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Law Helps Protect Troops From Creditors

By SAM HANANEL, Associated Press Writer

(03-26) 18:42 PST WASHINGTON, (AP) -- When Army reservist Steve Welter was called up for active duty in Iraq last August, his wife never thought she would face her own fight to save the family's home from foreclosure. A 65-year-old federal law, which Congress expanded last year, provides a range of protections for activated reservists and for Guard members called up by the Pentagon.

Those protections include a 6 percent cap, under certain circumstances, on consumer and mortgage interest rate debt incurred before activation; protection from eviction or foreclosure; payment deferral for federal taxes; and a stay on civil proceedings, including divorce and bankruptcy.

Keira Welter knew the law was supposed to protect a soldier's property from creditors during active military service. But for months, she said, Wells Fargo Home Mortgage Co. did not seem to care about the law, no matter how many times she explained her case.

"We had worked so hard to own our own home, and while my husband was over there serving our country it was going to be taken away," said Welter, 31, of Osawatomie, Kan.

After Wells Fargo started foreclosure proceedings in February, Keira Welter contacted the state attorney general's office and members of Congress. It was not until a local television station aired her story and Sen. Pat Roberts, R-Kan., intervened that the company finally backed off.

The Welters are not the only ones who faced hurdles seeking protection under the Servicemembers Civil Relief Act.

Lt. Col. Bruce Woolpert, a legal adviser to the Kansas National Guard in Topeka, said he fields desperate calls every week from soldiers and their families trying to understand their rights under the law and asking how they can stop creditors from repossessing cars or seizing homes.

"We had a foreclosure that was actually going to occur the next day," Woolpert said. "It was going to happen until we could generate the letters and get them to the company and say, 'Please stop this, it's not a valid foreclosure.' Wisdom prevailed and it was stopped."

The military is quick to let families know about the law as part of the family support briefing that soldiers get before they are deployed.

But the help is not automatic. Soldiers and sailors have to ask for it and provide proof of their call-up. Woolpert said the soldiers are given pre-typed letters of requests to creditors to make the process easier. Still, many soldiers call him later to understand how to qualify for help.

Woolpert said most companies understand the law and try to follow it, but some, particularly smaller banks and car loan companies, are not as enlightened.

Kevin Waetke, a spokesman for Wells Fargo Home Mortgage in Des Moines, Iowa, said the company has apologized to Welter and dismissed the foreclosure action. The company has special procedures in place for active duty soldiers that its employees are supposed to follow.

"What this isolated incident has shown us is that there are ways to enhance our processes," Waetke said.

The Welters' case was unusual, Woolpert said, because most big lenders are familiar with the law.

"One of the problems is with large lending institutions, as soon as the matter goes to collection, it becomes a bureaucratic problem to reverse the trend," Woolpert said. "Sometimes it's hard to find the right person to say 'Stop this because the rule applies.'"

In Welter's case, she appeared to follow all the rules. She first sent a copy of her husband's duty orders to Wells Fargo in August. The company claimed it was never received.

She kept calling the company to explain how the family, with three young children, struggled to make mortgage payments during her husband's Army training, when he had to stop working as a full-time firefighter for weeks at a time. His reserve paychecks were much smaller than his firefighter salary.

"I mentioned the law every single time," Welter said. "And every single time I was told 'We don't know what that is.'"

Roberts, outraged by Welter's story, took the issue to the Senate.

"I remain concerned that those responsible for complying with the Servicemembers Civil Relief Act are not fully educated about their obligations and that the problem is nationwide," Roberts said.

The senator has asked the Office of the Comptroller of the Currency, which regulates national banks, to post the law on its Web site and include it in any publications it sends to banks.

Kevin Mukri, a spokesman for the Comptroller of the Currency, said the agency has not received Roberts' letter. But he said national banks are very familiar with all federal laws and regulations.

"I have not heard of this being an issue," Mukri said.

Keira Welter said she still is concerned about what will happen when her husband comes back from Iraq. The legal protection generally ends within 90 days after the date of discharge from active duty, though she expects to be caught up on mortgage payments by then.

"I want my credit to be cleaned up," she said. "I want them to restore the late fees and I want to make sure this never happens again."

ABOUT THE SERVICEMEMBERS CIVIL RELIEF ACT

Related links:
- SCRA Pocket Guide from MLCP (l)
- Text of the SCRA (Public Law 108-189) - PDF file
- Servicemembers Civil Relief Act Replaces Soldiers' and Sailors' Civil Relief Act
- Guide to the SCRA

The Servicemembers Civil Relief Act (SCRA) is a federal statute passed by Congress to allow military members to suspend or postpone some civil obligations so that the military member can devote his or her full attention to military duties. The original Soldiers' and Sailors' Civil Relief Act was passed during World War I. The statute was reenacted during World War II, and was later modified during Operation Desert Storm. The Servicemembers Civil Relief Act amended the Soldiers’ and Sailors’ Civil Relief Act and was signed into law on December 19, 2003 as Public Law 108-189. The Servicemembers Civil Relief Act can be found at 50 United States Code Appendix Sections 501-593.

WHO DOES IT PROTECT?

