Bankruptcy And Members Of The Military

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Many people who find themselves in financial trouble consider applying for bankruptcy as a way to resolve their debts. This situation happens to people serving in the military as well. This is why Congress passed the Service Members Civil Relief Act (SCRA). It was passed December 19, 2003, signed by President Bush, and it basically completely rewrote the Soldiers and Sailors Civil Relief Act of 1940 (which had been a re-written version of an absolute moratorium enacted during the Civil War and the Soldiers' and Sailors' Civil Relief Act of 1918, during World War I). It's main purpose was to help to allay the legal and economic encumbrance on military corpsmen who were in active duty status in Operation Iraqi Freedom.

The first part of the act provided different definitions so there could be no confusion. A service member is a member of the uniformed services, and the definition of military service is a member of the Army, Air Force, Nave, Marine Corps, or Coast Guard who was in active duty, or an active commissioned officer of the Public Health Service, National Oceanic and Atmospheric Administration, and any lawful absence. A dependent of a service member is either the service member's spouse, child, or whom they provide more than one-half of a person's support for 180 days before an application for relief. A court is a court or administrative agency of any State of the United States or the United States itself. The definition of state is the commonwealth, possession, or territory of the United States as well as the District of Columbia.

The SRCA does three important things in the protection of military members, including reservists and members of the National Guard. First of all, it can prevent the filing of a default judgment by a creditor. That means that nobody is allowed to report that a soldier has refused to pay his or her debts and close out their account, or sue them for the amount. They have to leave the accounts open and give the military person a chance to resolve the debt. The SRCA also requires that service members be notified of all activity against their account. A creditor cannot take any action without notifying the service member, so that military members are not taken by surprise when accounts come due. Finally, the SRCA can wipe out judgments or garnishments against service members. This means that if a business or agency has sued a soldier, they are not allowed to ask for the award to be taken out of the soldier's paycheck.

Under SRCA, home foreclosures can be halted, and new payment schedules can be arranged under court order. Neither can soldiers or their families be evicted from apartments or rental properties. Insurance companies cannot cancel policies for non-payment of premiums. In addition, military members cannot be charged over six percent interest, and may request a lowering of interest if it's not offered. A lease can be broken by an individual once they go into active duty, meaning they are shipped out to basic training or job-school. They can only do this if the lease was entered into before going into active duty, though they can terminate a residential lease that they had entered into while active in the military if they have to deploy or have a permanent change of station. The breaking of a lease request must be completed in writing with a copy of the orders. What this also does, though, is leave the burden of the lease and rent on a roommate who is not active in the military, if they have one. The amount of total rent for the property is not decreased, and the SRCA doesn't protect non-military roommates unless they are a legal dependent of the serviceman. The same process goes for the breaking of a lease of a car.

If the military obligation of a service member causes them to struggle with payments on financial obligations like loans, mortgages, or credit cards, then the interest rate can be capped at 6% for the remainder of the service members military obligation. The debts that qualify for this are the ones that were incurred before coming on active duty, while debts that they incur after going on active duty aren't protected as much.

The provisions of the SRCA protect service members and their families from being harassed by creditors. These provisions also protect those connected with military families, such as relatives who help support the family who is living on a military salary. If these supporters incur debt because of their giving to military members, they may also be eligible for the kinds of protection the SRCA offers.

The SRCA does not provide for Reemployment Rights, and these are considered a separate legislation than the Soldiers' and Sailors' Civil Relief Act.

The goal of the SRCA is to discourage service members from filing for bankruptcy while serving in the military. There are already significant financial burdens associated with serving in the military, and the young men and women who serve need protection from getting into deep financial holes through lack of income, or through exploitation by creditors. Invoking SRCA protection can provide more options for financial recovery than bankruptcy, and more hope for future financial health.


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