Boston Bankruptcy Attorney
The Soldiers and Sailors Civil Relief Act
In 1940, the United States Congress passed the Soldiers and Sailors Civil Relief Act in an effort to offer protection to active military members and their families. The act provides various protections. Any active member or reserve member called up for active duty may be eligible for:
- Reduced interest rates on mortgage payments
- Reduced interest rates on credit card debt
- Protection from eviction if rent is $1,200 or less each month
- A delay of all civil court actions, such as bankruptcy, foreclosure, or divorce proceedings
One of the most important provisions under the act limits the amount of interest that a lender can collect on the debts of persons in military service to 6 percent per year during the period of military service. This applies to all debts that have been incurred prior to the commencement of active duty and includes interest on credit card debt, mortgages, car loans, and other debts. The provision applies to pre-service debts. This interest rate reduction does not occur automatically. In order to take part, a serviceman or servicewoman must request it.
Once a service member requests the rate reduction, the creditor must either comply or apply for court relief. The SSCRA puts the burden on the creditor to show that military service has not “materially affected” a member’s ability to repay the debt. The court will generally grant relief if the creditor can make his or her case.
It has been recommended that service members notify lenders of their intent to invoke the 6 percent cap in writing. The debtor should also supply the creditor or lender with proof of mobilization or activation to active duty. This should include evidence of the difference in the member’s military and civilian pay. This notice can prevent creditors from attempting to challenge interest rate reduction requests in court.
This cap does not apply to federal guaranteed student loans. While this is true, the Department of Education has, in the past, deferred or suspended payments on student loans for reserve component military members called to active duty.
Contact a Boston Bankruptcy Lawyer
For more information on the options available to service members, contact the Boston bankruptcy attorneys of Joshua Spirn & Associates at 1-800-975-5346.
