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Servicemembers Civil Relief Act Guide


Table of Contents

 

SERVICEMEMBERS CIVIL RELIEF ACT GUIDE

 

PURPOSE

This guide discusses matters base legal office staffs should address in advising personnel concerning the Servicemembers Civil Relief Act (SCRA). SCRA provides temporary suspension of judicial and administrative proceedings and transactions involving civil liabilities of members whose military service affects their ability to meet their civil obligations. Information on SCRA is particularly applicable for those who have recently come on active duty or are preparing for a long-term deployment that may impact their ability to meet their financial commitments entered into at their present location.

Specific subjects include: suspension of judicial and administrative hearings of civil suits against members; limitations for individuals seeking to enforce civil liabilities of members concerning leases, installment contracts, mortgages, and liens; members’ rights with regard to suspension of life insurance premiums, public land rights, taxes, and business obligations; and, default judgments entered against members in certain circumstances.

SCRA was signed into law on 19 December 2003, updating and superseding the Soldiers’ and Sailors’ Civil Relief Act of 1940. SCRA requires the Secretary of Defense to provide notification of the benefits under SCRA to its members. Once such notice has been promulgated, by the Department of Defense and/or the United States Air Force, it should be consulted in conjunction with this guidance.


COVERAGE UNDER THE ACT

Members covered by SCRA include all members on Federal active duty, including regular members of the Armed Forces (Army, Navy, Air Force, Marine Corps and Coast Guard); Reserve, National Guard and Air National Guard personnel who have been activated and are on Federal active duty (whether as volunteers or as a result of involuntary activation); inductees serving with the armed forces; Public Health Service and National Oceanic and Atmospheric Administration Officers detailed for duty with the armed forces; persons who are training or studying under the supervision of the United States preliminary to induction; and National Guard and Air National Guard personnel on duty for training or other duty authorized by 32 U.S.C. 502(f) at the request of the President, for or in support of an operation during a war or national emergency declared by the President or Congress.

In addition, certain benefits are extended to dependents of members and all benefits are extended to citizens of the United States serving with the armed forces of the U. S. allies during the time of war.

Also, courts and administrative agencies may extend a stay, postponement, or suspension and may vacate or set-aside a judgment, when done for a member pursuant to SCRA, with regard to a surety, guarantor, endorser, accommodation maker, co-maker, or other person who is or may be primarily or secondarily subject to the obligation or liability.

SCRA does not cover or protect members of Reserve, National Guard and Air National Guard components not on active duty; retired personnel; and National Guard and Air National Guard troops called to duty under Title 32 U.S.C. state orders, EXCEPT for those troops called up under 32 U.S.C. 502(f) for purposes of responding to a national emergency declared by the President and supported by Federal funds. Note: ANG personnel on Title 10 orders are covered by the SCRA.


CIVIL SUITS AND ADMINISTRATIVE PROCEEDINGS IN GENERAL

Stays

A party (defendant or plaintiff) in a suit or administrative proceeding who is on active duty or has been released from active duty in the previous 90 days, and has received notice of such proceeding, may make at any time before final judgment, an application to the court or administrative body for a stay of the proceeding. Such application must include:

Upon such application the court or administrative body must stay the action for a period of not less than 90 days. A party who is granted such a stay may apply (at the time of the initial application or at a later time) for an additional stay based on continuing material affect of military duty on the member’s ability to appear. The same information required for the initial application is required with the application for an additional stay. The court or administrative body may, sua sponte or upon such an application, stay the action for an additional period of not less than 90 days.

If the court or administrative body refuses to grant the additional stay, the court must appoint counsel to represent the member in the action or proceeding.

An application for a stay does not constitute an appearance for jurisdictional purposes and does not constitute a waiver of any substantive or procedural defense.

Application cannot be made for a general stay in an action covered by the protections for eviction and distress discussed below.

No fine and/or penalties under contracts may be imposed for failure to comply with the contract during the stay.

Default Judgments

For any civil action or proceeding in which the defendant does not appear, the plaintiff must file an affidavit stating whether or not they have evidence that the defendant is on active duty.

A person who knowingly makes a false affidavit or other verification document shall be fined up to $100,000 or imprisoned for up to one year.

