While serving their country in the armed forces, some servicemen and servicewomen may face difficulty in meeting certain financial obligations at home, such as rent or mortgage payments, if they are activated for military duty. The Servicemembers Civil Relief Act (SCRA) was passed in 1003 to ensure that service members protecting our country do not suffer the added burden of worrying about the loss of a home.
Military personnel should learn about the SCRA and the protections and benefits it provides for themselves and their families. The SCRA can provide many forms of relief to military members. Below are some of the most common forms of relief.
Major Provisions of Servicemembers Civil Relief Act (SCRA)
- Mortgage Relief: Under certain conditions, an active-duty military member or his dependents may receive temporary relief from paying a mortgage.
- Termination of Leases: A member of the military just entering active duty may be able to terminate a lease without repercussions, if certain conditions are met.
- Protection from Eviction: An active-duty member of the military who leases a house or apartment can prevent an action for a period of time, usually three months, if the rent does not exceed $1,200 a month and the active-duty status impacts their ability to pay rent.
- Six Percent Cap on Interest Rates: Under the SSCRA, an active-duty military member can cap the interest rate at six percent for all obligations, including mortgages and car loans, entered into before beginning active duty. Once a service member requests the rate reduction, the creditor must either comply or apply for court relief. The SSCRA puts the burden on the creditor to show that military service has not “materially affected” a service member’s ability to repay the debt. The court generally grants relief if the creditor can make his or her case.
- Stay of Proceedings: If an active-duty member of the military is sued, he or she may have the proceedings postponed.
- Reopening Default Judgment: If a default judgment is issued against an active military member, he or she can reopen the judgment once certain conditions are met.
Relief is also available in regards to taxes or assessments for qualified service members and dependents. A service member or dependent may, at any time during his/her military service, or within six months thereafter, apply for relief of any obligation or liability incurred before active duty. The court may grant stays of enforcement during which time no fine or penalty can accrue.
The SSCRA’s 6 percent interest rate applies in two instances:
- where the individual incurs a debt, then enlists in the military
- where the individual is in the reserves or the Guard and incurs a debt and is subsequently called to active duty.
The law is in effect all the time — not just during times when the U.S. is involved in a war.
More than 100,000 National Guard and military reservists have been called to active duty, and another 1.3 million reservists may be called if the war escalates. The provisions of the Act are not necessarily granted automatically, so service members are advised to notify their lenders, and, where applicable, their attorneys or the Internal Revenue Service to apply for the protections.
Some protections for reservists and members of the National Guard are provided only if the service member is “materially affected” by being called to duty. For example, if a service member cannot show up in court for legal actions, he or she would be materially affected. In the case of financial obligations, if low military pay scales create an economic hardship for the military member or her family, the protection might apply.
None of the provisions of the Soldiers’ and Sailors’ Civil Relief Act of 1940 are automatically granted. In order to receive the benefits, the more than 100,000 National Guard and military reservists who have been called to duty must notify their lenders either by the phone or through a letter. Lenders will want to see a copy of the service member’s military orders and information about earnings.
Lenders also may want:
- The date on the Induction Order (activation date) and the mortgage date to ensure the mortgage pre-dates the Induction Order.
- The rank, branch of service, and service number for the service member.
Below is a sample letter that service members can send to credit card and mortgage lenders to notify them of the act and its provisions. Letters should be sent through certified mail. Click here to download a sample letter.
SOURCE: Department of Housing and Urban Development