortgage, the reduced rate extends for one year after active military service. In addition to mortgage debts, the cap applies to credit card debts, car loans, business obligations, and other debts, as well as fees, service charges, and renewal fees. Keep in mind that creditors have the right to challenge this provision if they believe your ability to pay a rate higher than six percent is not "materially affected" by your military service.
- Postponement of foreclosures. No sale, foreclosure, or seizure of property for a breach of a pre-service mortgage obligation is valid if made during or within nine months after your period of active duty, unless pursuant to a valid court order. This can provide you with tremendous protections from foreclosure in the many states that permit foreclosures to proceed without involvement of the courts. If you miss a mortgage payment, you should immediately contact the Legal Assistance Office.
- Deferred income taxes. The Internal Revenue Service (IRS) and state and local taxing authorities must grant a deferral of income taxes due before or during your military service if your ability to pay such income tax is materially affected by military service. No interest or penalty can be added as a result of this type of deferral.
- Eviction prevention. You and your family cannot be evicted from housing for nonpayment of rent without a court order, no matter what your rental agreement or local laws say. This protection applies to residences for which the monthly rent is not more than $2,975.54 per month (in 2011). If your ability or your family's ability to pay rent is "materially affected" by your military service, you may apply to the court and the court must grant either a ninety-day delay in eviction proceedings or adjust obligations under the lease in a way that preserves all parties' interests. Be sure to see your Legal Assistance Office for advice if you are concerned that you or your family will be evicted.
- Protection against default judgments. If you are on active military duty and a civil action, a civil proceeding, or an administrative proceeding is filed against you, the judge must appoint a lawyer to represent you in your absence. The court must grant a stay of at least ninety days if it determines that there may be a defense to the action and that the defense cannot be presented without your attendance.
- Postponed civil court matters. If your military service will prevent you from participating in a civil court action or administrative proceeding, you can request a ninety-day delay (or "stay") in the proceeding; you are automatically entitled to this delay if you follow all of the requirements. These proceedings may include actions for divorce, child paternity and support cases, and foreclosure proceedings.
- Protection for small-business owners. If you are a small-business owner, your nonbusiness assets and military pay are protected from being available to satisfy creditors while you are on active duty. This applies to debts or obligations you may have due to your business.
- Termination of lease agreements. You may terminate your residential lease (and some other kinds of leases, including agricultural, professional, and business) by delivering written notice of termination. This applies if you entered into a lease and then started military service, or you entered into a lease during military service and then received permanent change of station (PCS) orders. It also applies when you have orders to deploy with a military unit or as an individual in support of a military operation for not less than ninety days. You must provide written notice of termination and a copy of your military orders (hand-delivered or by return-receipt mail) to the landlord.
- Termination of automobile leases. You may terminate an automobile lease under certain specific circumstances. For example, if you signed the lease agreement before being called to active duty, if you signed a lease agreement and then received PCS orders outside the continental United States (OCONUS), or you signed a lease agreement and then received orders to deploy.
- Termination of phone service. You may request termination of cell phone service or phone exchange service if you entered a contract for such services before receiving military orders to relocate, for not less than ninety days, to a location that does not support the contract.
- Prevention of repossession of property. Without a court order, property cannot be repossessed for nonpayment or a contract terminated or rescinded for any "breach" by you prior to or during your military service. For example, if you purchased or rented an automobile prior to entering active duty, that automobile could not be repossessed for nonpayment or other breach of the contract while you are on active duty, without a valid court order.
- Life insurance coverage protection. Life insurance companies cannot terminate coverage or require payment of additional premiums if you engage in military service (except for increases in premiums, based on age, in individual term insurance). An insurer also may not limit or restrict coverage for any activity required by military service.
- Suspension of professional liability insurance. If you are a professional in health care or legal services, or another professional as determined by the Secretary of Defense, and you are called to active duty, you may suspend your professional liability insurance policy upon written request to the insurance carrier. You don't have to pay premiums for suspended insurance and any premiums paid by you while on active duty must be refunded. To reinstate your suspended insurance, you must transmit a request to the insurance carrier within thirty days of release from active duty.
- Voting rights in your home state. Your residency for state, federal, or local voting purposes, like your tax residency, is unaffected by your absence from your usual voting state due to military service. Similar protections exist for spouses.
Waivers of rights under the SCRA
It is possible to waive your rights under the SCRA. Only written waivers signed during or after a service member's period of military service are effective. If you sign a waiver of your SCRA rights before you enter military service, the waiver will be considered invalid. Whether you are considering signing a waiver document at any time, either before, during, or after military service, it is extremely important to read the document carefully and sign only after obtaining the advice of a qualified attorney.