If it appears that the defendant is on active duty, the court or administrative body may not enter judgment against the defendant until it has appointed an attorney to represent the member.

 

Where the defendant is on active duty, the court shall grant a stay of proceedings for a minimum period of 90 days upon application of counsel or sua sponte if the court determines that: 1) there may be a defense to the action and a defense cannot be presented without the presence of the defendant; or 2) after due diligence counsel has been unable to contact the defendant or otherwise determine if a meritorious defense exists. (Note: the requirements for application of a stay described above do not apply in this case).

If based on the affidavits filed the court or administrative body cannot determine if the member is on active duty, the court or administrative body may require the plaintiff to file a bond to indemnify the defendant against any damages that the member may suffer if the default judgment should later be set aside in whole or in part.

If a default judgment is entered against a member on active duty (or within 60 days after termination of or release from active duty), an application can be made within 90 days of release from or termination of active duty to the court by the member or on behalf of the member requesting the court or administrative body set aside or vacate the default judgment. Upon such application, the court or administrative body must reopen the judgment for the purpose of allowing the member to defend the action if it appears that: 1) the member was materially affected by reason of the military service in making a defense to the action; and 2) the member has a meritorious
or legal defense to the action.


Note: Vacating, setting aside or reversing a default judgment because of any of the provisions of SCRA shall not impair any right or title acquired by any bona fide purchaser for value under such judgment.

Statute of Limitations

During a period of active duty, time prescriptive statutes (both for and against the member) are tolled and do not run, regardless of whether or not the member’s service has materially affected compliance, and regardless of whether the cause of action arose before or during the period of active duty service.

During a period of active duty, the period provided by law for the redemption of real property sold or forfeited to enforce an obligation, tax, or assessment shall not run.

These statute of limitations rules do not apply to time limitations established under federal internal revenue laws.


SPECIFIC ACTIONS

Note: Upon application to a court, a member’s dependent is entitled to the protections listed in this section if the dependent’s ability to comply with an obligation is materially affected by reason of the member’s military service.

Rents and Leases

Evictions and Distress - A landlord may not evict a member on active duty or the dependents of a member on active duty from premises occupied for dwelling purposes for which the rent does not exceed $2,400 per month for 2003, which amount is adjusted for inflation for subsequent years, or subject such residence to a distress except by court order. This rule applies regardless of whether quarters were rented before or after entry onto active duty.

A landlord who knowingly takes action in contravention of this rule or attempts to do so shall be fined up to $100,000 or imprisoned for up to one year.

Where a landlord applies to a court for an order for eviction or distress, the court may sua sponte and must, if a request is made by or on behalf of a member showing that the ability to pay the agreed rent is materially affected by military service, stay the proceedings for an equitable period (90 days is the suggested time period); or adjust the obligation under the lease. Where a stay is granted the court may grant appropriate equitable relief to the landlord. (Note: the application for a general stay of proceedings described above is not applicable in this type of proceeding).

In accordance with an order issued by a court in such a proceeding, DFAS must make an allotment from the pay of a member to satisfy the terms of such order, subject to DOD, DFAS, and AF regulations establishing the maximum amount of pay that may be allotted under this rule.

Termination - Leases of Premises - A member may terminate a lease at his or her will for premises occupied or intended to be occupied as a residence by the member or the member’s dependents or for professional, business, agricultural, or similar purpose where:


Termination - Motor Vehicle Lease - A member may terminate a motor vehicle lease for a vehicle used, or intended to be used, by the member or the member’s dependents for personal or business transportation if:

the lease is executed by or on behalf of a person who thereafter and during the term of the lease enters active duty under orders for a period of not less than 180 days (or receives orders extending a period of active duty to at least 180 days without a break in service); or,

a member, while on active duty executes the lease and thereafter receives military orders to PCS outside of the continental United States or to deploy with a military unit for a period of not less than 180 days.

Termination of either a real property or motor vehicle lease must be made by delivering (by hand, by carrier, or by return receipt requested mail) a written notice of the termination with a copy of the member’s orders to the lessor or the lessor’s agent; and in the case of a motor vehicle by return of the vehicle not later than 15 days after the date of delivery of the written notice.

