Borrowers who have been called up for military duty -- whether for mortgage loans, credit card debt or auto loans -- are entitled to relief under a very old law known as the Soldiers and Sailors Civil Relief Act.

Enacted by Congress at the start of World War II, this act mandates that all lenders must automatically reduce the interest rate obligations of persons in active military service down to 6 percent.

How does this law work? Quite simply. If you -- or a family member -- have been called into active duty as a result of our War on Terrorism, your lender should be notified immediately. The lender is then required by law to immediately reduce the interest rate on your loan so that it does not exceed this 6 percent cap.

It is to be noted that this law applies only to debts incurred prior to the debtor going into active service. Debts incurred while in the military are not covered under this law.

The law is straightforward -- and a very powerful tool designed to assist servicemen and women whose income is less while on active duty than what it was in civilian life. The law simply states:

No obligation or liability bearing interest at a rate in excess of 6 percent per year incurred by a person in military service before that person's entry into that service shall, during any part of the period of military service, bear interest at a rate in excess of 6 percent per year unless, in the opinion of the Court, upon application thereto by the obligee, the ability of such person in military service to pay interest upon such obligation or liability at a rate in excess of 6 percent per year is not materially affected by reason of such service...

In simple terms, if you are on active military duty (which includes the Coast Guard, Officers of the Public Health Service and the National Oceanic and Atmospheric Administration) your interest rate on your debt obligation must be reduced down to this 6 percent rate. If the lender does not believe that your income today is materially lower than when you were a civilian, the lender has the right take you to Court but the burden to prove that you have not been "materially affected by reason of such service" falls squarely on the lender.

More important, the benefits of the Soldiers and Sailors Civil Relief Act are retroactive. Thus, everything you have paid over 6 percent from the time you were called into military service must be credited toward your account.

Obviously, you must advise your lender. The best way to do this is to discuss the situation with your military legal advisor. Alternatively, you can send a letter to your lender, and include a copy of your military orders.

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.

In addition to mortgage and other debt payments, the Act provides other important relief to the men and women in our Armed Services.

1. Leases: If a lease was entered into prior to the tenant's entry into the armed services, the tenant has the right to terminate the lease, even before the term has expired. This does not, however, give a military personnel the right to terminate leases entered into while they are on active duty. The landlord must be given 30 days advance notice of the termination, and rent must be paid up to the date the lease ends.

2. 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. If the Judge determines that the military service has materially affected the ability to pay, the Court must "stay: (stop) the eviction for a period of not more than three months. There are three basic requirements imposed by the law:
   1. The landlord is attempting to evict a person who is in military service;

   2. The leased premises are used for residential housing by the spouse, children or other dependents of the military person, and

   3. The agreed upon rent does not exceed $1,200 per month.

   Since this is a complex issue, tenants who are on active military service must consult with the legal assistance attorney assigned to their unit.

3. 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 two years.

4. 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 60 days after that duty ends.

Thus, the law provides broad protections for those who have been called up to serve our Country. Student loans, however, are not covered under this law, regardless of the material effect that the service has on the person's ability to pay.

For more articles by Benny Kass, please press here.

Copyright 2001 Benny Kass. Posted by Realty Times with permission.

Published: December 10, 2001

Use of this article without permission is a violation of federal copyright laws.

Author of the weekly Housing Counsel column with The Washington Post for nearly 30 years, Benny Kass is the senior partner with the Washington, DC law firm of Kass, Mitek & Kass, PLLC and a specialist in such real estate legal areas as commercial and residential financing, closings, foreclosures and workouts. Mr. Kass is a Charter Member of the College of Community Association Attorneys, and has written extensively about community association issues. In addition, he is a life member of the National Conference of Commissioners on Uniform State Laws. In this capacity, he has been involved in the development of almost all of the Commission’s real estate laws, including the Uniform Common Interest Ownership Act which has been adopted in many states.