The Servicemembers Civil Relief Act (SCRA) is the main federal law that protects Service Members’ rights while they serve. It helps ensure that you can focus on the mission, unhindered by any financial distractions at home. While you’re defending our country, you shouldn’t have to be worried about things like foreclosure or property repossession. This is the law that protects those rights.
Key SCRA Guidelines that Protect Your Rights
#1: Protection against default judgments
This part of the SCRA protects you against default judgments that might happen while you serve. While you serve your country, a court can’t enter a default judgment against you. They must either appoint an attorney to represent you or stay the proceedings. A stay means the delay the judgment until you can appear in court.
This is particularly important for child custody cases, although it applies to any civil court action. It means your ex can’t try to get a custody agreement or adjust an existing agreement when you can’t be there to fight in court. If any court enters a default judgment while you serve, you have a right to reopen the case within 60 days of release from service.
#2: Protections against fines, penalties and garnishments
This essentially means that someone can’t add excessive penalties and fines to a contract while you serve. Basically, if your service prevents you from keeping up with an obligation, then a court can decide to reduce or waive penalties and fines.
In addition, the SCTA also protects you against garnishments. If you face something like wage garnishment because of failure to pay during service, the court can vacate the judgment.
#3: All interest rates cap at 6%
A key piece of the Servicemembers Civil Relief Act caps all interest rates at 6% during a period of service. If you incur any debt before military service begins, the lender must reduce your interest rate to no more than 6%. That cap remains in place while you serve; for mortgages and trust deeds on a home, the limit remains in place up to one year after service.
If a lender adds additional interest charges to your debt during service, they get forgiven without penalties. The lender must also reduce the payment amount according to the rate decrease; in other words, they can accelerate principal repayment by keeping your payments the same.
You can even get this cap in interest applied retroactively. If you submit written notice to the creditor within 180 days of release from service, all interest charges over 6% are forgiven. The interest rate cap includes service charges, renewal charges and fees; it does not include insurance charges.
#4: Additional child custody protections
In addition to prohibiting default judgments, the SCRA regulations specifically control child custody cases during deployment or service.
- Any temporary order of custody expires relative to your release from service
- With a permanent order, deployment does not factor in for what’s in the best interest of the child
- Military service does not create a right of removal – i.e. the court won’t rule in a co-parent’s favor simply because you serve
#5: Protection from eviction
The SCRA also protects you against evictions during service. A landlord can’t evict you or your dependents without a court order during a period of service. There is an exception for high-dollar properties. If your rent is over a certain limit of the housing price inflation adjustment listed in the Federal Register, this doesn’t apply.
But for most properties and renters, this protects you and your family from eviction. It’s also important to note that the court can order relief for the landlord if the eviction stay costs them. In fact, if there is a court order for repayment, they can assign a pay allotment for you to cover the rent. This is a maximum cap on the allotment, so it won’t drain your income entirely.
#6: Protection from repossession
Purchase and lease agreements can’t terminate during your service, leading to repossession. Basically, if you fail to pay as a result of service, no one can take your property or repossess any collateral.
The court can order repayment as a condition of repossession. This means whoever repossesses the property must make you whole if they want to take the property.
#7: Protection from property seizure and foreclosure
Just like a landlord can’t evict a renter during service, a mortgage lender can’t foreclose on you or seize your property. In fact, the SCRA protects you from the sale, seizure or foreclosure on a property up to one year after service. The mortgage lender must go to court for them to grant the lender the right to foreclose or sell your property.
If the court orders a stay in a foreclosure case, they can order up to 3 third-party impartial appraisals on the property. Based on those appraisals, the court can order to use a portion of the property’s equity to pay the lender. This only happens if the court finds that the equity liquidation won’t create undue financial stress for you.
#8: Terminating leases when you begin service
The SCRA also has protections to help you get out of lease agreements. These apply when you receive orders to deploy AND orders for permanent change of station. Basically, if you won’t benefit from a lease because you’re away serving your country, you can get out of the agreement.
- At your discretion, you can terminate a lease before or during a period of service at any time without penalties.
- You must provide written notice, along with a copy of your orders
- If the lease involves a vehicle or any property, you must return in within 15 days of that written notice
- If there are any arrearages that you need to pay, they get ordered on a prorated basis.
- The lessor can’t add termination charges, but any taxes and other charges, such as excess wear or mileage, may apply
- If you make any advance payments, you get a refund of the payments within 30 days of the lease termination
This only applies if your service affects your ability to use the property you leased. So, for instance, if you lease a car and simply move to another state in the U.S., it doesn’t apply. You can take the car with you, so you can’t terminate the lease in this case.
#9: The ability to get out of telephone service contracts
The SCRA also gives a servicemember called to deploy the ability to get out of a telephone service contract. If you will deploy to somewhere that you can’t use that service, you have a right to cancel the contract without any penalties.
