In December 2003, the President signed the Servicemembers Civil Relief Act (Act), a law to reduce the economic and legal burdens of military personnel. The Act updates prior laws and gives servicemembers on active duty added protections. The Act also applies to reservists who have been called up for active duty. This article covers some of the most important provisions in the Act.
Interest Rate Cap
While in military service, active duty servicemembers qualify for a 6 percent interest rate cap on mortgage loans, credit card debt, car loans, and other debts. The cap applies to co-signers on a debt whether they are on active military duty or not. A servicemember has to request the rate reduction. A creditor must comply or seek court relief. If court action is pursued, the creditor bears the burden of showing that military service does not materially affect the servicemember’s ability to repay the debt. The interest cap does not apply to federally guaranteed student loans.
Real Property Leases
Under the Act, eviction proceedings cannot be started against servicemembers who lease real property if the monthly rent is $2400 or less. Also, active duty soldiers can terminate a real property lease if they are moving due to a permanent change of station or a deployment of at least 90 days. Lease termination applies only to leases that were signed before a servicemember went on active duty.
Installment Contracts and Mortgage Foreclosures
Contracts to buy real or personal property are covered by the Act. If a servicemember has paid a deposit or installment under the contract before going on active duty, the seller cannot rescind or terminate the contract for nonpayment or breach of contract without a court order. The Act also prevents mortgage foreclosures under certain conditions.
Stay of Court Proceedings
A servicemember who is a party to a civil lawsuit as a plaintiff (the person suing) or a defendant (the person being sued) can request a stay or postponement of court proceedings. The stay applies to bankruptcy actions, mortgage foreclosures, and divorce proceedings.
While on active duty, the military covers a servicemember’s health care needs. The Act provides that an insurance company has to reinstate health insurance coverage when a servicemember is released from active duty.
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