Termination of a lease for premises is effective:

Termination of a lease for a motor vehicle is effective on the day on which the notice of termination is delivered or the vehicle is returned to the lessor, whichever is later.

The member is responsible to pay all lease payments due to the date of termination on a prorated basis and rent paid in advance must be refunded to the member. In the case of the lease of a motor vehicle, the lessor may not impose an early termination charge, but all other charges in accordance with the terms of the lease must be paid by the member.

A person who knowingly takes action in contravention of this rule or attempts to do so shall be fined up to $100,000 or imprisoned for up to one year.

Installment Contracts

If a member contracts to purchase, lease or for bailment of real or personal property (including a motor vehicle) and pays at least a deposit or one installment payment on the contract before coming onto active duty, the contract may not be rescinded or terminated, nor the property repossessed for breach of the contract, without a court order.


In a hearing concerning such a contract, a court:


A person who knowingly takes action in contravention of this rule or attempts to do so shall be fined up to $100,000 or imprisoned for up to one year.

 

Mortgages and Liens

If a member is obligated on real or personal property, secured by a mortgage, trust deed, or other similar security and the obligation originated before the period of active duty and an action is filed during or within 90 days after the period of active duty to enforce the obligation, a court may sua sponte after a hearing and must upon application by a member when the member’s ability to comply with the obligation is materially affected by military service:

A sale, foreclosure, or seizure of such secured property for a breach of the member’s obligation shall not be valid if made during, or within 90 days after, the member’s period of active duty, unless a court order is granted before such action.

A person who knowingly takes action in contravention of this rule or attempts to do so shall be fined up to $100,000 or imprisoned for up to one year.

 

Storage Liens

A person holding a lien for storage, repair, cleaning, or other purpose on the property or effects of a member may not, during any period of active duty and for 90 days thereafter, foreclose or enforce any lien on such property or effects without a court order granted before foreclosure or enforcement.

A person who knowingly takes action in contravention of this rule or attempts to do so shall be fined up to $100,000 or imprisoned for up to one year.

 

Stayed Actions for Personal Property

When a court orders a stay in a proceeding to foreclose a mortgage on or to repossess personal property, or to rescind or terminate a contract for the purchase of personal property, the court may order an appraisal, and if undue hardship to the member’s dependents will not result, the court may order that the amount of the member’s equity in the property be paid to the member or the member’s dependents, as a condition of foreclosing the mortgage, repossessing the property, or rescinding or terminating the contract.


OTHER OBLIGATION AND LIABILITY RELIEF

 

Anticipatory Relief

A member may apply to a court for relief during a period of active duty or within 180 after release from active duty, from any obligation or liability incurred before the member entered active duty or any tax liability or assessment that became due before or during the member’s period of active duty.

The court, after appropriate notice and hearing, if it determines that the ability of the member to comply with the terms of an obligation or liability or pay a tax due has been materially affected by reason of military service, may:


If a court grants a stay under this rule, no fine or penalty shall accrue on the obligation, liability, or tax during the stay.

 

Business and Trade Obligations

While a member is on active duty, a member’s assets not held in connection with a trade or business, cannot be used to satisfy an obligation of a member’s trade or business for which the member is personally liable.

A court may modify this relief as justice and equity desire should the holder of such a trade or business obligation apply to the court for relief.

 

INTEREST RATES

Any obligation or liability incurred by a member, or by a member and the member’s spouse jointly, before the member enters active duty shall not bear an interest rate in excess of 6% per year during the period of active duty. An obligation or liability will become subject to this interest rate limitation as of the date of order to active duty, where the member provides the creditor with written notice and a copy of the military orders, no later than 180 days after the date of termination or release from active duty.

A court may grant a creditor relief from the maximum interest rate only if the court determines that the member’s ability to satisfy the obligation has not been materially affected by virtue of military service.

The 6% per annum interest rate (includes services charges, renewal charges, fees or any other charges except bona fide insurance). The payments on the loan must be re-amortized to 6% so that the payments are lowered (i.e. – the creditor may not accelerate the payment of principal defeating the purpose of the act).

