When you enter active duty in the military, more than a fair share of sacrifices will be made. First, you’ll be away from your family. You also may be concerned that your financial obligations will be harder to fulfill. What happens if you miss a rent payment while overseas on duty?
Luckily, the Servicemembers Civil Relief Act (SCRA) assists active-duty Service Members with financial issues and debt. So what happens under the SCRA benefits? Read on to find out.
All Interest Rates Capped at 6%
The SCRA lowers interest rates to 6% during your time in the military. For mortgages, this reduction stays in place for a year after your service comes to an end.
This is great news for those with high-interest debt, such as with credit cards. According to Military One Source, this capped interest rate applies to “credit card debts, car loans, business obligations, some student loans and other debts.” It also applies to “fees, service charges and renewal fees.”
No Penalties, Late Fees, or Wage Garnishment
You may not be able to make payments on a service contract or loan agreement because your service interfered with your ability to. But great news: you won’t be charged with penalties or late fees. In addition to waiving all penalties and fines, the lender will not be able to ask the court to garnish your paychecks.
Facing challenges with debt? We can help you find solutions.
Foreclosure, Repossession, and Eviction Postponements
Under the SCRA, there can be no foreclosure or sale for missed payments of preservice mortgage debt during or within nine months after your active-duty service.
This also pertains to property seizure as well. According to Military One Source, “property cannot be repossessed for nonpayment or a contract terminated for any payment gaps prior to or during your military service without a court order.” In the case of a court order, if they order a stay in a foreclosure, the court can request up to three third-party impartial appraisals of your property.
Regarding evictions and missed rent payments, the landlord can’t evict you unless there is a court order in place. This is applicable if you have a lease that started before you began service.
If your military service is affecting you or your family’s ability to pay rent, you can apply to the court. This should result in a 90-day delay in eviction proceedings or an adjustment in your lease obligations.
Suspended Income Tax Collections
If your ability to pay income tax is affected by military service, the IRS won’t attempt to collect during your period of service. You have up to 180 days after your service release date before the collection actions resume. During this period, no interest charges or penalties will be applied during service. Normally, penalties can go up to 25%.
Small-business Protection
There is no need to worry if you are a small business owner on active duty. Nonbusiness assets and military pay will be protected from creditors. This is applicable to your business debts or obligations.
Termination of Auto and Residential Leases
In certain conditions, you can terminate both residential and automobile leases. If you sign a lease for your car but then get deployed, you can break that agreement. The same applies to residential leases. That lease can be terminated if you receive a permanent change of station orders or get deployed for more than 90 days. You may need to provide a copy of your military orders to qualify.
Protection on Life Insurance Coverage
Your coverage cannot be terminated by life insurance companies due to nonpayment. As well, they can’t require payment of extra premiums when you are serving in the military. However, the SCRA does not cover increases in premiums based on age in individual term insurance.
The Secretary of Veterans Affairs will allow you to apply for life insurance protection on term, whole, universal and endowment policies. Yet, your beneficiaries will not be able to receive payouts during your service. Unpaid premiums can possibly be deducted out of the settlement if you pass away during your time serving.
Default Judgement Protection
If you are serving on active duty and have a court case filed against you, a lawyer is required to represent you. Even though you will be absent from the hearing, no default judgment can be entered against you.
If the court determines there could be a defense to the action and it cannot be presented without you there, it could grant a delay, or stay, of 90 days.
Professional Liability Insurance Suspension
If you are a professional in legal services, health care, or an alternative profession as defined by the Secretary of Defense, you are able to suspend your professional liability insurance policy. This can be done by sending a written request to the insurance carrier.
Under this part of the act, premiums for the suspended insurance do not need to be paid. As well, any premiums paid while on active duty must be reimbursed. If you wish to restore the suspended insurance, be sure to send a request to the carrier within 30 days from your active-duty release.
Child Custody Agreements
Your service does not allow your co-parent to claim full custody of your child(ren). This is because your co-parent cannot permanently alter an existing agreement. Your co-parent also cannot seek a permanent child custody agreement during your absence. Additionally, your service cannot be the only reason for a revision to the agreement.
