The Servicemembers Civil Relief Act (SCRA) provides certain types of financial assistance to active-duty military personnel so as to not punish them for defending the country during times of conflict. It was signed into law in 2003, effectively modernizing laws that had been in effect in some way, shape, or form since the Civil War.
Modernization of the statutory protections afforded soldiers was necessary in large part because the nature of military service has changed so much over the years. “Service members’ financial situations are increasingly at risk due to abrupt activations and change of station, especially deployment abroad,” says Edward F. Sherman, a professor at Tulane University Law School and a retired lieutenant colonel in the U.S. Army JAG Corps. “Those who have been activated had their financial lives uprooted.”
You can find an overview of the law’s most important provisions below, followed by a more detailed explanation and the historical background of the law.
- Cap on Interest Rates: Interest for financial obligations that are in existence at the time you’re called into active duty is limited to 6% for the duration of your service, and you will not be responsible for the difference upon completion.
- Safeguard from Eviction and Foreclosure: You cannot be evicted from a leased house or apartment due to your inability to pay a predetermined amount of rent during the course of active duty. Furthermore, a lender cannot foreclose upon your property due to an inability to pay that arises as the result of active duty obligations.
- Tax Deferral: You are not responsible for local income taxes when stationed temporarily, and you do not have to pay any taxes (aside from those related to Social Security or Medicare) until you have been out of active duty for 180 days.
- Delay of Court Proceedings: You can request that court proceedings be postponed during active duty.
- Contractual Protection: Missing installment payments as a result of active duty cannot result in repossession of property without a court order.
- Insurance Retention: You cannot lose personal insurance or life insurance as a result of active duty obligations.
- Lease Termination: You may cancel a residential or automotive lease signed prior to being called into active duty under certain circumstances.
- Cell Phone Contracts: You have the right to suspend or terminate a cell phone agreement if you receive a Permanent Change of Station or are deployed outside of the U.S. for at least 90 days.
Active Duty: The period from the time active duty orders are received until discharge.
Dependent: The servicemember’s spouse, child, anyone for whom the servicemember provided more than 50% financial support in the 180-day period leading up to active duty service.
- Permanent Change of Station (PCS): The official relocation of an active duty servicemember.
The Servicemembers Civil Relief Act applies to active duty personnel in the Coast Guard, Air Force, Army, Marine Corps, and Navy; National Guard Members and Reservists in active federal duty; and Commissioned Officers of the Public Health Service and the National Oceanic and Atmospheric Administration. Dependents of the aforementioned types of military personnel are also eligible for certain benefits.
Protections: Should your military service prevent you from meeting obligations related to mortgages, credit card accounts, and non-Federally guaranteed student loans entered into prior to active duty, you have the right to cap the interest on such accounts at 6% for the duration of your service. The amount of your required monthly payment will be reduced by the respective amount of interest that you are no longer obligated to pay. This excess interest is permanently settled and will not be owed following the completion of your military duties.
Eligibility: To be eligible for the 6% interest rate cap you must demonstrate not only that you are on active duty, but also that your active duty significantly inhibits your ability to make payments to your financial obligations as previously agreed.
- Logistics: Interest rate relief under the SCRA is contingent upon you submitting a written request to your creditors, along with copies of your orders, within 180 of being released from service.
Protections: You are exempt from eviction from a leased property due to the inability to make monthly rent payments as a result of financial hardship caused by military service. This provision currently applies to rent payments of up to $2,932.31 per month, though this figure is subject to change based on inflation. Furthermore, you may legally terminate your lease as a result of being stationed elsewhere for 90 days or more or if you receive Permanent Change of Station (PCS) orders.
Eligibility: In order to benefit from SCRA rent relief, you must have signed your lease before entering active duty and have already received your active duty orders.
- Logistics: You must provide written notice to your landlord that you either will be unable to pay rent or wish to terminate your lease. You must also make the next rent payment due following the provision of written notification to your landlord as well as pay any amounts owed for the 30 days that follow thereafter.
Protections: Mortgage lenders are prohibited from foreclosing upon or repossessing properties secured by a mortgage without a court order during a servicemember’s active duty period as well as the three months following its conclusion.
- Eligibility: You are eligible for foreclosure protection if you took out your mortgage prior to beginning active duty and your service prevents you from meeting your obligations as originally agreed upon.
- Logistics: You must provide your mortgage lender with a copy of your active duty orders.
Protections: You cannot be required to pay local income taxes on military pay in the municipality in which you’re stationed on active duty, and this municipality cannot use your military income to increase your spouse’s tax obligations. This provision only applies to military pay, however, which means alternate forms of income pay may be taxed locally. You may also be able to defer taxes owed for up to 180 following the completion of active duty, provided you are able to demonstrate that your military service caused your inability to pay.
Eligibility: The provision against double local income taxation applies to all active duty military personnel stationed away from their permanent residence. To qualify for a deferral of other tax obligations, you must currently be on active duty and be experiencing financial hardships caused by your military obligations.
- Logistics: Only file income taxes in your state of permanent residence.
- Protections: You have the right to request a “stay of proceedings” for at least 90 days if you are served with a legal complaint to which your active duty military obligations prevent you from responding. Furthermore, you are entitled to request a “stay of execution” if military obligations prevent you from complying with a court order issued before, during, or within 90 days of the completion of active duty military service. Finally, if a default judgment is entered against you as a result of your failure to appear in court and your failure to request a stay of proceedings or a stay of execution, you can have the judgment reopened by providing a written request to the court within 90 days of the completion of your service.
