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Protection for the Military from Creditors: Servicemembers’ Civil Relief Act

| Jul 9, 2021 | Bankruptcy

It is unfortunate that the military are targeted by so many predatory creditors.  Having an office so close to Ft. Hood, I have helped many active military and veterans and their families find relief from creditor harassment and lawsuits under the Bankruptcy code and the Servicemembers’ Civil Relief Act (SCRA).

The Servicemembers’ Civil Relief Act protects members of our military and co-signers on their debts which is typically their family.  To qualify for protection under the Servicemembers’ Civil Relief Act, the member of our military just demonstrate that their service of this country is materially affecting their ability to pay their bills.  The Servicemembers’ Civil Relief Act offers various for our military personal and their families from creditors.  Some examples of those protections are found below.  This list is just a general example of some protections and is not legal advice.

Under the Servicemembers’ Civil Relief Act, a servicemember may cap the interest rate on some obligations to 6% while the servicemember is on active duty.   These obligations may include credit cards, car loans, mortgage, and personal loans but not federal guaranteed student loans.  The servicemember must have obtained the obligation prior to being called on active duty.  The capped interest rate does not apply to any addition debt incurred on the obligation while the servicemember is on active duty.  For example, if the servicemember has a credit card with a balance of $1,000.00 prior to being called onto active duty and the servicemember continues to use the credit card while on active duty, then 6% cap applies only to the balance prior to being called to active duty or in this example $1,000.00.  To obtain the cap on interest, the servicemember must give the creditor written notice of the call to active duty and a copy of his or her military orders during the active duty or up to 180 days after the release from active duty.

Servicemembers’ Civil Relief Act protects our military personal from evictions from their homes.  If the military personal receives an eviction notice, he or she can seek court protection under SCRA claiming that military service materially affected his or her ability to pay the rent in a timely manner.  In addition, to qualify, the military personal or his or her family must show the court that they occupy the property as their home and the monthly rent is less than a certain limit that changes periodically due to inflation.

While the servicemember is on active duty, there are limitations to a creditor’s rights to repossession of collateral of secured loans like vehicles and homes.  Later this week, I will blog about some of the class action lawsuits where servicemembers are suing their mortgage companies for foreclosures in violation of the SCRA.  However, briefly, these provisions apply if the contract was entered into prior to the servicemember going on active duty and the servicemember has made at least one payment under the contract.  Once these requirements are met, the creditor cannot repossess the property (i.e., vehicle, furniture, house) or terminate the contract while the servicemember is on active duty without a court order.

Regarding residential leases, the Servicemembers’ Civil Relief Act allows members of the military to break a lease when they are called to active duty, transferred to another station, or deployed.  To break a residential lease under these provisions, the servicemember must make the request in writing, and must include a copy of his or her orders placing him or her on active duty, transfer orders, or deployment orders. The member may deliver the notification by hand, by commercial carrier, or by mail (return receipt requested).

When someone is sued in civil court and he or she does not make an appearance in that court, the other side may take a default judgment against the person who did not appear.  A default judgment is a judgment that is called a different name because the person sued did not appear in court.  Under the Servicemembers’ Civil Relief Act, the servicemember may vacate, or set aside, the default judgment if the servicemember can show that he or she did not appear in court and he or she did not have notice of the court proceedings.  Appearance in court is not necessary a physical appearance.

Furthermore, if the servicemember is sued in civil court, under the Servicemembers’ Civil Relief Act, the servicemember may stay or postpone the civil court proceeding for 90 days if the servicemember has notice of the proceeding and is on active duty or within 90 days of release of active duty.  The servicemember must two letters.  First, the servicemember must submit a letter demonstrating that due to active duty the servicemember is unable to appear and state when the servicemember would be able to appear.  Second, the servicemember’s commanding officer must submit a letter demonstrating that the servicemember’s active duty prevents appearance in court and military leave is not authorized.

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