The SCRA is designed to protect active duty military members, reservists who are in active federal service, and National Guardsmen who are in active federal service. Some of the benefits under the SCRA extend to dependents of active duty military members as well.

WHAT KIND OF RELIEF CAN IT PROVIDE?

The SCRA can provide many forms of relief to military members. Below are some of the most common forms of relief.

1. 6% CAP ON INTEREST RATES: Under the SCRA, a military member can cap the interest rate at 6% for all obligations entered into before beginning active duty if the military service materially affects his or her ability to meet the obligations. This can include interest rates on credit cards, mortgages, and even some student loans (except for Federal guaranteed student loans), to name a few. To qualify for the interest rate cap the military member has to show that he or she is now on active duty, that the obligation or debt was incurred prior to entry on active duty, and that military service materially affects the members' ability to pay.

To begin the process, the military member needs to send a letter along with a copy of current military orders to the lender requesting relief under the SCRA. The interest rate cap lasts for the duration of active duty service. The interest rate cap will apply from the first date of active-duty service. The military member must provide written notice to the creditor and a copy of military orders not later than 180 days after the servicemember’s termination or release from military service.

2. STAY OF PROCEEDINGS: If you are served with a complaint indicating that you are being sued for some reason, you can obtain a "stay" or postponement of those proceedings if your military service materially affects your ability to proceed in the case. A stay can be used to stop the action altogether, or to hold up some phase of it. According to the SCRA, you can request a "stay" during any stage of the proceedings. However, the burden is on you, the military member, to show that your military service has materially affected your ability to appear in court. In general, you can request a stay of the proceedings for a reasonable period of time (30-60 days). For example, if you are being sued for divorce, you can put off the hearing for some period of time, but it is unlikely that a court will allow you to put off the proceedings indefinitely. The stay can be granted in administrative proceedings.

3. DEFAULT JUDGMENTS: A default judgment is entered against a party who has failed to defend against a claim that has been brought by another party. To obtain a default judgment, a plaintiff must file an affidavit (written declaration of fact) stating that the defendant is not in the military service and has not requested a stay. If you are sued while on active duty, you fail to respond and as a result a default judgment is obtained against you, you can reopen the default judgment by taking several steps.

First, you must show that the judgment was entered during your military service or within 30 days after you've left the service. Second, you must write to the court requesting that the default judgment be reopened while you are still on active duty or within 90 days of leaving the service. Third, you must not have made any kind of appearance in court, through filing an answer or otherwise, prior to the default judgment being entered. Finally, you must indicate that your military service prejudiced your ability to defend your case and show that you had a valid defense to the action against you.

4. PROTECTION FROM EVICTION: If you are leasing a house or apartment and your rent is below a certain amount, the SCRA can protect you from being evicted for a period of time, usually three months. The dwelling place must be occupied by either the active duty member or his or her dependents and the rent on the premises cannot exceed $2400.00 a month in 2003and this rent ceiling will be adjusted annually for consumer price index (CPI) changes.

In 2004, the amount of the rent ceiling is now $2465.00. Additionally, the military member must show that military service materially affects his or her ability to pay rent. If a landlord continues to try to evict the military member or does actually evict the member, he or she is subject to criminal sanctions such as fines or even imprisonment. However, if you feel that you are in this situation, don't just stop paying rent and wait three months. Come in and talk to a legal assistance attorney.

5. TERMINATION OF PRE-SERVICE RESIDENTIAL LEASES: The SCRA also allows military members who are just entering active duty service to lawfully terminate a lease without repercussions. To do this, the service member needs to show that the lease was entered into prior to the commencement of active duty service, that the lease was signed by or on behalf of the service member, and that the service member is currently in military service or was called to active-duty service for a period of 180 days or more. Proper written notice with a copy of orders must be provided to the landlord.

6. TERMINATION OF RESIDENTIAL LEASES DURING MILITARY SERVICE: The SCRA allows military members who receive permanent change of station (PCS) orders or are deployed for a period of 90 days or more to terminate a lease by providing written notice to the landlord along with a copy of the military orders. The termination of a lease that provides for monthly payment of rent will occur 30 days after the first date on which the next rental payment is due and payable after the landlord receives proper written notice.

7. MORTGAGES: The SCRA can also provide temporary relief from paying your mortgage. To obtain relief, a military member must show that their mortgage was entered into prior to beginning active duty, that the property was owned prior to entry into military service, that the property is still owned by the military member, and that military service materially affects the member's ability to pay the mortgage.

8. TERMINATION OF AUTOMOBILE LEASES DURING MILITARY SERVICE: The SCRA allows military members to terminate pre-service automobile leases if they are called up for military service of 180 days or longer. Members who sign automobile leases while on active-duty may be able to terminate an automobile lease if they are given orders for a permanent change of station outside the continental United States or to deploy with a military unit for a period of 180 days or longer.

CONCLUSION:

As you can see, the SCRA can be a big help to military members in times of need. In fact, the United States Supreme Court has declared that the Act must be read with "an eye friendly to those who dropped their affairs to answer their country's call." The SCRA actually provides many more protections than those listed here. If you think that you may qualify for protection under the SCRA, you should contact a military legal assistance office to talk with an attorney about your specific case.