On December 19, 2003, President Bush signed Public Law Number 108-189, a major amendment to the Servicemembers' and Sailors' Civil Relief Act (SSCRA). Prior to these changes, the last major revision of the SSCRA occurred in 1940. As a result, servicemembers will now benefit under the newly revised and named Servicemembers' Civil Relief Act (SCRA).
This notice will not attempt to fully review or analyze this legislation. It is only intended as an informative guide to alert servicemembers of some of the more important provisions of this legislation. Please see a legal officer for details.
What Can the SCRA Do For You?
The present version of the SCRA offers improved benefits to today's military members beyond what was provided by the SSCRA. The most significant benefits of the SCRA are:
- A cap on interest rates for pre-service debts;
- The ability to delay certain civil court proceedings;
- An opportunity to reopen default judgments;
- Protection against eviction from leased housing;
- The ability to terminate certain leases;
- Protection against repossession of property;
- Tax relief; and
- Protection against foreclosure on certain land purchase agreements.
While this spectrum of benefits sounds very broad, each is subject to some exceptions. You must understand those limitations before you'll know what the SCRA can do for you, so read on to learn more about each benefit.
Capturing Your Interest
The six percent interest cap was one of the most frequently used provisions of the SSCRA. This provision requires the reduction of interest on any pre-service loan to six percent. One area of ambiguity was whether the interest in excess of six percent is forgiven, deferred, or subject to some other treatment. Section 207 of the SCRA resolves this issue. It also, for the first time, details the steps that a servicemember must take to obtain the interest rate reduction. The servicemember must make a written request to reduce the interest to six percent and include a copy of his applicable active duty orders. Once the creditor receives notice, the creditor must grant the relief effective as of the date the servicemember is called to active duty. The creditor must forgive any interest in excess of the six percent with a resulting decrease in the amount of periodic payment that the servicemember is required to make. As under the SSCRA, the creditor may avoid reducing the interest rate to six percent only if it can convince a court that the servicemember's military service has not materially affected the servicemember's ability to pay.
Delaying Civil Proceedings
It is common when a servicemember is notified of a lawsuit, he is notified while deployed or stationed overseas. The SCRA can help in such a situation. When a service member's ability to pursue or defend against a lawsuit is "materially affected" (i.e., seriously limited) by his military duties, the servicemember can request a delay of the court's proceedings. The judge then halts the proceedings until the servicemember is again in a position to represent his legal interests effectively.
The new SCRA expands the definition of "court" to include "an administrative agency of the United States or of any State". Previously, the SSCRA did not apply to administrative hearings. The increasingly widespread use of administrative hearings had left a large gap in the intended protection of servicemembers. This extension to administrative proceedings is emphasized again when the SCRA specifically defines its applicability as including "any judicial or administrative proceeding commenced in any court or agency". Finally, the servicemember must not be acting in bad faith (for example, a servicemember who deliberately skipped several court dates that he could have made before deploying would probably not be permitted an SCRA delay).
Defeating Default Judgment
Another important SCRA benefit is the ability to set aside a default judgment. If a person fails to appear to defend himself in a lawsuit, the court may assume he is in the wrong, and enter a default judgment against him. Once a default judgment is in place, it is not always easy to undo.
Under the SCRA, it establishes requirements that must be met before a court can enter a default judgment. This complete revision of the corresponding provision of the SSCRA clarifies the procedures required before a court can enter a default judgment but provides little substantive change. One addition is language defining when a court should grant a stay when the defendant is in military service and has not received notice of the proceedings. The court must grant a stay for at least ninety days upon request of the court appointed attorney if there may be a defense which cannot be presented in the absence of the servicemember, or the attorney has been unable to contact the servicemember to determine the existence of a defense. This stay procedure is unrelated to the new required stay procedures where the servicemember has received actual notice of the proceedings and requests a stay.
