Servicemembers Civil Relief Act
Using the SCRA to avoid financial issues at home while you serve your country.
When you’re serving your country in a combat zone, the last thing you need to worry about is an eviction notice or credit card bill at home. You should be able to focus on your mission without any financial distractions. Congress created the Servicemembers Civil Relief Act with just that purpose in mind. It protects your financial rights during active-duty service.
The information below can help you understand how the SCRA protects you and how to use it. If you are a Service Member enrolled in a debt management program, please call 1-888-294-3130. We can help you ensure your interest rate caps are in place and offer a fee reduction while you serve.
10 ways the SCRA protects your rights during active duty service
#1: It caps all interest rates at 6%
One of the biggest advantages the Servicemembers Civil Relief Act offers is an interest rate reduction. The law caps all interest rates a 6% during a period of military service; for mortgages the cap remains in place for a year after your service ends.
The 6% cap applies to:
- Auto loans
- Personal loans
- Credit cards
- Store accounts
- Tax debt
Basically, anything that has an applied interest rate can get reduced. To get the rate reduction, you must provide written notice to the creditor and they may require a copy of your orders. If you forget to apply a cap before service, don’t worry. You can apply up to 180 days AFTER your release from service. Then the creditor applies rate reduction retroactively.
A note for DMP clients: If you enroll in a debt management program, in most cases the interest rates of any debts included in the program are reduced or eliminated already. However, call a customer service representative to make sure your rates are all below 6%. In addition, your representative can help you waive the monthly maintenance fees on your program during deployment.
#2: The SCRA protects you in child custody agreements
The courts make every effort to avoid default child custody agreements during a period of service. Your co-parent can’t seek a permanent child custody agreement in your absence or permanently modify an existing agreement. If the court puts any temporary agreement in place, it usually expires at or near the date of your release.
Your military service also can’t be the sole reason for a modification. In other words, your co-parent can’t claim full custody simply because you serve in the military.
#3: Protections against penalties, fines and garnishments
If you have a service contract or loan agreement and can’t make the payments, you won’t face excessive late fees or penalties because of a period of service. If you can prove that service interfered with your ability to make payments, the lender must waive all fines and penalties.
In addition, a lender can’t go to the court to ask them to garnish your paychecks on a civil charge. So, let’s say your service interferes with private student loan payments; the lender can’t go to court to ask them to garnish your wages in your absence.
#4: Don’t sweat default judgments
If you have any court case pending during a period of service, they won’t enter a default judgment against you. The court will issue a stay until you can return or until the court can appoint an attorney to represent you. If a court enters a default judgement against you during service, you have a right to reopen the case. You can apply to reopen within 60 days of your release from service.
#5: Your landlord can’t evict you or your dependents
If you have a rental agreement that starts before you start service, then the landlord can’t evict you. The landlord must get a court order for the eviction and, in most cases, the court will order a stay. This applies to housing both for you and any dependents you have.
Just keep in mind that if the court orders a stay, then they can order relief on behalf of your landlord, too. This basically means that they assign a reasonably sized pay allotment to cover your rent. There are caps on the allotment size, so you don’t have to worry about it draining your income entirely.
#6: SCRA protections against foreclosure and property seizure
Homeowners have similar protections against foreclosure that renters have against eviction. A lender cannot foreclose on or sell your property during a period of service. This protection also extends to other any property under a loan. So, for instance, if you have a storage lien against you, they can’t foreclose or enforce the lien during service.
In the case of a home, if the court orders a stay in a foreclosure, they can take additional steps. They can order up to three third-party impartial appraisals of the property. If the court finds you have extra equity in the property, they can liquidate it. This is then used to catch up on your mortgage payments. This only occurs if the court rules the equity liquidation won’t cause you financial distress.
#7: The SCRA offers early lease termination without penalties
If you get into a lease and then get deployed, you can terminate the lease penalty-free. This also applies to permanent change of station orders, which may also affect your lease. Basically, you terminate the lease with written notice and return any associated property within 15 days.
The lessor also can’t apply early termination charges or any fees or charges that weren’t listed in your original agreement. So, if you have a car lease, you may have excess wear or mileage charges that you must pay. If you made any advance payments, they get returned within 30 days of the termination date.
This does not apply if you can take the leased property with you. For example, let’s say you receive PCS within the continental United States. You can take your car with you, so the SCRA would not lead to a lease termination in that case.
#8: Get out of telephone service contracts
If you start a service plan, you can cancel the plan, assuming that the service won’t work at your location. In this case, you cancel without any early termination fees or penalties. Other taxes and fees may apply.
Another great benefit is that if you return from deployment within 3 years, you have a right to get your old number back. This can be helpful when you try to reestablish once you return stateside.
#9: Life insurance policy protections
You can apply for life insurance protection through the Secretary of Veterans Affairs on whole, term, endowment and universal policies. There is a cap to the policy amount based on your group life insurance limit or $250,000 – whichever is higher.
Once you apply, they can’t cancel, forfeit or let a policy lapse due to nonpayment. Just be aware that your beneficiaries also can’t receive payouts during your service. If you pass away during service, any unpaid premiums may be deducted out of the settlement.
#10: Suspension of tax collection actions
If you owe money to the IRS, they won’t attempt to collect during a period of service. In fact, they give you up to 180 days after your service release date to resume collection actions. Even better, no penalties or interest charges apply during service. This is incredibly beneficial, since they can levy penalties up to 25% in normal circumstances.