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How the SCRA Can Protect Your Rights and Your Money

Sep 10, 2020 3 min read Ben Gran

Key Takeaways

  • The SCRA gives service members extra rights in managing personal finances.
  • Benefits include lower-interest loans, protection against foreclosure, and more.
  • You'll need written documentation of your military orders.

As a member of the military, you've put a lot of time, energy, and sacrifice into serving your country, and sometimes there are special financial stresses and risks that go along with that. Military service members have the same financial obligations and stresses as everyone else, but sometimes, because of the nature of active duty and the pressures of deployment, service members need a little extra help or forgiveness in dealing with financial situations.

For example:

  • What if you fall behind on your mortgage while on active duty and are threatened with foreclosure?
  • What if you miss a credit card payment because you had to deploy?
  • What if you have to move to a new military station and you have to break the lease on your current residence?

To better support military service members and their families, the U.S. government provides extra consumer protections under the Servicemembers Civil Relief Act (SCRA).

The SCRA exists to protect your rights and help you save money when dealing with the demands of military life. Under the SCRA, military service members can qualify for lower interest loans, get help breaking an apartment lease without penalty, as well as other financial protections. It's not a “get out of debt free" card, by any means, but the SCRA does have a few important protections that active duty military service members should be aware of.



So if you are ever behind on your mortgage and facing foreclosure, talk to your lawyer or ask the court about what protections you may qualify for under the SCRA.

Here are a few of the biggest benefits of the SCRA, as described by the U.S. Department of Justice, and what they mean for you and your family:

Interest rate cap and loan interest forgiveness

Under the SCRA, service members only have to pay a maximum interest rate of 6% on certain financial obligations (including credit cards, vehicle loans, mortgages, home equity loans, and student loans) that were incurred prior to military service. Any interest above 6%, and any fees other than the interest rate, must be forgiven by creditors. This includes retroactive forgiveness of interest already charged that was in excess of the 6% amount.

In order to qualify for the 6% interest rate on their debts, military service members must provide their creditors with a copy of their military orders and a written notice; these documents must be provided to creditors within 180 days of the end of the service member's military service.

NOTE: This low-interest loan program only applies to debts that people take on prior to entering military service. So if you join the military and then run up credit card debt or take out a new car loan, you will not qualify for a 6% interest rate cap under the SCRA.

Protection against default judgments

If a service member is a defendant in a civil court proceeding (such as a home foreclosure), and the service member is unable to attend a court hearing, a court may not enter a default judgment against them until it appoints an attorney to represent the service member's interests.

Hopefully, you will never be a defendant in a lawsuit, but in case you are, this SCRA benefit provides an added level of protection for your legal rights and might even help slow the foreclosure process and save your home.

Protection against non-judicial foreclosures

In case you fall behind on mortgage payments, the SCRA provides some extra relief and protection to help save your home from foreclosure. The SCRA states that “during a period of military service, and for one year after a period of military service … a creditor must get a court order prior to foreclosing on a mortgage." Courts also have the ability to force creditors to adjust the payment plan for the mortgage of a military service member, “if the service member's ability to meet the obligation is materially affected because of his or her military service."

So if you are ever behind on your mortgage and facing foreclosure, talk to your lawyer or ask the court about what protections you may qualify for under the SCRA.


Protection against vehicle repossessions

As a military service member, you are also protected from having your vehicle repossessed by creditors without a court order, as long as you “either placed a deposit for the vehicle, or made at least one installment payment on the contract before entering military service."

Help with terminating residential (apartment) leases

There are times service members get a new “permanent change of station" (PCS) order and have to relocate on relatively short notice, or they have to deploy to the other side of the world. If these circumstances require you to break your lease, the SCRA can help you get out of your apartment lease early with less hassle.

According to the provisions of the SCRA, if you have a residential apartment lease for an apartment that is occupied or intended to be occupied by a service member or a service member's dependents, and the lease was executed by someone who later joined military service, or someone who was already in the military and “later receives permanent change of station ('PCS') orders or deployment orders for a period of at least 90 days," then you have the right under the SCRA to terminate your lease.

To terminate your lease early under the SCRA, the service member must give the landlord:

  • Written notice and a copy of his or her military orders, or:
  • A letter from a commanding officer

Upon giving proper written notice and a copy of military orders, the service member's lease will officially terminate 30 days after the next rent payment is due. For example, if you give your landlord proper written notice of your move on November 20, and your rent is due December 1, then your lease will be terminated on December 31.

Military members should know their rights under the SCRA, doing so ensures they have every legal and financial protection that the law allows. Also, be aware of any possible changes in the details or enforcement of the SCRA.


What you can do next

Know your rights under the SCRA and be prepared to provide proper written documentation if you qualify for lower-interest loans, protection against foreclosure or vehicle repossession, or if you need to break a lease early due to military orders. Full details of the Servicemembers Civil Relief Act (SCRA) are available at the U.S. Department of Justice website Opens in new window.



Ben Gran is a freelance writer based in Des Moines, Iowa. He writes about personal finance, financial services, technology, and business.


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