The servicemembers civil relief act (SCRA): What it covers and who is eligible

The Servicemembers Civil Relief Act, or SCRA, is designed to financially protect those who have served the Nation. If you are a member of the U.S. Military or other U.S. service organization, you are entitled to the enhanced financial protections that the SCRA has to offer.

We will explore how the SCRA may be able to protect your financial situation.

What is the Servicemembers Civil Relief Act (SCRA)?

The Servicemembers Civil Relief Act (SCRA) is a law that provides legal protections for active duty service members. It suspends some civil obligations so that service members are able to devote themselves fully to serving their country.

While the financial and legal protections offered through the SCRA are appealing, some of the details can get confusing. If you want to benefit from SCRA during a financially difficult time, consider signing up for military legal assistance to guide you through the process.

History of the SCRA

The Servicemembers Civil Relief Act (SCRA) was voted into law by Congress in 2003. It replaced the Soldiers' and Sailors’ Civil Relief Act (SSCRA), which was initially passed in 1940 and updated in 1991.

The goal of the SCRA is to provide financial protection to active duty members of the U.S. Military, reserves, Coast Guard, National Guard and other organizations when they are serving the country.

Servicemembers Civil Relief Act benefits and protections

The Servicemembers Civil Relief Act offers a range of benefits and protections to eligible members of the armed forces. If you qualify for protection under the SCRA, you may receive some of the benefits and protections below.

Interest rate caps

Any debt that you took on before joining the military, reserves, Coast Guard, National Guard or other qualifying organizations must be capped with an interest rate of 6%. This holds no matter what the original interest rate of this debt was. The capped interest rate will stay in place while you are on active duty. You’ll qualify for the rate cap on most forms of debt, including home equity loans, home equity lines of credit (HELOCs), credit cards, auto loans, mortgage loans, student loans and personal loans.

Foreclosure protection

If you took out your mortgage loan before entering active duty service, your lender is not allowed to foreclose on you without first filing a valid court order, if your ability to repay the loan is affected by your active duty service obligations. Filing this will slow the time it takes a lender to initiate foreclosure proceedings. This protection, too, lasts while you are on active duty and for an additional 12 months after you leave the military, reserves, National Guard, Coast Guard or other qualifying organization.

Eviction Protection

If you are unable to pay rent on time due to your service obligations, you may be protected from the coming eviction for up to 90 days. During those 90 days, your dependents may be able to remain in the property, if a judge determines that your service allows you to qualify for SCRA protections.

Income tax deferment

Under the SCRA, the Internal Revenue Service, state and local tax authorities must defer your income taxes if your ability to pay the taxes is impacted by your military service. During the deferment, the taxing agency cannot add interest or penalties to the balance.

Termination of residential leases

Under the SCRA, service members can cancel all leases without any financial penalties if they are being deployed for 90 days or more. For example, you can use this protection to terminate a residential lease agreement.

In order to use this benefit, you’ll need to provide a copy of your military orders to the property owner.

Termination of auto leases

If you received orders to report for active duty, you have the right to terminate your auto lease. After all, you likely won’t be able to use your vehicle if you are heading overseas for an extended period of time.

Termination of phone service

The SCRA also allows members to cancel contracts with service providers without financial penalty. This includes contracts that members have entered into with telephone, Internet, cable and other providers. As with the SCRA’s lease protection benefit, service members must have signed these contracts before they were called into active duty.

Default judgment protection

In a default judgment, a court order favors the person or party suing you if you do not appear in court to defend yourself. This could be a serious problem for active duty service members. If you are serving your country, you might not be able to appear in court.

Under the SCRA, though, if you are on active duty service and can't appear in court to defend yourself in a civil action, the court is not allowed to make a default judgment against you until it first appoints an attorney to serve as your defense.

The act stipulates that the party filing a lawsuit against you must file an affidavit with the court declaring whether you are on active duty service. The act also states that the court must allow a delay of the case for at least 90 days.

Postponed civil court matters

If you are involved in a civil court matter, your active duty service might prevent you from attending the proceedings. With that, you can request a delay or stay of 90 days, which can be extended for an additional 90 days.

While this protection applies to civil court matters, it won’t excuse you from criminal court proceedings.

Small-business owner protection

If you are a small-business owner who is called into active duty, your nonbusiness assets and military pay are protected from creditors. For example, active duty service might force you to put business operations on hold, which could result in cash flow problems. This protection will keep your personal assets safe.

Voting rights

If you have to leave your home state to serve, you won’t give up your voting rights. Instead, you’ll still be able to vote in state, federal, and local elections even if you aren’t living in your home state.

Life insurance coverage protection

Service members can also cancel any contracts they signed with insurance providers without penalty, thanks to the SCRA. This holds for policies that service members have taken out with life, auto, health and other insurance providers. Again, service members must have signed these policies before being called into active duty service.

Professional liability insurance suspension

If you carry professional liability insurance and are called into active duty, you can suspend the policy through a written request to your insurer. While on active duty, you won’t have to pay the premiums. But after you return, you can reinstate your suspended insurance policy through a written request within 30 days.

Who is eligible for protection under the Servicemembers Civil Relief Act?

The SCRA covers active duty members of the Army, Navy, Marines, Air Force and Coast Guard. The act also covers members of the military reserves when they are serving on active duty and members of the National Guard when they are mobilized for 30 or more consecutive days.

Even active duty officers of the Public Health Service or the National Oceanic and Atmospheric Administration receive the financial protections of the act.

It's important to note, though, that the benefits of the SCRA are only available to those who are on active duty service. The act does not cover veterans of these military units or organizations.

If you are the child of an active duty service member or married to a member, the protections of the SCRA might also apply to you. The key is that your spouse or parent must be on active duty.

You might also qualify for SCRA benefits if an active duty service member provides financial support for you. According to the act, you'll qualify for SCRA benefits if this active duty service member has been providing more than half of your financial support in the 180 days before you apply for one of the financial protections of the act.

If you are applying as a child of an active duty service member, you'll typically need to be under 18 and not married to receive any SCRA benefits.

How do you apply for SCRA benefits?

If you want to receive a benefit outlined in the SCRA, you must request it with a lender, court, credit provider, insurance company or other organization and verify your active duty status.

Say you want to reduce the interest rate on your credit card from 18% to the 6% rate guaranteed by the SCRA. You'll need to write a letter to your credit card provider stating your account number, the start date of your active duty service and a written request saying that you want to reduce your interest rate.

You must provide a copy of your active duty orders to your credit card issuer to prove that you are being called into service. You can get form letter templates for this from your on-base legal office.

Or maybe you want to cancel an apartment lease without having to pay any cancellation penalties. You'll need to write a letter to your landlord, including the date of your active duty service. Again, you'll usually need to send a copy of your active duty orders to your landlord.

Be aware, though, that lenders, landlords and credit card providers might have different policies regarding how service members should apply for SCRA benefits. Call your financial providers, insurance providers or other organizations first to ask about how to file for these benefits.

The bottom line

The SCRA provides important protections for active duty service members. If you are applying for a loan or new credit, it makes financial sense to apply for the interest rate cap provided through the act. It’s important, too, to turn to the act’s protections if you want to cancel a lease or you are facing foreclosure on your home.

If you are an active-duty service member ready to make the move to owning a home, get started on a mortgage application with Rocket Mortgage® to see if you qualify for a VA or other type of home loan.