Note: Interest rate cap does NOT apply to federal guaranteed student loans (20 U.S.C. 1078(d))

 

INSURANCE

 

Protection of Life Insurance Policy

If a member makes an application, for protection under this rule, to an insurance company and the Department of Veterans Affairs (VA), with regard to a life insurance policy on the member’s life which:


An application to receive this protection must be made in writing by the member, the member’s legal representative, or the beneficiary if the member is not in the United States (including territories), and must:



Upon receipt of an application, the insurance company must send a report to the VA for VA determination and the member and the insurance company must provide additional information as required by the VA.


During the period of protection under this rule:


Upon expiration of the period of protection under this rule:

 

Assignment of Life Insurance Policy

If a life insurance policy on the life of a member is assigned to secure payment of an obligation before the member comes on active duty, the assignee may not exercise any right or option obtained on the assignment while the member is on active duty and within one year of release from or termination of active duty, without a court order.

This rule does not apply:


Where a court is petitioned for an order to allow exercise of a right or an option under this rule, the court may refuse to grant the order if it determines the ability of the member to comply with the terms of the obligation is materially affected by military service.


A person who knowingly takes action in contravention of this rule or attempts to do so shall be fined up to $100,000 or imprisoned for up to one year.

 

Professional Liability Protection

A member who when ordered to active duty:

may make a written request to the insurance carrier, and the insurance company must suspend the member’s coverage and must reinstate the coverage for at least the same duration as the suspension if the member requests reinstatement within 30 days after the date of release from active duty.

During the period of suspension, the insurance carrier:


Where a civil or administrative action for damages for professional negligence or liability is commenced during the period of suspension of insurance coverage and the action is based on an act or omission that occurred before the beginning of the suspension and would be covered by the insurance, but for the suspension, such action must be stayed until the end of the period of the suspension.

 

Health Insurance

Where a member makes an application within 120 days of being released from active duty, an insurance company must reinstate health insurance coverage without imposing any exclusions or waiting periods for the member or other persons covered by the insurance under the member’s coverage if:

 

TAX RELATED PROVISIONS

 

Taxes on Property

No property owned by a member or jointly by a member and the member’s dependants can be sold to enforce the collection of a tax which became due before or during the time a member is on active duty, on a member’s personal property or real property occupied as a dwelling, or for professional, business, or agricultural purposes by a member or a member’s dependents or employees while a member is on active duty, without a court order and upon a determination by the court that the military service does not materially affect the member’s ability to pay the tax.

A court may stay a proceeding to enforce collection of a tax or sale of the property while the member is on active duty and up to 180 days after the release from active duty.

When a member’s property is sold pursuant to a court order, a member shall have the right to redeem or commence an action to redeem the property during the period of active duty or within 180 days after release from active duty, unless state law would provide a longer period in which case the state law applies.

Where a member does not pay a tax on property covered by this rule, the amount of interest on the tax that can accrue on the unpaid amount until paid is 6% and no additional penalty or interest shall be incurred by reason of non-payment.

 

Collection of Income Tax

Where a member notifies the Internal Revenue Service or state taxing authority of entrance on active duty, the collection of income tax falling due before or during the period of active duty shall be deferred for a period of not more than 180 days after the member’s release from active duty, where the member’s ability to pay the tax is materially affected by military service.

No interest or penalty shall accrue during the period of deferral and the statute of limitations on collection shall be suspended during the period of active duty and for 270 days after release from active duty.

A member cannot receive a deferral under this rule for federal social security and medicare taxes.

 

Residence

A member shall neither lose nor acquire a residence or domicile for voting or tax purposes based on his absence or presence in a tax jurisdiction pursuant to military orders.

Military pay is not considered income from services performed or from sources within a tax jurisdiction if the member is not already a resident or domicile of the jurisdiction in which he located pursuant to military orders.

The personal property of a member, not used for business purposes, shall not be deemed to be located in a tax jurisdiction in which the member is present pursuant to military orders unless that tax jurisdiction is already the member’s domicile or residence.

A tax jurisdiction may not use the military pay of a nonresident member to increase the tax liability imposed on other income earned by the resident member or the member’s spouse subject to the tax jurisdiction.

