A benefit of being in the military are the programs in place specifically designed to limit debt risks to service members and to help them dig their way out of debt.
These programs are not a punishment or burden. They can be a help to a veteran drowning in debt and are, in fact, a benefit of serving your country.
The Servicemembers Civil Relief Act (SCRA)
The Servicemembers Civil Relief Act (SCRA) gives those in the military extra protection if they encounter legal or financial situations that unnecessarily complicate their lives. The law is designed to allow those in the military to devote their energies to protecting and defending the country.
The law, passed in 1940 when it was called the Soldiers’ and Sailors’ Civil Relief Act, bans creditors from proceeding with foreclosures, evictions, garnishments, repossessions and other actions until 60 days after a service member leaves active duty.
If you have any questions about your rights under the SCRA, contact your closest military legal office for more information. You can find the closest military legal office at: legalassistance.law.af.mil .
Among its protections, the SCRA:
- Prevents your landlord from evicting you unless your rent is higher than $4,089.62 per month; this amount changes yearly to reflect market value
- Stops foreclosures without court order
- Stops vehicle repossessions without a court order
- Stops civil proceedings, including divorce and child support
- Prevents the owner of a storage facility from selling your goods without a court order when the rent on the unit isn’t paid
- Allows you to terminate cell phone contracts if you relocate for at least 90 days to an area that isn’t covered by your provider.
- Allows you to terminate vehicle leases signed before active duty if you are mobilized (PCS OCONUS) (Deploy OCONUS) for at least 180 days.
- Allows you to terminate a housing lease without penalty if you are deployed for 90 days or more.
- Limits all interest on loans taken out before active duty to 6%. To receive this benefit, you must notify your lender in writing with a copy of your orders to active duty, or provide a letter from a commanding officer.
The SCRA applies to members of the Army, Navy, Marine Corps Air Force, and Coast Guard; members of the Reserves on active duty; members of the National Guard mobilized by federal order for more than 30 days, and active-duty officers of the Public Health Service or National Oceanic and Atmospheric Association.
SCRA rights may be exercised by anyone with a valid power of attorney for the service member. Some rights apply to dependents.
Taking advantage of any of your SCRA rights to delay payments will not reflect on your credit report. The law was passed to help service members, not hurt them.
The Military Lending Act (MLA)
The Military Lending Act caps interest rates and fees imposed on military service members who resort to desperation loans — loans that typically strangle consumers with high interest rates.
While the idea of a cap is a good one, the actual limit is still an extremely high rate of 36%, a rate that should be avoided at all costs. An interest rate of 36% could spiral out of control quickly. Its only benefit is it may be lower than what some non-service members pay.
The MLA covers:
- Payday loans
- Tax-refund anticipation loans
- Vehicle title loans
- Read the MLA Applicability Flow Chart
In short, it covers all loans that service members would be wise to avoid.
Joint Federal Travel Regulations
These regulations are designed to protect military personnel facing foreclosures or evictions. The program provides cash allowances to help with travel and transfers associated with landlord actions – i.e., to help a person return home if they are threatened by their landlord. These regulations relate to per diem travel, transportation allowances and relocation allowances.
Homeowners Assistance Program (HAP)
The Homeowners Assistance Program provides financial aid to qualified candidates who have to sell their home at a loss or are not able to sell their home. The benefit program is available to active-duty personnel and veterans, civilian employees of the Department of Defense, and surviving spouses.
Credit Counseling
A nonprofit credit counselor can make a service member’s life easier. This counselor can provide debt relief guidance to struggling veterans, and active-duty service members and their families. Credit counselors are trained to provide support and guidance to those in need. Their goal is to help you reduce or, in the best possible world, eliminate debt altogether. It can never hurt to consult one.
Debt Consolidation
Debt consolidation is the process of combining all debt into one loan with a lower interest rate, then paying it off with one manageable payment that fits your budget. Anyone, including service members, who take advantage of this program must promise not to run up more debt while paying down the original bills. The better your credit score, the better the interest rate you could receive. The USAA and the Navy Federal Credit Union cater to veterans and active-duty members. In addition, service members can utilize Military Debt Consolidation Loans (MDCLs) or VA Consolidation Loans – provided they already have a VA loan of any kind.