Servicemembers’ Civil Relief Act Of 2009: Part 1
Throughout this car registration process, we learned one big thing: there are laws in place to protect servicemembers and their spouses, but these laws do nothing unless we are informed about them. It is right to expect the people in charge of things like tag agencies to understand these exceptions, but we have to be armed with the knowledge in case they don't. So, today, let's talk about the 2009 Servicemembers' Civil Relief Act (SCRA) and everything it does for us.
This law was created to postpone or suspend certain civil obligations so servicemembers can focus on duty and relieve family stress. It is designed to protect against legal and financial actions that hinder someone's ability to serve. It covers everyone on active duty, in the reserves, and in the National Guard while they are on active duty. These rights can be exercised by anyone holding a power of attorney over the service member and, in some aspects, by the spouse. This covers:
1. Credit card debt
We hear about this a lot, but it has one huge caveat. The debt had to be taken out before joining military service. For any loan such as car, house, student, or credit card debt, the annual interest rate will be reduced to a maximum of 6% per year. This is huge, considering most credit cards operate on a 20% or higher interest rate, and depending on what year you purchased a house or car, the interest rate could be much higher.
To get this interest rate, you need to send in a copy of your orders to service or get a letter from a commanding officer with the start date in service to the lender asking for the interest reduction. The reduced interest rate will last as long as you are in the service before returning to what it was, except for a house loan, which will continue for an extra year under the SCRA rate. The difference between the lowered rate and the actual rate will not be considered deferred interest as it was previously.
Using this act, you can request an interest rate reduction anytime during service and up to 180 days after release. The lender cannot revoke the loan or credit account or refuse to give a new credit account because of the SCRA. As I said, this law sounds great, but it has a huge caveat that it only applies to the debt we got before service. For my family, 90% of our debt came after joining. As tricky as things get with debt, this is just a reminder that this only reduces the interest rate being charged; we still have to pay back the entirety of the debt.
2. Pending trials
This law protects our service members from a default judgment in civil cases. A default judgment happens in favor of the plaintiff (the one suing) when the person being sued does not appear in court. The court cannot make a default judgment without the plaintiff first proving that the person they are suing is or is not in military service. If they are in military service, then the court cannot enter a default judgment without appointing a lawyer to act on your behalf. The court can also delay proceedings for at least 90 days under certain conditions.
This is very helpful to protect military members from being taken advantage of purely because they are out of the state or country on military orders. Heck, half the time, our service members can't leave base to sit in court for three hours, even if it's happening in the same county.
3. Taxes
We do not have to pay state taxes on personal income or property if the only reason we are in this state is due to military orders. This one also extends to spouses, so we do not have to pay those same taxes as long as our reason for being in the state is due to our spouse's military orders.
4. Voting rights
Like the tax rules, we maintain our voting rights in whatever state we claim residency in, even if we live elsewhere due to military service. This applies to spouses, too.
5. Endings leases
This is the section that we are probably most familiar with. This allows us to terminate leases without penalty if we receive PCS orders or if a servicemember receives deployment orders for more than 90 days. We had some single friends who did that before a deployment since they knew they would be buying property or moving to a new place when they returned. This saved them six months of rent, and they either stored their furniture in a unit or a friend's house for a much lower cost.
Send a copy of orders or a letter from a commanding officer to the landlord to start exiting the lease. If the lease has monthly payments, we may have to make one more payment after ending the lease, but that's handled more on a case-by-case basis.
These same rules apply to car leases but in much rarer circumstances. To use this to exit a car lease, we need to have the lease before entering service and then be called on active duty for at least 180 days. Or if we got the lease after joining, we need PCS orders from CONUS to OCONUS or vice versa. This does not cover from one state to another, so make sure that a lease allows the car to be moved to a different state before signing since that's not always a given in these contracts. There are also exceptions if a deployment lasts more than 180 days.
This act does these things and more, which we will talk about on Monday. It’s so important to be informed about the projections in place for our family so that we can make the most informed choices. And it gives us more knowledge to support one another through this life because we are all going to encounter obstacles, some of which can be easily avoided with the right information.