The Servicemembers Civil Relief Act (SCRA) was enacted in 2003 to ease financial burdens on servicemembers during periods of military service. The SCRA provides servicemembers with relief for a wide variety of financial obligations, such as rental agreements, evictions, installment contracts, credit card interest rates, mortgage interest rates, automobile leases, life, and health insurance, and income tax payments.

What is the Servicemembers Civil Relief Act (SCRA)?

Are you a servicemember with more than a 6% interest rate on your mortgage, automobile loans, student loans, or other financial obligations that you incurred before you entered the service? Have you been threatened of or had a repossession or foreclosure occur while you were on active duty? Threatened to receive a penalty for terminating residential housing or automobile lease? Well, the Servicemembers Civil Relief Act (“SCRA”) may be able to help you.

Who is included?

The SCRA provides relief to “service members”, meaning:

  • Full-time active duty members of the five military branches (Army, Navy, Air Force, Marine Corps, and Coast Guard);
  • Reservists on federal active duty;
  • Members of the National Guard on federal orders for a period of more than 30 days;
  • Servicemembers absent from duty for a lawful cause or because of sickness, wounds, or leave; and
  • Commissioned officers in active service of the Public Health Service (PHS) or the National Oceanic and Atmospheric Administration (NOAA).

What benefits does the SCRA provide?

The SCRA provides servicemembers with a wide variety of financial benefits. Below are the most common benefits utilized by the SCRA.

Cap of 6% on loans

The first protection that the SCRA provides servicemembers is a cap of 6% interest rate on select financial obligations that were incurred prior to entry into military service. This cap includes “service charges, renewal charges, fees, or any other charges (except bona fide insurance) with respect to an obligation or liability.” This rate reduction is to stay in effect so long as the servicemember is on active duty or, in the case of mortgage loans, during service plus one year after. More importantly, this rate reduction can be retroactively applied so that the servicemember is provided with forgiveness for past interest charges that exceeded 6% while the individual was a servicemember.

It is essential that servicemembers quickly act because these benefits are only available to a servicemember if they provide written notice no later than 180 days after the date of the servicemember’s termination or release from military service.

Protection Against Foreclosure, Default Judgment & Repossessions

If the creditor of a servicemember is seeking a default judgment against them, the court in the case may not enter a default judgment against that defendant until after it appoints an attorney to represent the interests of that defendant servicemember. If this attorney is unable to reach the servicemember, then the case must stay for 90 days.

Similarly, for mortgages that were obtained before entering the military, a creditor must get a court order prior to foreclosing on a mortgage. Courts are sometimes obligated to stay a non-judicial foreclosure proceeding or adjust the payments if the servicemember’s ability to meet the obligation is materially affected because of his or her military service.

Likewise, a creditor may not repossess a vehicle during a borrower’s period of military service without a court order if the servicemember borrower either placed a deposit for the vehicle or made at least one installment payment on the contract before entering military service.

Ability to Terminate Rental Lease

Under the SCRA, a property that is occupied (or intended to be occupied) by a service member or their dependents may be terminated when the servicemember receives permanent change of station orders or deployment orders for a period of at least 90 days. To terminate the residential lease, the servicemember must provide written notice and a copy of the servicemember’s military orders.

Once written notice is provided, the lease will terminate 30 days after the next rent payment is due. Similarly, if a servicemember lessee dies while in military service, the spouse of a lessee may terminate the lease within one year of the death.

Protection from Property Liens

The SCRA also protects servicemembers against property liens. A property lien is a legal claim on an asset that allows the holder to access the property if debts are not paid. For example, if a servicemember pays for a storage unit, the owner of the storage unit has a property lien against the contents of the storage unit if rent is not paid

The SCRA prevents a lienholder from enforcing the lien (i.e. selling property) without a court order during the servicemember’s period of military service and 90 days thereafter. So using the above example, if a servicemember owns a storage unit, the storage unit facility may not dispose of the servicemembers items in the storage unit in the event that the servicemember stops paying rent unless it obtains a court order.

If you have experienced one of the above-mentioned life events, give us a call for a free consultation.