Many lenders and business owners know the rules of the SCRA as they apply to civil matters. They know they have to get a military status verification before heading to civil court. But what about the SCRA and military bankruptcy proceedings? What are these protections and when do they come into play?
The Servicemembers Civil Relief Act is an important law that provides protections to service members with active military status. Because of the vulnerabilities that service members can face, Congress has protected their interests at home while they are serving their country.
Does The SCRA Apply to Bankruptcy?
Under the SCRA, members of the military are entitled to certain protections. These include protections against foreclosure, eviction, repossession and other court actions. The SCRA also guarantees service members a 6% interest rate under certain circumstances. This interest rate can apply to mortgages, car loans, credit card debt, student loan debt and more.
While plaintiffs are not barred from taking a civil action against active-duty military personnel, they must follow certain protocols, including determining military status before proceeding with a court case.
Bankruptcy Protections Under the SCRA
Rules governing the SCRA and bankruptcy are the same as the rules governing the SCRA and civil matters. The ways in which the SCRA affects filing bankruptcy are identical to the ways in which it affects civil proceedings.
This holds true for both Chapter 7 bankruptcy cases and Chapter 13 bankruptcy cases. Filing for Chapter 7 means those serving in the military must liquidate all their assets in order to be freed of their obligations.
When an active duty member of the military files for Chapter 13, they may keep some of their assets while they pay back some of their debt over a period of time. Oftentimes, receiving credit counselling is part of filing for bankruptcy protection, the idea being that military members might avoid further serious financial problems if they have access to proper education and support.
Get a Military Status Verification
Before forcing a debtor with military status into bankruptcy involuntarily, creditors must first obtain an affidavit as to military service. This requires an SCRA verification.
If the results of the search show that the defendant is on active duty, then the SCRA entitles the service member to a 90-day stay of proceedings. Afterwards, the court may choose to grant a further stay based on need.
Stay in Compliance with the SCRA
Attempting to bring a service member to court without providing an affidavit as to military service or taking any civil action against them is a serious offence under the SCRA. Those who fail to comply with this important law may face harsh fines or even criminal penalties.
The best way to determine a client or customer’s military status is to rely on the Servicemembers Civil Relief Act Centralized Verification Service. We provide reliable military status verifications, usually within 24 hours. For a small extra fee ($30), we even provide an affidavit for you to bring to court with you, should that be required by the court.
Rely on the SCRACVS
Mistakes in determining active military status are expensive. Violating the SCRA can trigger fines and penalties. Not having the correct paperwork can delay your case, costing you more money as you must wait for the courts to help you collect the debt.
SCRACVS helps to make compliance quick, easy and affordable. Log into or sign up for your free account today.