Realty Times - New Law Provides Relief For Military Personnel

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New Law Provides Relief For Military Personnel

by Benny L. Kass

Borrowers -- whether for mortgage loans, credit card debt or auto loans -- who have been called up for military duty have just been given greater financial and legal protections. On December 19, 2003, President Bush signed into law the "Servicemembers Civil Relief Act" (SCRA).

Under this new law, "Servicemembers" are defined as persons on active duty in the military, but also includes National Guard members who have been called up for active duty for more than 30 days.

If yourself or a family member have been called into active duty, all of your lenders should be immediately notified, and you must send them a copy of the military orders. Once the lender has been put on notice, it must reduce all interest payments down to six percent, and most importantly, must forgive all pre-service debts which exceeded this six percent cap. It should be noted that this protection applies only to debts incurred before the borrower went into active military service; debts incurred while on active duty are not similarly protected.

Since the start of World War II, there was a law known as the Soldiers and Sailors Civil Relief Act. That law also required lenders to automatically reduce the interest rate obligations of persons in active military service down to six percent. However, it was not clear that all interest above the six percent cap was to be forgiven. SCRA clarifies this, with clear language in Section 207 of the Act that "interest at a rate in excess of six percent per year ... is forgiven."

The old Soldiers and Sailors Relief Act was 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. However, that law was enacted over 60 years ago, and times have changed. Additionally, various Court cases have given different -- and often conflicting -- interpretations of that old law. Accordingly, Congress decided to update and clarify the rights of our service men and women. The stated purpose of SCRA is:

To provide for, strengthen, and expedite the national defense through protection extended by this Act to servicemembers of the United States to enable such persons to devote their entire energy to the defense needs of the Nation; and to provide for the temporary suspension of judicial and administrative proceedings and transactions that may adversely affect the civil rights of servicemembers during their military service.

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 new law provides other important relief to the men and women in our Armed Services.

Leases: If a lease was entered into prior to the tenant's entry into the armed services, the tenant has the right to terminate it, even before the term has expired. Members of the military who receive orders for a permanent change of station or to deploy with a military unit for a period of not less than 90 days also have the right to terminate leases, even if the leases were entered into while they were on active duty. The landlord must be given thirty days advance notice of the termination, and rent must be paid up to the date the lease ends. There is no longer a requirement that the lease contain a military termination clause.

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. (Note: this is the law in many states anyway. A landlord generally cannot exercise self-help by evicting a tenant without first obtaining Court approval.) 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 three months, unless the Judge finds that "justice and equity require a longer or shorter period of time." There are three basic requirements imposed by the law:

The landlord is attempting to evict a person who is in military service;
The leased premises are used for residential housing by the spouse, children or other dependents of the military person, and
The agreed upon rent does not exceed $2465 per month. It should be noted that the older law had a threshold of $1,200. The new law provides a formula for increasing the ceiling based on an inflation index.

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

Insurance: The private life insurance policy cannot lapse, terminate or be forfeited for nonpayment of premiums for a period while the insured is on active duty, plus one year.

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 90 days after that duty ends.

Legal Representation: Under certain circumstances, when a lawsuit is brought and the Court determines that the Defendant is on active military duty, the Court cannot enter a judgment until after the Court appoints an attorney to represent the interests of the servicemember. There is an interesting sentence in the new law, to the effect that 'if an attorney appointed ... to represent a servicemember cannot locate the servicemember, actions by the attorney in the case shall not waive any defense of the servicemember or otherwise bind the servicemember." In other words, Lenders beware: if your borrower is on active military duty, your best option is to refrain from filing a lawsuit until his/her service has ended.

Thus, the new law extends -- and expands upon -- the protections which Congress initially provided to the men and women who served during World War II. Our servicemembers should devote their energies to their military tasks and not have to worry about their creditors.

Published: February 16, 2004

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

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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.

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