The Servicemembers Civil Relief Act (SCRA) states that it is generally applicable to any action or proceeding commenced in any court. Therefore, the provisions of the SCRA are applicable to proceedings before the bankruptcy court.

Can the SCRA Help Me with My Bankruptcy?

Yes, the SCRA has provisions that can be applied during your bankruptcy proceeding. The purpose of the SCRA is to ensure that certain civil liabilities, legal proceedings, and transactions which may put you at a disadvantage and affect your civil rights be temporarily suspended while you are in active duty. 

In terms of bankruptcy, the SCRA can:

  • Limit the actions that can be taken against you in a bankruptcy proceeding if you are in active military service. 
    For example, if a creditor is trying to attach a lien to your property, the time during which the Trustee can challenge this action is extended by the amount of time you are in active service. This occurs once you started your active duty before the deadline for when the creditor’s action could be challenged.
  • Allow you to extend the period of time in which actions can be brought against you, as well as the time in which you can bring an action in bankruptcy.  This means that, for example, although the Bankruptcy Act states that a petition may be filed against you within four months after the commission of an act of bankruptcy (where you generally are not paying your debts), the four-month period is not adhered to if the person has entered military service within four months after this act of bankruptcy.

Does the SCRA Provide Other Benefits?

Yes, the SCRA can provide you with many other benefits which can affect civil court cases, insurance, eviction and many other areas of your life. Some of these benefits are outlined below. 

Protection Against Entry of Default Judgments

Usually when a defendant is in default for failure to appear in court, the plaintiff must file an affidavit with the court before a default judgment may be entered. The affidavit must state whether the defendant is in the military. The court may not order entry of judgment against you (defendant), if you are in the military until after the court appoints an attorney to represent you. Either your attorney or the court can request a stay of proceedings for no less than 90 days if they determine that:

  1. There may be a defense and the defense cannot be presented without the defendant’s presence or
  2. Your attorney has not been able to contact you or otherwise determine if you have a legal defense to the claims.

If a default judgment is entered against you during your active duty service, or within 60 days after your active duty service has ended, the SCRA allows you to reopen that default judgment and set it aside. To set aside a default judgment, you must show that you were disadvantaged by not being able to appear in person, and that you have good, legal defenses to the claims against you.   

Delay of Court And Administrative Proceedings

If you have notice that you are to appear in a court or administrative proceeding but you who are unable to appear due to military duties, you can request that the proceeding be postponed. The proceeding can be postponed for a mandatory minimum of ninety days.  Your request must be in writing and must: 

  1. Explain why your current military duty affects your ability to appear
  2. Provide a date when you will be able to appear 
  3. Include a letter from the commander stating that your duties do not allow you to appear and that you are not authorized leave at the time of the hearing.  This letter or request to the court will not be considered a legal appearance in court.  

Further delays may be granted at the discretion of the court, and if the court denies additional delays, an attorney must be appointed to represent you.

Termination of Leases

The SCRA allows you to terminate leases if, after you signed the lease you receive orders for a permanent change of station (PCS) or a deployment for a period of 90 days or more. The SCRA will allow you to terminate leases for automobiles for personal or business use by you and your dependents. The pre-service automobile lease may be cancelled if you receive active duty orders for a period of 180 days or more. The automobile lease entered into while the servicemember is on active duty may be terminated if the servicemember receives PCS orders to a location outside the continental United States or deployment orders for a period of 180 days or more. 

Six Percent Interest Rate

The SCRA gives you the ability to reduce the interest rates on some of your loans and mortgage interest rates to 6% under certain circumstances, if you incurred this debt before you started active duty.
You may be eligible for the 6% interest rate if:

  • You took out the loan during a time when you were not on any form of active duty in any branch of the military.
  • The interest rate is currently above 6% per year.
  • Your military service affects your ability to pay the loan at the regular (pre-service) interest rate.
  • You notified the lender in writing with a copy of your military orders.

Do I Need An Attorney?

If you are filing bankruptcy and you are a member of the military, you should consult an experienced bankruptcy attorney so that your rights under the SCRA will be protected. The SCRA can be quite a complicated piece of legislature, but it contains benefits that may be vital to your case. A bankruptcy attorney will understand these benefits and ensure that you take advantage of them. If you are not filing for bankruptcy, an attorney will be able to determine which other benefits you are eligible for.