Veterans Get More Financial Protection

The men and women in the military are protecting our country. However, while they are on active duty, they often have problems meeting certain financial obligations here at home, such as keeping current on their rent or mortgage obligations. In August of this year, President Obama signed a law that added greater protections to the existing laws affecting those military personnel who are now on active duty.

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In December, 2003, President Bush signed into law the Servicemembers Civil Relief Act (SCRA), which was a complete revision and update of the Soldiers' and Sailors' Civil Relief that was first enacted during World War 2. The new SCRA law protected those in military service in such areas as mortgage relief, termination of leases, protection from eviction, a 6 percent cap on interest rates, and the right to reopen any default judgments obtained while in the military.

However, that law applied only to obligations that originated before the servicemember's military service, and for which those obligations still were applicable. The new law, entitled "Honoring America's Veterans and Caring for Camp Lejune Families Act of 2012, amended SCRA by extending the period of time for some of the earlier protections.

Here is a summary of the protections afforded to our nation's servicemen:

"Servicemembers" are defined as persons on active duty in the military, but also includes National Guard members who have been called up for active duty for more than 30 days.

If you - or a family member - are on active duty, all of your lenders should be immediately notified, and you must send them a copy of the military orders. Once the lender has been put on notice, it must reduce all interest payments down to six percent, and - most importantly - must forgive all pre-service debts which exceeded this six percent cap. It should be noted that this protection applies only to debts incurred before the borrower went into active military service; debts incurred while on active duty are not similarly protected.

The stated purpose of SCRA is:

to provide for, strengthen, and expedite the national defense, defense through protection extended by this Act to servicemembers of the United States to enable such persons to devote their entire energy to the defense needs of the Nation; and to provide for the temporary suspension of judicial and administrative proceedings and transactions that may adversely affect the civil rights of servicemembers during their military service.

It should be noted that the reduction in the interest rate must be accompanied by a reduction of the monthly payment. The lender cannot require you to continue to pay your same payment each month, and credit more toward principal.

  • Leases: if a lease was entered into prior to the tenant's entry into the armed services, the tenant has the right to terminate it, even before the term has expired. Members of the military who receive orders for a permanent change of station or to deploy with a military unit for a period of not less than 90 days also have the right to terminate leases, even if the leases were entered into while they were on active duty. The landlord must be given thirty days advance notice of the termination, and rent must be paid up to the date the lease ends. There is no longer a requirement that the lease contain a military termination clause.
  • Rent: military personnel - as their civilian counterparts - must continue to pay rent if the lease is not terminated. However, the Act does provide some protection from eviction. Only a court can order the eviction of the tenant.(Note: this is the law in many States anyway. A landlord generally cannot exercise self-help by evicting a tenant without first obtaining Court approval.) If the Judge determines that the military service has materially affected the ability to pay, the Court must stay (stop) the eviction The new law now allows the Judge to stay the proceedings or adjust the obligation to preserve the interests of all parties at any time during the period of military service or within one year thereafter. Since this is a complex issue, tenants who are on active military service must consult with the legal assistance attorney assigned to their unit.
  • insurance: the private life insurance policy cannot lapse, terminate or be forfeited for nonpayment of premiums for a period while the insured in on active duty, plus one year.
  • garnishments and attachments: On the request by the military person - or the Court on its own - may stay or vacate any attachments or garnishments against the debtor during the period of active duty plus up to one year after that duty ends.
  • legal representation: under certain circumstances, when a lawsuit is brought and the Court determines that the Defendant is on active military duty, the Court cannot enter a judgment until after the Court appoints an attorney to represent the interests of the servicemember.

    Thus, the new law extends - and expands upon - the protections which Congress initially provided to the men and women who served during World War II. Our servicemembers should devote their energies to their military tasks and not have to worry about their creditors.

    The Supreme Court, in a case involving SCRA, has ruled that the law must be read with "an eye friendly to those who dropped their affairs to answer their country's call."

Published: July 4, 2013