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If you or someone you know has been a service member for the United States, then you’ve likely heard of the SCRA. However, you might not know exactly what the SCRA is or how it can help you.
SCRA stands for Servicemembers Civil Relief Act. The SCRA (formerly called the Soldiers’ and Sailors’ Civil Relief Act) was enacted into law in 2003. This law aims to protect military personnel who are on active duty by limiting actions that can be taken against them. It also aims to reduce, postpone or stop any civilian obligations while a person is on active duty.
This law is intended to allow military personnel to focus on their military duties by reducing financial and legal burdens that might otherwise affect them.
What Does the SCRA Cover?
The SCRA is quite extensive in protecting active military personnel and covers many different factors. Some of the most used features include limits on interest rates, foreclosures and more.
Interest Rates
Under the SCRA, creditors must limit the amount of interest for military personnel to six percent per year. This six percent maximum also applies to debts incurred before military service. Any interest that is higher than this maximum must be forgiven by the creditor.
This limited interest rate applies to credit cards, mortgages, business obligations, fees, service charges, annual renewals and loans (like auto, recreational vehicle and home equity loans). However, this rule affects only some student loans.
For mortgages, the reduced rate of six percent will continue for one year after active-duty service ends.
A service member’s interest rate isn’t automatically reduced when they enroll in the military. Instead, the individual needs to reach out to their creditor with a copy of their military active-duty orders and a formal, written request to abide by the six percent interest maximum.
There are some exceptions to the rule. Suppose a creditor appeals the request and the court finds that the service member’s ability to repay isn’t impacted by their active duty. In that case, the service member may have to pay the original interest rate.
Foreclosures and Repossessions
Under the SCRA, service members are protected against default judgments, including foreclosures and repossessions. When a service member doesn’t appear in court because they’re away on active duty, the court cannot issue a judgment.
Foreclosures
If the service member purchased a home before their military service, a lender cannot seize or foreclose on the house. The only exception is if the lender receives a court order for foreclosure.
Some states don’t require a court order to foreclose on a home (nonjudicial foreclosures), but under the SCRA, service members are protected in these states too.
Additionally, a foreclosure postponement extends to one year after military service ends, also known as “tail coverage.”
Repossessions
Lenders cannot repossess property—such as vehicles—for nonpayment or under a contract termination due to payment gaps. This applies to any missed payments during the service member’s military service. The only exception is if the lender receives a court order for repossession.
Income Taxes
If a service member can show that their military service impacts their ability to pay their income taxes, payment the income taxes can be deferred. This rule applies to the IRS, state and local tax authorities. Additionally, the service member can’t be charged any interest or fees for the income tax deferral.
Small Businesses
If a service member owns a small business, creditors cannot come after them for business obligations or debts while the individual is on active duty. The SCRA protects the individual’s military pay and nonbusiness assets from the creditors associated with the small business.
Credit
When a service member asserts their rights under the SCRA, creditors cannot respond by revoking or denying credit or changing the credit terms. For example, if an individual invokes the six percent interest rule, the creditor cannot respond by reducing their credit card limit.
However, individuals should note that if a service member misses a payment, the creditor can report them to credit reporting companies. This late payment may then show up as a negative item on their credit report and may lower their credit score.
Other
Voting
Service members retain the right to vote in their state of residency, even when they’re stationed for active duty in another state or country. They don’t need to change their voter registration and will be able to vote in their state of legal residence.
Civil Judicial Proceedings
Any civil judicial proceedings, including family law proceedings, are postponed under the SCRA. If it is found that a defendant service member has not been able to attend court because they’re on active duty, the court cannot enter a default judgment against them. The service member then has to appoint an attorney to represent their interests as a defendant.
Life Insurance
A life insurance company cannot increase payments or terminate coverage because an individual is on active duty. An exception to this rule is natural premium increases that come as a result of age.
Insurance companies also can’t limit or restrict any type of coverage due to active-duty service.
Who Is Eligible?
The SCRA covers all active-duty military members, including:
- Army
- Marine Corps
- Air Force
- Space Force
- Coast Guard
- Navy
- Reserves and National Guard
- Commissioned officers in active duty with the Public Health Service or the National Oceanic and Atmospheric Administration
A service member’s eligibility begins the first day of their active-duty service commitment and ends between 30 and 90 days after finishing active duty. For some aspects covered by the SCRA, the SCRA protection can extend up to 180 days post-active duty.
For Reserve and National Guard members, the eligibility for SCRA begins the very day they receive their mobilization orders. Even if Reserve and National Guard members are in unpaid status or not on active duty, the SCRA protections apply.
SCRA protections can apply to the spouses and children of service members or to other individuals who relied on the service member for 50 percent or more of their financial support. This support had to start at least 180 days before using SCRA protections.
Service members who are uncertain about the coverage for themselves or their loved ones can contact the Legal Assistance Office at their base.
Waiving Your Rights
A service member can waive their rights under the SCRA with a written document signed after their military service period starts. Waiving your SCRA rights before entering military service makes the action void.
While you can waive your SCRA rights, it’s generally not recommended to do so. Make sure you consult an attorney before proceeding with this action, and read the documents carefully before signing.
How to Take Advantage of the SCRA
The majority of your rights under the SCRA require you to take some form of action before protection takes effect. Tax authorities, lenders and courts often don’t know that a person is on active duty. To take full advantage of the SCRA, you should first understand all the benefits and your rights.
For example, to get a refund on certain interest and fees you have to actively request relief by submitting paperwork so they can verify your active-duty military status, but it’s well worth the effort.
In general, when you’re applying for SCRA benefits, you’ll need to provide the following information:
- Account number
- Start date of the active-duty service
- Request for relief in accordance with the SCRA
- Copy of active-duty orders
Certain companies may give you additional SCRA benefits on top of everything else. One large bank offers active-duty personnel interest rates that are two percent lower than what the SCRA requires Many other creditors or financial institutions also offer additional benefits.
By understanding your SCRA benefits, you can set yourself up to take full advantage of everything being offered to you. This can help you significantly when you return from active duty.
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