How the Servicemember Civil Relief Act Works to Help Keep Military Members Financially Secure

Military Transition

The Servicemember Civil Relief Act or SCRA is another tool to help service members achieve financial success. Responsible finances are critical for maintaining both a military career, and maintaining a security clearance. Beginning as the Soldiers’ and Sailors’ Civil Relief Act in 1940, it has undergone several changes over the years. The SCRA is a federal law that is designed to protect military families from financial exploitation during times of military service.

As part of the U.S. Code, it covers things like rental agreements, security deposits, prepaid rent, evictions, interest rates on credit card and mortgages, foreclosures, income tax payments, life and health insurance, and installment contracts. People violating the protection of military families SCRA are subject to a lawsuit filed by the attorney general. However what is found many times in these cases is both the violator and family being violated are not aware of the protections provided by this act.

And the Act not only protects those on active duty beginning on the date they entered military service but also provides protection to National Guard and Reserve personnel once they are activated for mobilization under certain types of military orders for the duration of their active duty service.

While the protection is varied and broad, here are the four most commonly used protections by most military families:

  • Interest Rate Cap
  • Protection from Default Judgements
  • Non-Judicial Foreclosures
  • Rental Lease Terminations

Interest Rate Cap

Under this portion of the Act, interest rates cannot exceed 6% on certain financial obligations that incurred prior to beginning military service. Once written notice and a copy of orders is received, the creditor must cap the interest rate at no higher than 6%. And rates higher than 6% cannot deferred, but must be forgiven by the creditor. This is valuable protection in the case of credit cards, student loans and home equity loans. Nor can a creditor increase the payment amount to accelerate the payment schedule.

Not all interest caps are the same. While most of them only cover a military family during the period of active duty, in the case of mortgages, they are also covered up to one year after military service.

Protection from Default Judgments

In any civil court proceedings, judgement cannot be made on a servicemember defendant if they are unable to appear before a court. In those cases, the court must appoint an attorney on behalf of the defendant and give that attorney a 90-day stay to prepare the case. This is most often used in foreclosures while the military member is deployed.

Non-Judicial Foreclosures

Without a court order, any non-judicial foreclosure is invalid for up to one year post military service. This protects military families from being evicted from their home if getting behind on their payments or rent is due to the servicemember’s employment in the military – again, most used when the service member is deployed, and the financial obligation must have occurred before entering military service.

Rental Housing Lease Terminations

In the case of house or apartment rentals, a landlord must terminate a housing agreement without recourse after receiving a written notice and copy of the military permanent change of station orders. The effective date would be 30 days from the date of the next monthly payment.

The whole point of SCRA is to protect families from financial turmoil and added stress in times when their families are already stressed from multiple deployments and permanent change of stations.

Next up in this series is preparing for college costs. Many  parents are not prepared for the unanticipated costs of college – ones that can upset an already finely-tuned and struggling budget.

Kness retired in November 2007 as a Senior Noncommissioned Officer after serving 36 years of service with the Minnesota Army National Guard of which 32 of those years were in a full-time status along with being a traditional guardsman. Kness takes pride in being able to still help veterans, military members, and families as they struggle through veteran and dependent education issues.

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