Active Duty Military and Facing Bankruptcy? SCRA Can Help

It's fairly common knowledge that members of the United States Armed Forces aren't making a whole lot of money. Most of the active-duty service members worry about their finances. In fact, according to a study done in 2019, 9 out of 10 of them have financial worries and about 10% of them have debt in collections.

However, active-duty military members are afforded protection by the federal government under the Servicemembers' Civil Relief Act. Here's what that means and how it can protect you if you serve on active duty and are facing bankruptcy. 

What is the Servicemembers' Civil Relief Act?

Active-duty military members need to be able to concentrate on their jobs, particularly when they are deployed. Because of this, the federal government has founded the Servicemembers' Civil Relief Act or SCRA. This law provides active-duty military members with protections such as: 

• temporarily suspends judicial proceedings, including bankruptcy court 
• reduces interest and allows forbearance, including bankruptcy payments
• restricts evictions against them and their dependents
• restricts repossessions and civil court actions

Creditors are fully aware that they are to first determine whether or not a debtor is on active duty or not and when before the creditor can file a lawsuit or enter a default filing against a debtor. To determine this, they only need a few pieces of information to perform a search in the SCRA database. 

How Can SCRA Protect You When You File for Bankruptcy? 

When you and your bankruptcy lawyer sit down and go over your financial situation, they will help you determine whether or not your creditors had met their requirements of the SCRA and provided you with your rightful protections under the act. For example, if a credit card was charging you a higher interest rate than what is permitted under SCRA, the bankruptcy lawyer will notify the judge, who will then direct the creditor to verify and/or recalculate what you owe, if applicable. Your lawyer can also ask the judge to instruct the creditors to remove any late payment fees if they were charged erroneously under SCRA. 

How Can SCRA Protect You During a Bankruptcy? 

The SCRA can protect you if you have already filed for bankruptcy, and you are in the middle of the process of either liquidation in a Chapter 7 or on a payment plan in a Chapter 13 bankruptcy when you come down on orders, particularly if you are a Reservist or a member of the National Guard. Remember, the SCRA places a temporary suspension on all judicial and administrative proceedings, including bankruptcy.

You can inform your bankruptcy lawyer of your orders for active duty and/or for deployment so he or she can ensure your bankruptcy case is not adversely affected so you can concentrate on protecting freedom. It's important to note that this protection does not begin when you begin active duty or leave on deployment. It begins when you receive the orders for active duty. 

Can SCRA Protect New Recruits As Well? 

SCRA protection begins when you receive orders for active duty, which means the protection for new recruits begins before they even ship off to basic training or boot camp. That said, if you have not yet enlisted and received your reporting orders, it's a good idea to inform your bankruptcy lawyer that you are considering enlistment so he or she can go over the fine details of what that would mean for your bankruptcy case. 

It's important to be aware that your protection under SCRA doesn't last forever. You are given 90 days after your discharge from active duty before SCRA protection is no longer afforded to you.