Financial Relief for Service Members and Their Families
On Memorial Day, Americans from coast-to-coast will honor those that gave their lives in service to our country. The Service Members' Civil Relief Act, or SCRA, was enacted to ensure that military members on active duty have added financial and legal protections. The act applies to all active duty members of the armed forces, including the activated National Guard and the commissioned corps of the National Oceanic and Atmospheric Administration and the Public Health Service.
A member is generally covered under the Act beginning on the first date of the active duty period until 30 to 180 days after he or she is released from active duty. Among the Act’s protections are:
Financial obligations such as credit card debt, loans and mortgages entered into before the active duty period cannot charge more than 6% interest and any excess interest above that point will be permanently forgiven and cannot become due later. This is only during the active duty period and does not apply to federal guaranteed student loans or new debt including refinancing and credit balance increases incurred while on active duty.
No lender may foreclose, seize or sell the homes of active duty service members for up to three months after the active duty period ends providing the mortgage was taken out before active duty began. The mortgage lender can request permission from the court to foreclose if it thinks that a borrower's active status has not materially affected his or her ability to pay the loan or appear in court.
Those who enter active duty after signing a rental agreement, for either housing or for a business, with a rent of $2,400 per month or less may terminate their leases without penalty. This applies even if a spouse or dependents occupy the residence. Typically, service members must either be called to active duty for at least 90 days or receive orders for a permanent change of station or deployment of at least 90 days.
Active duty service members may terminate automobile leases signed either before or after active duty begins if the member meets certain conditions. This generally also applies to members of the reserve and guard if, after signing the lease, they are called to active duty for at least 180 days or more or receive orders for a permanent change of station outside the area.
Lenders cannot repossess cars or other consumer goods purchased with installment contracts before the servicemember entered active duty without a court order. Once in court, a judge may grant a stay of repossession proceedings if he or she feels that active duty has materially impacted the service member’s ability to pay.
Service members, recent veterans and their families can also receive free debt relief from American Debt Counseling, Inc. In addition to the confidential and free credit counseling services ADC provides to all consumers, ADC is waiving all fees for a service member to enter into and participate in a debt management program. The program is available only to new clients who are recent veterans or who currently serve in the U.S. military, and their spouses. To find out more, call 1-888-DEBT-USA.
