President George W. Bush is leaving the White House, but the Soldier’s and Sailor’s Civil Relief Act of 1940, amended and signed into law by Bush in 2003, remains. Now called Servicemembers Civil Relief Act, the law is meant to provide relief to families from civil actions against a service member who’s on active duty. The Act is quite broad, protecting against creditor actions in cases of default on mortgages and leases and on car and credit card debt, preventing wages from being garnished and preventing eviction. The interest rate accruing on unpaid debt is capped at 6%.
Now, unlike bankruptcy law, the Act does not eliminate or discharge debt, but it does postpone repayment deadlines up to ninety days after the service member’s active duty ends. In one of my earliest bankruptcy blogs,Special Treatment For Special People In Bankruptcy, I explained that our bankruptcy laws make special allowances for veterans and active military people, allowing needy service members and veterans to have more income and still file a Chapter 7 bankruptcy.
An interesting case relating to the Servicemembers Civil Relief Act came up a month or so ago. The husband is serving in Iraq, and the wife discovered her wages were being garnished by a creditor for a truck the couple had owned. Under the Act, the court forced the creditor to return the money it had taken from the wife’s wages and postpone debt collection until the husband gets out of the service.
There is one aspect of this case that relates to what I’ve been writing in my blogs about car repossession and auto loans (see Repossessing Repos In Bankruptcy). Years earlier, before the husband had gone overseas, the couple had bought a pickup truck. They got behind on their payments and voluntarily surrendered the truck to the finance company. The finance company sold the truck for less than the couple owed, and this is the debt for which the creditor garnished the wife’s wages.
The Servicemembers Civil Relief Act does not solve all the financial issues this couple has, but it buys time for them to seek financial advice. If a decision is made to file bankruptcy, it will be crucial for them to include the debt they owe to the truck creditor in the paperwork they prepare for the bankruptcy court process. Meanwhile, the special relief provided by the federal law seems like the least we can do for our servicemember families.