- Eligibility: In order to qualify for a stay of proceedings or a stay of execution, the court proceeding in question must conflict with your active duty service. In order to reopen a default judgment, the following conditions must be met: 1) the judgment was entered within 30 days of the completion of your active duty; 2) your military obligations prevented you from responding to the original complaint; and 3) you have a case.
- Logistics: You must provide a written request to the court within 90 days of the completion of your service.
Termination of Leases:
Property Leases: Service members may terminate a lease used to secure property that is designated for dwelling, business, or agricultural use and entered into prior to active duty service upon entering into active duty, receiving orders for a deployment of 90 days or more, or for a PCS.
Auto Leases: Servicemembers may terminate auto loans entered into prior to active duty service after 180 of service or upon receiving PCS orders for a deployment of 180 or more days. Lenders are also prohibited from charging early termination fees and are required to return prepaid amounts to the borrower.
- Eligibility: A servicemember must have entered into the respective lease prior to active duty and must provide written notice of termination to the lessor.
- Property Leases: Service members may terminate a lease used to secure property that is designated for dwelling, business, or agricultural use and entered into prior to active duty service upon entering into active duty, receiving orders for a deployment of 90 days or more, or for a PCS.
- Property Leases: Written notice of termination must be provided to the landlord. The effective termination date for a month-to-month lease falls 30 days after the first payment due date following the provision of written notice. All other leases are considered terminated on the last day of the month following the month in which written notice was provided.
- Auto Leases: Written notice of contract termination must be provided to the lender and the vehicle must be returned within 15 days of the provision of this notice. The date both are in the possession of the lender is considered the contract’s termination date.
- Protections: A party with whom you entered into a contract prior to active duty cannot exercise any right or option to terminate the contract or repossess any real property it is used to secure without a court order while you are on active duty.
- Eligibility: You must have both entered into the contract and paid either a deposit or at least one installment prior to the beginning of your active duty. Active duty obligations must also have a material impact on your ability to fulfill your obligations under the terms of the contract.
- Logistics: You must be able to provide a copy of your active duty service orders as well as demonstrate that your service obligations significantly impact your ability to pay.
- Life Insurance: A life insurance policy may not lapse or be terminated due to nonpayment while you are on active duty and for one year thereafter.
Health Insurance: A health insurance policy suspended during active duty will commence upon the completion of service without any disruption not provided for in the terms of the original policy agreement. This holds true even if a medical condition arose during active duty (provided that military service is not deemed to be its cause).
- Life Insurance: You must have taken out the policy at least 180 days prior to the commencement of active duty, and active duty obligations must have a material impact on your ability to pay.
- Health Insurance: The policy must have been in effect prior to the commencement of active duty service.
- Life Insurance: You must provide a written copy of your active duty orders as well as be able to demonstrate that your service obligations significantly impacted your ability to pay.
- Health Insurance: You must apply for reinstatement of coverage within 120 of the conclusion of your active duty. You must also provide a written copy of your active duty orders as well as be able to demonstrate that your service obligations significantly impacted your ability to pay.
Cell Phone Agreements:
- Protections: You have the right to suspend or terminate a cell phone contract if you are deployed outside the continental U.S. for at least 90 days or you receive a PCS. Service providers are prohibited from assessing penalty fees or requiring contract extensions as a result of the suspension or termination of your original agreement.
- Eligibility: You are eligible for this protection if you entered into your cell phone agreement prior to receiving active duty service orders and your service obligations significantly impacted your ability to pay.
- Logistics: You must provide written notice of suspension/termination along with a copy of your service orders.
SOL & Waiver of Rights
Statues of limitations are suspended during active duty. This provision applies both to your ability to initiate legal proceedings as well as the ability for others to initiate legal proceedings against you.
It is possible to waive certain rights provided via the SCRA. This can only occur as a result of your signing a contract during the course of your active duty that dictates the particular rights to be waived as well as the specific financial instruments to which the waiver applies. The waiver must be established in a separate contract from that which laid out your original obligations and must be expressed in at least 12-point font.
The Servicemembers Civil Relief Act (SCRA) was signed into law in 2003 by President George W. Bush. Its purpose is to modernize the Soldiers and Sailors Civil Relief Act (SSCRA) of 1940. More specifically, the SCRA of 2003 clarified language from the SSCRA of 1940, added additional guidance for compliance, made administrative changes to the layout of the law, and accounted for changes in business practices that arose in the 63-year interim between the passage of the two laws.
The SSCRA of 1940 itself represented a modernization of the Soldiers and Sailors Civil Relief Act of 1918, which instructed courts to take whatever action was deemed necessary to protect the rights of military personnel while in the service of the country. The original seeds of this legislation can be traced all the way back to the Civil War, when the Union established a complete moratorium on civil actions against federal soldiers and the Confederacy conferred similar protections upon its personnel.
Ask The Experts: Military Finance
CardHub sought the input of experts on the unique financial hurdles facing members of the military, the effectiveness of the SCRA, and what other regulations might be needed in the future. You can check out what they had to say below.
Image: Sean Locke Photography/Shutterstock