Debt, Credit and Foreclosure Issues

The Servicemembers Civil Relief Act

While protecting our country, some service members may have trouble meeting their financial obligations for a variety of reasons such as an unexpected activation, deployment, injury, or extension of service. The Servicemembers' Civil Relief Act (SCRA) was enacted in 2003 to offer these service members and their families special protections and benefits.

The SCRA covers all active duty service members, Reservists, and the members of the National Guard while on active duty. The protection begins on the date of entering active duty and generally ends 30 to 90 days after the date when the service member is discharged from active duty.

If you are on active duty and have questions about the SCRA or the protections it offers, contact your unit judge advocate or installation legal assistance officer.

If you are the family member or dependents of an active duty service member and you have questions, or think you may be entitled to the protections and benefits of the SCRA, contact or visit your local military legal assistance office.

 

Mortgage Interest

The SCRA limits the amount of interest a service member may be charged on his or her mortgage or other debt to 6 percent during periods of active service. The interest rate reduction only applies while the service member is on active duty and one year thereafter, and any interest above 6 percent that would have been charged during that time must be forgiven. The original interest rate will apply once the service member is no longer on active duty. To be eligible for this relief, the debt must exist before the service member's activation date.

To request this temporary interest rate reduction, the service member must submit a written request and a copy of his or her military orders to the mortgage lender. The request may be submitted as soon as the orders are issued but must be provided to a mortgage lender no later than 180 days after the date the service member is released from active duty.

Some mortgage lenders may voluntarily allow service members to stop making payments on their mortgage principal during active duty. Service members who are unable to pay their mortgages at the reduced rate should contact their lenders to see if they offer other repayment options for military personnel. There are also a variety of general resources for homeowners who are unable to make their mortgage payments available at the U.S. Department of Housing and Urban Development.

View a sample letter to creditors/mortgage lenders:

• Sample Letter to Creditors/Mortgage Lenders to Request a Reduction in Interest Rates under the SCRA (PDF) 

 

Foreclosures

Where the SCRA is applicable, mortgage lenders also may not foreclose upon, or seize property for a failure to pay a mortgage debt while a service member is on active duty or within 90 days after the period of military service unless they have the approval of a court. To obtain permission from the court to foreclose, the lender would have to show that the service member's ability to repay the debt was not affected by his or her military service.

 

Protection from Eviction

In most cases, a landlord cannot evict a service member or his or her dependants from their residence while the service member is on active duty, unless the landlord applies for a special court order. To be eligible for this protection, your monthly rent must be $2,831.13 or less (Note: this amount is updated annually to adjust for inflation and is current through 2008). If your landlord applies for a court order to evict you or your family during your military service, the court can postpone the eviction for 90 days or however long the court determines is just. For more information, visit the U.S. Department of Housing and Urban Development website, or contact your local veterans' service officer.

 

Termination of Residential, Business, and Other Leases

A service member who signed a lease for residential, professional, business, agricultural, or similar purposes is entitled to terminate that lease if he or she enters active military service after signing the lease. A service member who signed a lease after entering active military service can terminate that lease if he or she receives orders for a permanent change of station or to deploy with a military unit for at least 90 days. To terminate a lease, the service member must provide the landlord or other lessor with at least 30 days written notice of the termination and a copy of the service member's military orders.

View a sample letter to landlords:

• Sample Notification Letter to Landlords to Terminate a Residential Lease under the SCRA (PDF) 

 

Cap on Interest for Other Debt

If a service member's military obligation has affected his or her ability to pay off debts such as credit cards, loans, mortgages, or student loans, the service member can have his or her interest rate capped at 6 percent. The interest rate reduction only applies while the service member is on active duty, and any interest above six percent that would have been charged during that time is forgiven. The original interest rate will apply once the service member is no longer on active duty. To be eligible for this relief, the debt must exist before the service member's activation date.

To request this temporary interest rate reduction, the service member must submit a written request to the creditor or lender with a copy of his or her military orders within 180 days of the service member's termination from active duty.