LAND RIGHTS

Any requirement to be present in, make improvement upon, expend resources on, or complete work on or in connection with:

A member who has a permit or license for use of public lands including mining and mineral leasing may suspend the permit or license during a period of active duty and for 180 days thereafter.

In order to obtain these protections, notification indicating the member is on active duty and requesting the protection, must be made:


These protections do not affect the right of a member to take action concerning any rights, permits, or licenses listed above while on active duty.

Any affidavits or submissions of proof required by the laws with regard to the rights, permits, or licenses listed above may be made by a member on active duty before an officer authorized to provided notary services under 10 U.S.C. 1044a (legal assistance attorneys and some paralegals).

 

POWER OF ATTORNEY

A power of attorney executed by member while on active duty, or before entering active duty if the member already had orders or had been informed such orders were forthcoming, which designates a relative as the attorney in fact for specified or all purposes and which expires by its terms after the member enters a missing status (as defined by 37 U.S.C. 551(2)) shall be automatically extended for the period the member is in missing status, unless the power of attorney states that the power granted expires even if the member is in a missing status.


WAIVER

A member may waive any of the rights and protections provided by SCRA by a written agreement executed during or after the member’s period of active duty.

 

INAPPROPRIATE USE OF ACT

If a court or administrative body determines in any civil proceeding that any interest, property, or right has been transferred or acquired with the intent to delay enforcement of an obligation, liability, or right by taking advantage of SCRA, the court or administrative body shall enter a judgment or order to enforce the obligation, liability, or right to prevent such inappropriate use of SCRA.


CREDIT RATING PROTECTION

Claiming rights under SCRA cannot be the basis for:


CROSSWALK OF SCRA SECTIONS TO FORMER SSCRA SECTIONS


SCRA

SSCRA

50 U.S.C. App.

Section Heading

1

--

Restatement of Act

1

501

Short Title; Table of Contents

2

510

Purpose

TITLE I – GENERAL PROVISIONS

101

511

Definitions

102

512

Jurisdiction and applicability of Act

103

513

Protection of persons secondarily liable

104

514/572

Extension of protections to citizens serving with allied forces

105

515

Notification of benefits

106

516

Extension of rights and protections to Reserves ordered to report for military service and to persons ordered to report for induction

107

517

Waiver of rights pursuant to written agreement

108

518

Exercise of rights under Act not to affect certain future financial transactions

109

--

Legal representatives

TITLE II – GENERAL RELIEF

201

520

Procedure of servicemembers against default judgments

202

521

Stay of proceedings when servicemember has notice

203

522

Fines and penalties under contracts

204

523

Stay or vacation of execution of judgments, attachments, and garnishments

205

524

Duration and term of stay; codefendants not in service

206

525

Statute of limitations

207

526

Maximum rate of interest on debts incurred before military service

--

527

Limitations prescribed by internal revenue laws as affected by period of service

TITLE III – RENT, INSTALLMENT CONTRACTS, MORTGAGES, LIENS, ASSIGNMENTS, LEASES

301

530

Eviction and distress

302

531

Protection under installment contracts for purchase or lease

303

532

Mortgages and trust deeds

304

533

Settlement of stayed cases relating to personal property

305

534

Termination of residential or motor vehicle leases

306

535

Protection of life insurance policy

307

535

Enforcement of storage liens

308

536

Extension of Protections to Dependents

TITLE IV -- INSURANCE

401

540

Definitions

402

541

Insurance rights and protections

403

542

Application for insurance protection

404

543

Policies entitled to protection and lapse of policies

405

544

Policy restrictions

406

545

Deduction of unpaid premiums

407

546

Premiums and interest guaranteed by United States

408

547

Regulations

409

547

Review of findings of fact and conclusions of law

TITLE V -- TAXES AND PUBLIC LANDS

501

560

Taxes respecting personal property, money, credits, and real property

502

561

Rights in public lands

--

562

Homestead entries and settlement claims; service as equivalent to residence and cultivation

--

563

Death or incapacity during or resulting from service as affecting rights; perfection of rights

