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Servicemen and Debt: Know Your Rights

posted by Nathalie Martin

If you don’t personally go to war, you might not think about what being deployed does to your pocketbook. Of course, American civilians regularly take on debt, like mortgages, student loans, credit card debt and so on. Active duty troops, particularly reservists, live in both worlds, sometimes as civilians, sometimes in active duty. This on again off again relationship with credit can wreak havoc on finances, a lesson some are learning the hard way.  Yet service persons in active duty get special rights in foreclosure, as well as in bankruptcy after they return. 

First, only a judge can authorize a foreclosure on a protected service member’s home, even in states where court orders are not required for civilian foreclosures. Moreover, a judge can act only after a hearing where the military homeowner is represented. The law also caps a protected service member’s mortgage rate, as well as rates on all other credit,  at 6 percent.

Recent updates to the Servicemember's Relief Act (Civil SCRA) also provide a wide range of other protections for individuals entering, called to active duty in the military, or deployed servicemembers. SCRA postpones or suspends certain civil obligations to enable service members to devote full attention to duty and relieve stress on the family members of those deployed servicemembers. A few examples obligations protected against are:
• outstanding credit card debt
• mortgage payments
• pending trials
• taxes
• terminations of lease.

The SCRA also expands current law that protects servicemembers and their families from eviction from housing while on active duty due to nonpayment of rents. It also provides a servicemember who receives permanent change of station orders or who is deployed to a new location for 90 days or more the right to terminate a housing lease. Finally it prevents servicemembers from a form of double taxation that can occur when they have a spouse who works and is taxed in a state other than the state in which they maintain their permanent legal residence.

The SCRA covers all active duty servicemembers, reservists and the members of the National Guard while on active duty. The protection begins on the date of entering active duty and generally terminates within 30 to 90 days after the date of discharge from active duty.

Also good to know, persons who have been on active duty for 90 days or more, within a year and a half of filing for bankruptcy, are not required to pass the means test in order to file a Chapter 7 case.  This is likely a further acknowledgment that wages can be unpredictable following deployment.


Ms. Martin,
I could not agree with you more regarding your post. Having served in the military and having over 40 years professional experience in consumer credit, collection and bankruptcy, those who serve and deployed to serve including family members are subject to a lack of understanding their rights.Last year while serving on the PA Governor's Task Force I and other volunteers saw the lack of understanding the SRA. There is much to be done to correct this problem and certainly in the credit and collection industry as a whole. Education is needed and belongs to the credit and collection community to help. My appreciation, for what is worth, for this post which is long overdue.

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