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Q: How can the Servicemember Civil Relief Act help me avoid foreclosure?

A: The two main tools to help avoid foreclosure under the Servicemember Civil Relief Act are the 6 percent interest cap and mortgage protection. However, these apply only to those mortgages that were secured prior to entry onto active duty. The SCRA protects active duty service members, activated Reservists, and National Guardsmen on Title 10 status, among other select personnel. Certain rights, such as mortgage protection, also extend to military dependents. The protections are not available to civilian employees or contractors.

The 6 percent interest cap puts a ceiling on the annual percentage rate of all applicable debts. Any overage is forgiven.  (That’s right … you never have to pay it back).  The 6 percent cap on mortgages extends a full year after the period of active duty service. The cap reduces the periodic payment by the proportionate amount of interest forgiven, which prevents creditors from negating the protection through acceleration. In order to receive the 6 percent cap, the service member must provide written notice and a copy of his or her orders to the creditor no later than 180 days after release from active duty.

Mortgage protection prohibits lenders from foreclosing on a service member’s property for a mortgage secured prior to active duty, without first obtaining a court order. As mentioned earlier, this protection extends to dependents.  The period of protection endures nine months after leaving active duty service.  Upon motion by the lender, the burden of proof is on the service member; however, the court may stay the proceedings or make an equitable adjustment in absence of an appearance by the service member.

In addition to the requirement that the debt was incurred prior to active duty service, the 6 percent interest cap and mortgage protection require that the active duty service has materially affected the service members’s ability to pay in accordance with the original terms.  The “material effect” is proven by comparing pre-service income, out of which the agreed mortgage payments were previously paid on time, with in-service income. Typically, the in-service income must be not only less, but also insufficient to reasonably maintain the service member before a court will grant relief.

If you have any debts that existed prior to your active duty service, make an appointment with your legal assistance office.

This column is not intended as individual or specific legal advice. If you have specific issues or concerns, you should consult a judge advocate at 421-4152/civ. 0711-729-4152.