503

564

Desert-land entries

504

565

Mining claims

505

566

Mineral permits and leases

506

567

Perfection of defense rights

--

568

Irrigation rights; residence requirements suspended

507

569

Distribution of information concerning benefits of title

--

570

Homestead entrymen permitted to leave entries to perform farm labor

508

571

Land rights of servicemembers

509

--

Regulations

510

573

Income Taxes

511

574

Residence for tax purposes

TITLE VI – ADMINISTRATIVE REMEDIES

601

580

Inappropriate use of Act

602

581

Certificates of service; persons reported missing

603

582

Interlocutory orders


--

583

Separability

--

584

Termination date

TITLE VII – FURTHER RELIEF

701

590

Anticipatory relief

702

591

Power of Attorney

703

592

Professional liability protection

704

593

Health insurance reinstatement

705

--

Guarantee of residency for military personnel

706

--

Business or trade obligations


TABLE OF SIGNIFICANT CHANGES AND ADDITIONS


SCRA

SSCRA

50 U.S.C. App.

Section Heading

Change

101

511

Definitions

ADDED definition of “dependent” to include the servicemember’s spouse, child, or individual receiving more than 50% of support from the servicemember.

101

511

Definitions

MODIFIED the definition of “court” to include administrative agencies.

108

518

Exercise of Rights Under Act Not to Affect Certain Future Financial Transactions

ADDED protection against credit reporting agency identifying a servicemember as an member of the National Guard or a reserve component as a result of exercising SCRA rights.

108

518

Exercise of Rights Under Act Not to Affect Certain Future Financial Transactions

ADDED protection from a change in terms offered or conditions required for the issuance of insurance as a result of exercising SCRA rights.

201

521

Protection of Servicemembers Against Default Judgments

MODIFIED standard for granting a stay of proceedings when the military servicemember-defendant has not received notice. If the defendant is in military service and has not received notice of the pending suit, the Court must grant a stay of proceedings for a minimum of 90 days. Formerly, the Court could but was not required to grant a stay.

201(g)

520

Protection of Servicemembers Against Default Judgments

EXTENDED to 60 days (formerly 30 days) time following termination of service in which a default judgment may be challenged. If a default judgment is entered during military service or within 60 days thereafter, the servicemember may request the court reopen the judgment.

202(a)

521

Stay of Proceedings When Servicemember Has Notice

EXTENDED to 90 days (formerly 60 days) time following termination of service in which a military servicemember-defendant who has received notice may request a stay of proceedings. Court must grant a stay of at least 90 days provided certain conditions are met.

204(b)

523

Stay of Vacation of Execution of Judgments, Attachments, and Garnishments

EXTENDED to 90 days (formerly 60 days) time following termination of service in which a military servicemember may request a stay of execution of a judgment, order, attachment, or garnishment.

207(a)

526

Maximum Rate of Interest on Debts Incurred Before Military Service

CLARIFIED interest in excess of 6% on affected debts is forgiven, disallowed acceleration of principal, and created procedures for notifying creditors.

301(a)

530

Evictions and Distress

INCREASED monthly rental limit for eviction protection from $1,200 to $2,400, indexed this rate for inflation ($2,465 for year 2004), and added provision granting relief for premises contracted but not yet occupied. Formerly, only premises that were occupied as a residence qualified.

305(b)

534

Termination of Residential or Motor Vehicle Leases

ADDED provision allowing termination of residential leases entered into while in military service upon receipt of permanent change of station or deployment orders for a period of 90 days or more. Formerly only leases executed prior to entering military service were covered.

305(b)

534

Termination of Residential or Motor Vehicle Leases

ADDED provision allowing termination of motor vehicle leases by an individual ordered to military service for more than 180 days or by a military servicemember upon receipt of orders for a permanent change of station outside the continental United States or to deploy for 180 days or more.

402(c)

541

Insurance Rights and Protections

CHANGED maximum amount of insurance protected from $10,000 to $250,000.

511(d)

574

Residence for Tax Purposes

ADDED provision preventing states from including military income to determine state marginal income tax rate imposed on non-military income.

703(a)

592

Professional Liability Protection

ADDED legal services to list of services eligible for suspension of coverage. Formerly, this provision listed “health-care services or other services determined by the Secretary of Defense to be professional services” and mobilization orders had to specify that legal services were considered professional services.

 

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Last Modified 9/19/2013