An Introduction to the SCRA

Are you a member of the United Army Reserve who has just been called up for active duty? An active-duty Marine or Soldier who is about to be deployed for several months? A Sailor who just got notified that you will be going out to sea for another tour? If so, you may be understandably worried about how you are going to balance the demands of military service and any financial or legal obligations you currently have.

The Servicemembers Civil Relief Act (SCRA) protects U.S. service members and their families from being placed in financial or legal jeopardy as a result of their military obligations. This means that while you are defending the nation, your family will not be evicted, your home foreclosed upon, or judgments entered against you. No service member deserves that kind of homecoming.

The attorneys at MJA have successfully fought for military service members and their families who are the victims of unfair lending practices by big banks, credit card companies, car dealerships, and property management companies. Before you request relief, or if you have questions about the protections you are entitled to, call or contact a dedicated SCRA attorney today to request a confidential consultation.

History of the SCRA

The SCRA traces its origins to a Civil War moratorium that protected Union soldiers and sailors from collection actions, divorce proceedings, and other legal issues during wartime. These protections resurfaced in 1918 with the Soldiers’ and Sailors’ Civil Relief Act. The Act was revisited frequently as society changed and became the Servicemembers Civil Relief Act we know today in December of 2003.

SCRA Coverage and Protection

The SCRA offers protection under federal law to:

• All full-time active-duty personnel from all divisions of the U.S. Armed Forces;
• All active-duty Reserve personnel;
• Members of the Army and Air National Guard, provided they have been called to respond to a national emergency and their period of active duty is more than 30 days in a row;
• Active duty commissioned officers of the Public Health Service or the National Oceanic and Atmospheric Administration; and
  
• Dependents of service members

If a service member has given someone a Power of Attorney (POA) during their absence, the POA can request SCRA protections on their behalf. In fact, the law actually requires a court to appoint someone to represent your interests if you are on active-duty and did not designate anyone beforehand.

SCRA Provisions

The SCRA contains several provisions that protect military personnel. They include:

• Interest rates on mortgages, credit cards, federally guaranteed student loans, and other debt accumulated before you entered active duty are capped at 6%.
• Lenders may not make a negative notation on your credit report because you requested SCRA protection.
• Civil court and administrative proceedings, such as divorce or bankruptcy, may be postponed at least 90 days.
• Your landlord may not evict you or your family without getting a court order first, provided your rent does not exceed a certain amount.
  
• You may terminate, without penalty, residential and business leases that began before you were called to active duty.
• You may cancel motor vehicle leases if you were called to active duty 180 or more days after signing it. The lease may also be terminated if you are being deployed for over 180 days or receive a permanent posting outside the U.S..
• If military service causes you to fall behind on your mortgage or vehicle installment payments, you are protected from foreclosure and repossession actions.
• Any health or life insurance plans canceled due to your service must be reinstated.
• If military orders require you to move to another state, your legal residence for tax purposes remains the same.

It is important to remember that these provisions are not automatic: you must actively request relief in a timely manner. Written notification is necessary for some protections, while others, such as the 6% interest rate, require you to show that you have been “materially affected” by your military service.

Lease Terminations

The SCRA provides service members the right to early termination of residential and motor vehicle leases. The service member on the lease, called the lessee, may choose to terminate the lease at any time after he/she enters military service or after the date of their military orders. If a service member is a joint lessee with a dependent (like a spouse) and terminates the lease, the termination is also effective for the dependent.

The SCRA lease termination provisions apply to leases of premises, like apartments or homes, and leases of motor vehicles. Early termination of a lease of premises can be sought when a person enters military service during the term of the lease or when a service member receives military orders for a permanent change of duty station or deployment for a period of not less than 90 days.

Interest Rate Cap

The SCRA requires creditors to limit interest rates on applicable debt to 6% while the service member is on active duty. These protections apply to many types of debt, but the most common include credit card debt, truck or car loans, and mortgages. Debt in the form of a mortgage or deed of trust will be limited for an additional year after active duty has ended.

Another advantage of these protections is that interest in excess of 6% is forgiven. When interest is forgiven, the creditor is required to reduce the service member’s payment amounts by the amount of the interest forgiven. In some cases, this can be a big benefit to service members as it reduces minimum monthly payments on debt.

Mortgage Foreclosure Protection

The SCRA has special provisions with regard to mortgages and deeds of trust. These provisions only apply to obligations on real or personal property owned by a service member which began before military service and is secured by a mortgage, trust deed, or something similar. If a service member has an obligation to which these provisions apply, the SCRA offers protections against actions on the mortgage or trust deed and sale or foreclosure.

If a party files an action to enforce an obligation under a mortgage or deed of trust during or within one year of a service member’s military service, the court may either stay (put on hold) the proceedings or adjust the obligation, such as a change in payment amount. If the service member can show that his or her ability to comply with the obligation is materially affected by military service, then the court is required to enter a stay or adjust the obligation.

The SCRA offers stringent protections against the sale, foreclosure, or seizure of property for a breach of an obligation against the property. The SCRA provides that no sale, foreclosure, or seizure is valid if made during or within one year of military service. There are two exceptions to this rule. The first is when a court grants an order before the sale, foreclosure, or seizure with a return made and approved by the court. The second is when the parties execute a valid waiver under the waiver provisions of the SCRA in Section 3918.

Vehicle Repossession

The SCRA provides strong protections for service members under installment contracts for lease or purchase. The SCRA states that contracts by service members for real or personal property, whether to own or lease, may not be rescinded (cancelled) or terminated for a breach of contract by the service member. Additionally, the property under the contract may not be repossessed without a court order. These protections only apply to contracts for which a deposit or installment is paid before the service member enters military service.

In order for a repossession to occur, the lien holder must seek a court order. The court hearing the case may order that the service member is refunded all or part of payments under the contract as a condition of the lien holder repossessing the property. The court may also either stay (put on hold) the proceedings as long as necessary or make another decision that the court believes is fair to all parties.

Protect Your Rights Under the SCRA

The SCRA offers significant protections to U.S. military personnel, but like most laws, it can be complicated to navigate. The attorneys at MJA have successfully fought for military service members and their families who are the victims of unfair lending practices by big banks, credit card companies, car dealerships, and property management companies. Before you request relief, or if you have questions about the protections you are entitled to, call or contact a dedicated SCRA attorney today to request a confidential consultation.