The SSCRA gave the court discretion to grant a stay of proceedings when the servicemember's military service materially affected his ability to participate in the case. The SCRA substantially revises this provision, mandating an initial stay. Additionally, the previously discussed extension of the SCRA to administrative hearings expands the reach of this stay provision to include administrative proceedings. The SCRA mandates an automatic stay for at least ninety days upon the servicemember's request. The request must explain why the current military duty materially effects the servicemember's ability to appear, provide a date when the servicemember can appear, and include a letter from the commander stating that the servicemember's duties preclude his appearance and that he is not authorized leave at the time of the hearing. In another new requirement, the court must appoint counsel to represent the servicemember if the court denies the request for an additional stay.
Section 300 of the SSCRA provided that, absent a court order, a landlord may not evict a servicemember or the dependents of a servicemember from a residential lease when the monthly rent is $1200 or less. The SCRA increases the applicable rent ceiling to $2400 per month for the year of 2003. The Act provides a formula to calculate the rent ceiling for subsequent years. Using this formula, the 2004 monthly rent ceiling is $2465.
Perhaps the most significant changes are found in Section 305 of the SCRA. Its counterpart in the SSCRA allowed a servicemember to terminate a pre-service "dwelling, professional, business, agricultural, or similar" lease executed by or for the servicemember and occupied for those purposes by the servicemember or his dependents. This provision did not provide any relief to an active duty servicemember required to move due to military orders. It also failed to address automobile leases. Section 305 remedies these problems. Leases covered under Section 305 include the same range of leases that the SSCRA covered. The section still applies to leases entered into prior to entry on active duty. It adds a new provision, however, extending coverage to leases entered into by active duty servicemembers who subsequently receive orders for a permanent change of station (PCS) or a deployment for a period of ninety days or more. The section also contains a totally new provision addressing automobiles leased for personal or business use by servicemembers and their dependents. Servicemembers may cancel pre-service automobile leases if the servicemember receives orders to active duty for a period of one hundred and eighty days or more. Also, servicemembers may terminate automobile leases entered into while the servicemember is on active duty if the servicemember receives PCS orders to a location outside the continental United States or deployment orders for a period of one hundred and eighty days or more.
The SCRA can also protect servicemembers against unreasonable repossession of personal property (cars, appliances, furniture, etc.) purchased under a pre-service installment contract (i.e., a payment plan). Normally, if a servicemember accidentally missed payments on such a contract, the lender could repossess (i.e., seize and sell) the property purchased under the contract.
The SCRA, if certain requirements are met, will require a lender to obtain a court order before attempting to repossess. The requirements are similar to the interest cap: the repossession protection only applies if (a) the installment contract was entered into before the servicemember went on active duty, and (b) the servicemember's ability to make payments has been materially affected by his entry onto active duty.
The important changes within this Title are found in Section 511, Residence for Tax Purposes. The SSCRA provided that a nonresident servicemember's military income and personal property are not subject to state taxation if the servicemember is present in the state only due to military orders. Some states, however, have included the amount of the nonresident servicemember's military income when calculating the applicable state income tax bracket for the servicemember's spouse. The result often places the spouse in a higher tax bracket. Thus, while the military income is not directly taxed, the servicemember and spouse pay more in state income tax than if the state did not consider the servicemember's military pay. This practice will end as Section 511(d) of the SCRA precludes states from using the military pay of nonresident servicemembers to increase the state income tax of the nonresident servicemember or spouse.
Land Purchase Protection
The SCRA also offers some protection to servicemembers who purchased land under a mortgage, or similar arrangement, before entering active duty. The protection applies if the purchase was made before the servicemember entered onto active duty, and the servicemember's entry into active duty has materially affected his ability to make payments. If those requirements are met, the lender cannot foreclose on the property without first obtaining a court order.
Where To Go From Here
If your have further questions, contact the Fort Gordon Legal Assistance Office at 706-791-7812/7813 to speak with an attorney on Wednesdays. Be sure to have your ID card. Remember, seeing a lawyer early may not only solve a problem you have, it may resolve or allow you to avoid a problem in the future.