Debtor and Creditor

Servicemembers Civil Relief Act

The Servicemembers Civil Relief Act (SCRA), signed into law in December 2003, provides people on active military duty with additional protections and rights against debts, contracts and court actions.

Who Is Covered?

People who are covered by the SCRA include:

  • Members of the Air Force, Army, Marine Corp, Navy and Coast Guard, including reservists, who are on active duty
  • Members of the National Guard who are on active duty for more than 30 consecutive days to respond to a national emergency
  • Commissioned members of the Public Health Service and the National Oceanographic and Atmospheric Administration

What Is Covered?

Among the protections and rights offered to service people by the SCRA are:

  • It helps service members on active duty break a real-estate or vehicle lease entered into prior to active duty
  • It gives the service member some additional protections against being evicted
  • It helps service members prevent foreclosure of their homes
  • It requires creditors to reduce interest rates on loans to active-duty service members to 6%
  • It protects service members who signed contracts prior to being called to active duty
  • It permits service members on active duty to automatically postpone judicial proceedings for at least 90 days
  • If a court enters a default judgment against a service member on active duty, it allows the service member to have the judgment set aside and have the case reopened
  • It enables the service member to delay certain life insurance premiums
  • It requires health insurers to reinstate insurance after active-duty service members are released from service

How Can I Lower the Interest Rate on My Debts?

One of the most popular provisions of the SCRA is the portion dealing with interest rate reductions.

If you incur a debt before being called into active duty, then upon entering active duty, you can request that the creditor reduce the interest rate to 6%. To do so, you'll need to request the reduction in writing (and include a copy of your military orders). One thing to remember: the interest-rate reduction only applies while you are on active duty. After leaving active duty, your interest rates will return to their original levels.

It's important to know that the creditor doesn't have to reduce your interest rate if he can prove that your ability to pay the higher interest rate isn't materially affected by your active duty. If your total income before entering active duty is the same as your total income while on active duty and your expenses are unchanged, then you probably aren't entitled to the interest rate reduction. However, most companies will honor your rate-reduction request without argument.

Who Can Help?

Despite the number of people on active duty with the military, not every company and court will be familiar with the SCRA. Sometimes you may need to explain the law to the company. Be prepared to let companies know that you are or were on active duty, and supply them with a copy of your military orders and a copy of the act.

If you're unable to get relief under the SCRA, or if you're unsure about whether it applies to you, talk to a lawyer or the legal assistance office affiliated with your specific branch of the military. They should be able to explain the law to you, and your creditors, insurance companies or the courts, in more detail.

Questions for Your Attorney

  • Who is covered by the Servicemembers Civil Relief Act?
  • Will the Servicemembers Civil Relief Act help me get a reduced interest rate on my outstanding debts?
  • If I was on active duty when a default judgment was entered against me, can I have the judgment set aside?
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