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SERVICE MEMBERS CIVIL RELIEF ACT

OF 2003

On December 19, 2003, President Bush signed into law the Service Members Civil Relief Act of 2003. This law is a complete revision of the Soldiers’ and Sailors' Civil Relief Act of 1940.

SCRA Installment Contract Protection

A servicemember who, prior to entry into active duty, entered an installment contract for the purchase of real or personal property (including motor vehicle), is protected under the SCRA if the servicemember's ability to make the payments is "materially affected" by the military service.

* The servicemember must have paid, prior to entry onto active duty, a deposit or installment under the contract.

* The seller is then prohibited from exercising any right or option under the contract to rescind or terminate the contract, to resume possession of the property for nonpayment of any installment due, or to breach the terms of the contract, unless authorized by the court.

PURPOSE

The purpose of the act is to:

1.Provide for, strengthen, and expedite the national defense through protection extended...to Servicemembers of the United States, to enable such persons to devote their entire energy to the defense needs of the nation; and

2.to provide for the temporary suspension of judicial and administrative proceedings and transactions that may adversely affect the civil rights of servicemembers during their military service."

PEOPLE

The SCRA of 2003 applies to active duty military service personnel. It also reaches National Guard Members who are called into active duty for more than 30 consecutive days to respond to a Presidentially-declared national emergency, as well as U.S. Troops serving under the authority of Allied Forces.

The protections of the Act apply to dependents of a servicemember if the dependents’ ability to comply with the obligation is materially affected by reason of the servicemember’s military service.

PROTECTIONS

The act extends protections to servicemembers for all kinds of things, such as:

  • life insurance policies
  • taxes
  • public lands; and
  • guarantees of residency for military personnel and their dependents.

PROVISIONS of interest to us:

Some of the provisions of the new law that hold more interest for us include the following:

Default

1.A Plaintiff in a court action may not take a default judgment against a servicemember without first having an attorney appointed to represent the servicemember.

That attorney must then locate the servicemember and put on a defense to the case,

or the attorney must declare to the court that a defense might be available and the servicemember cannot be located.

The judge must then stay the court proceedings for at least 90 days.

If a default judgment is somehow obtained by a Plaintiff when this provision of the Act should have prevented the judgment, the servicemember may request that the judge reopen the case to allow a defense to be made, or may request that the judge vacate or set aside the verdict. The servicemember has to show that he/she was materially affected in making a defense because of military service, and that a legal defense to the action (or some part of it) exists.

These protections exist from the time a servicemembers enters the military until 90 days after termination of, or release from, military service.

Statute of Limitations

2.The period of a servicemember’s military service may not be included in computing any statute of limitations(except, of course, IRS limitations).

Limit on Interest Rate

3.A contract bearing interest at a rate in excess of 6% per year that is incurred by a servicemember, or by the servicemember and spouse jointly, BEFORE the servicemember enters military service shall not bear interest at a rate in excess of 6% per year during the period of military service.

Interest in excess of 6% per year that would be incurred but-for the prohibition in this Act is FORGIVEN!

The amount of any interest forgiven hereunder must be applied to any periodic payments due from the servicemember!

The servicemember must merely provide the creditor written notice and a copy of the military orders calling the servicemember to duty or extending duty, not later than 180 days from the servicemembers termination of, or release from, military service.

A court may grant a creditor relief from this provision of the Act if the ability of the servicemember to pay is not materially affected by reason of the servicemember’s military service.

No Termination For Breach

  1. If a servicemember makes a deposit or installment payment on a contract for purchase or lease of a motor vehicle (or other real or personal property) BEFORE entering military service, the contract may not be rescinded or terminated due to a breach of its terms occurring BEFORE or DURING that person’s military service,

NOR MAY the property be REPOSSESSED for such breach without a court order.

Any person who knowingly resumes, or attempts to resume, possession of property in violation of this portion of the Act is guilty of a misdemeanor crime, and may be held civilly liable for wrongful conversion.

Servicemember Termination of Lease

  1. The SERVICEMEMBER, however, has the option to terminate a motor vehicle lease early if the vehicle is used, or was intended to be used, by the servicemember or the servicemember’s dependents for personal or business transportation,

if: a. after the lease is signed and during the term of the lease, the servicemember goes on at least 180 days active service; or b. the servicemember is on active duty when the lease is executed and thereafter receives a permanent change of station outside the continental U.S., or deploys for at least 180 days.

Amounts unpaid for the period preceding the termination of the lease shall be paid on a prorated basis. And reasonable contractual charges, except for an early termination charge, (tax, title, registration, excess wear and tear) shall be paid by the servicemember.

Storage Liens

6.Any person holding a lien for storage, repair or cleaning of property or effects of a servicemember may not, during any period of military service and for 90 days thereafter, foreclose or enforce any lien on such property without a court order.

Any person who knowingly takes an action to foreclose or enforce any lien in violation of this portion of the Act is guilty of a misdemeanor crime, and may be held civilly liable for wrongful conversion.

Waiver of Protection

A servicemember may waive the protection of the Act, in writing. However, the waiver is effective only if executed during or after the servicemember’s period of military service.

More Information Available

A full copy of the new Servicemembers Civil Relief Act of 2003 is on file in the Legal Department. If you would like a copy of the full act, or have questions about these or other sections of the Act, please e-mail me.