In 2023, homeowners of 357,062 properties received notice of a foreclosure filing. Scary stuff -- but if you're in the military, the SCRA or Servicemembers Civil Relief Act may protect you from foreclosure.
Here's what you need to know about the SCRA if you're in the military and own a home.
What is the SCRA?
The Servicemembers Civil Relief Act is a law designed to help active members of the military and their family members. Its main purpose is to keep active duty personnel from being distracted by stateside financial pressures, and to protect their families from poverty, evictions and other hardships.
It's an excellent shield against foreclosure.
Can the SCRA could help me avoid foreclosure?
Yes. If you took out a mortgage before you went into active duty military service, in most cases, you can't be foreclosed on while you're on active duty. And you generally get 12 months to work things out with your lender after leaving the military. Think of the SCRA as a life preserver. It won't pull you out of the ocean, but it can keep you from drowning.
If you do use SCRA protection from foreclosure, it's important to keep making your mortgage payments. The SCRA is there to help military homeowners make payments more manageable. But it does not wipe out their financial obligations.
Related: How to Avoid Home Foreclosure With the SCRA (Servicemembers Civil Relief Act)
How do I get the SCRA working for me, if I need it?
You have to contact the SCRA. it doesn't magically step in to help you. You can be an active military member on the verge of losing your home. And if you do nothing, you will probably lose your home. But if you apply for help from the SCRA website you may come out just fine. You can complete the forms online or use the information on the site to call the support office.
You must provide proof that you're in the military and on active duty. Also, document that you obtained your mortgage before leaving for active duty.
Alternatively, contact your nearest military assistance legal office. Applying for help with the SCRA can be confusing, so it can help to have someone walk you through the process. Your mortgage lender or loan servicer may also be able to help.
Just make sure that you contact a reputable lender or helper who really is with a military assistance legal office. Avoid unsolicited overtures from lowlife scammers who unfortunately love to prey on military members.
What else can the SCRA do for me?
Most SCRA protections keep you from suffering possible consequences of a sudden move -- for instance, penalties if you have to break a lease when called up. Here are the most common protections requested from the SCRA:
Six percent cap on interest rates
SCRA can get your (or your spouse's) credit card, mortgage, student loan or other loan interest rates capped to no more than 6% per year. This cap applies as long as you're on active duty, and applies only to debt that you took on prior to going on active duty. In addition, you must show that your active duty assignment harms your ability to pay the loan. This could apply if your assignment comes with a pay cut, for example, or if you being shipped out increased your spouse's child care costs.
Protect your credit rating
Once you request SCRA protection, lenders cannot deny or revoke credit, change the terms of an existing loan, or refuse to grant credit. Lenders cannot report adverse credit history on your credit report for invoking your SCRA rights. And insurers may not refuse to insure you because you invoke SCRA protections.
Judicial relief
If you miss a scheduled court appearance because of your duty assignment, you can, under SCRA, request that civil court and civil administrative proceedings be postponed. This applies to actions involving bankruptcy, divorce, or foreclosure as well -- for at least 90 days.
Note that this protection does not apply to criminal proceedings.
In addition, if a court enters a default judgment against you because you failed to appear in court, you can request that the matter be re-opened and the default judgment set aside. Consult your nearest Armed Forces Legal Assistance Office about this protection before your court date, because it can be complicated.
Related: How to Avoid a VA Mortgage Foreclosure
Protection against evictions
If you rent your home or apartment, your landlord cannot evict you or your dependents while you are serving on active duty without a court order. To get this protection, your rent cannot exceed $9,812.12 per month (2024).
Under SCRA, you can also ask the court to delay the execution of an order to evict you or your dependents for 90 days. But the court can still decide not to postpone eviction if it believes the landlord has a good case for proceeding.
Ability to terminate property leases
You can break residential and business property leases that began before your active-duty assignment. You also can terminate a lease you signed during active duty if your permanent duty station was changed. Or if a new deployment will last more than 90 days. You must provide written notification of cancellation to your landlord.
Cancellation of automobile leases
You can terminate a car or truck lease if you are called to active duty for 180 days or more after signing the lease. You also can terminate the lease if you receive orders for a permanent change of duty station outside the U.S. Or if you're being deployed with a military unit for 180 days or more.
Relief from foreclosures and forced sales
Sometimes, an active-duty assignments prevents you from being able to pay your mortgage or meet the terms of a purchase or installment contract. Under SCRA, real estate lenders may not foreclose without a court order. Auto lenders can't repossessed your vehicle without a court order. This applies only if you can't pay because of your active military service. You can request a stay of such a proceeding under certain circumstances.
Termination and reinstatement of insurance
What if you cancel your health insurance while on active duty? Under SCRA, you can reinstate it without loss of benefits, waiting periods, or penalties in most instances. SCRA also protects your life insurance from lapse, termination, and forfeiture for nonpayment of premiums or indebtedness. This applies for the period of military service plus two years.
You also can cancel professional liability insurance when you enter active duty. And when you return, you can reinstate it without penalty as well. Deadlines for applying for reinstatement differ depending on the type of insurance -- from 30 days for professional liability insurance to 120 days for reinstatement of health insurance benefits.
State tax relief
If your orders require you to move from your home state to another state, SCRA protects you from paying taxes to the new state. So if your state of legal residence is tax-free Texas, you won't have to pay Virginia state income taxes if you're assigned to Virginia.
This also applies to personal property taxes. However, if you or your spouse earns non-military income, you may have to pay income taxes to the state where you're stationed. And this applies only to non-military income earned in that state, if it has an income tax.
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This article was revised by Keith Gumbinger.