Another really nice part of this protection is the right to keep your number. If you come back from that deployment or period of service within 3 years, you can get your old number back. This also applies to family plans if your family goes with you. Again, the provider must refund any advance payments within 30 days of the cancel. They can’t add any additional termination charges, although taxes and other fees may still apply.
#10: Protection from storage liens
If you have a lien against any property, they can’t foreclose or enforce the lien during a period of service. The court can stay the proceedings until you get back.
#11: Life insurance policy protections
A whole section of the Servicemembers Civil Relief Act offers protections for insurance policy holders. This applies to any policy, including whole, term, endowment and universal insurance. As long as your insurance policy is less than $250,000 or your max group life insurance limit (whichever is greater) you can apply for protection.
You apply for life insurance protection through the Secretary of Vetrans Affairs. A legal representative or the policy beneficiary can also apply for protection. Once granted, the protection applies for up to years after military service.
Your policy can’t lapse, be terminated or forfeited as a result of nonpayment. However, during the protection period, you also won’t get any dividends or monetary benefits without Secretary approval. If there are unpaid premiums, they get deducted from the settlement in the case of your death.
The IRS also defers income tax collection during a period of service. The IRS won’t attempt to collect while you serve and for up to 180 days thereafter. Even better, no penalties or interest accrue during the service period. This is important, since penalties can accrue at a rate of up to 25% on unpaid tax debt in normal circumstances.
In addition, your taxes don’t change as a result of service. Basically, if you move to a different tax jurisdiction as part of your service orders you still maintain your previous residency. In other words, you won’t be subject to sales taxes and state taxes wherever you move.
#13: Protections for property and land rights
A little-known part of the SCRA protects you if you have claims to public lands. Basically, you can’t have land rights yanked, because you didn’t meet residency, output or improvement requirements due to your service. This includes mining claims, desert-land entries and mineral leases.
This part of the SCRA also protects you if you can’t meet requirements due to injury during service. If you have to be hospitalized or go for rehabilitation, you land rights are protected.
#14: Power of Attorney
If you set up Power of Attorney before you deploy and then go missing, the Power of Attorney automatically continues. In other words, if you’re missing in action, your spouse or the family member you designate can still act on your behalf. This automatic extension applies as long as you don’t specify an end date when you set it up.
#15: Professional liability protection and health insurance reinstatement
The final protections granted allow you to easily reinstate any health insurance and professional liability protections following service. This applies if you have a professional liability insurance policy or health insurance that suspends or terminates during service. You can simply apply for reinstatement within 120 days of your release from service.
It also stipulates the reinstatement must restore you to what you had prior to service. So, a policy provide can’t change your rates or premiums on you.
What the SCRA doesn’t protect
Amidst the range of protections that the Servicemembers Civil Relief Act provides, there are a few things it mentions that aren’t protected:
- It doesn’t protect codefendants who aren’t in military service. While SCRA protections extend to dependents and often your spouse (especially if they go with you), it doesn’t protect codefendants. A civil case can go forward against your codefendant while you serve. Then your part of the case moves forward following release from service.
- It doesn’t count towards any statute of limitations. A period of service does not count in the time elapsed on a statute of limitations. For example, if a collector pursues you for debt repayment and it’s close to the end of the statute, that date gets pushed back.
- You’re still on the hook for unpaid life insurance premiums. All premiums and interest are guaranteed by the U.S government. If the policy expires and the cash value is less than the premiums and interest, the United States pays the difference. But then you owe the U.S. a collectible debt that can’t be discharged through bankruptcy.
- No protections for debts incurred during service. All SCRA protections only apply to debts, obligations, purchase and lease agreements made before the period of service. You can’t take out a new loan and apply the 6% interest rate cap retroactively.
- All stay of proceedings are up to the court’s discretion. If a lender or lessor claims that your service does not materially affect your ability to pay, the court can rule in their favor. This means you’d still be on the hook for any payments or added interest charges above 6%.
What happens when someone violates the SCRA?
In most cases, violations of the SCRA are a misdemeanor worth fines and up to one year in prison. Someone must knowingly violate your rights. For example, if your spouse gets an eviction notice and submits a copy of your orders, your landlord can’t willfully evict your spouse anyway. If they ignore your service and try to move forward in spite of it, they violate the law. If someone violates your rights protected by the SCRA, you have a right to sue as a civil action. You can seek relief to make you whole and even monetary damages.
In addition, if a business or lender shows a pattern of SCRA violations, that can face civil action by the Federal or any State Attorney Generals Offices. Fines for habitual violations can result in fines up to $55,000 for a first offense. If they violate it again, the fines can be up to $110,000.