How the SCRA Protects Servicemembers from Bankruptcy

The Servicemembers Civil Relief Act (SCRA) provides those in the military with certain protections in civil actions. Specifically, it “pauses” many types of civil claims so that servicemembers can focus their attention and efforts on serving our country. That means that it specifically applies to those on active duty or who have been deployed. One of the many benefits of this Act is that it applies to bankruptcy proceedings as well.

Benefits for Servicemembers Outside of Bankruptcy

The SCRA was not created just to apply to bankruptcy. It also affects a wide variety of other legal situations as well. Examples of benefits that the SCRA provides to servicemembers include:

• Additional protections to prevent or stop default judgments altogether
• Forbearance or reduced interest charges for some debts
• Restricted eviction proceedings
• Staying proceedings where the servicemember cannot present his or her defense without physically being able to appear in court
• Reopening cases where a default judgment is granted
• Pausing execution or enforcement of outstanding judgments
• Decreased or paused contractual penalties

These benefits will generally terminate when the servicemember is no longer on active duty. They may also stop 90 days after the servicemember is discharged.

The SCRA and Bankruptcy

The benefits under the SCRA are also helpful because it stops many of the legal proceedings that would force a servicemember into bankruptcy, including collection proceedings and other legal issues. You have the opportunity to deal with these issues when you come back from active duty under the SCRA.

Because the SCRA does not explicitly say which civil actions that it applies to, bankruptcy proceedings are also covered. That means that any adverse action or bankruptcy proceeding must include a statement that indicates that the individual is not a servicemember before a default ruling can be entered.

If a servicemember files bankruptcy just before leaving for active duty, the entire proceeding will likely be stayed for at least 90 days. It may also “pause” until the servicemember’s return if their presence is necessary to continue the proceeding.

However, in some bankruptcies, such as in Chapter 7, your attorney and the trustee may be able to continue the bankruptcy without your continued participation. That means that it is possible that the entire process is done by the time the servicemember returns home from active duty. That type of fresh start could be very beneficial for an active servicemember.

Checking Military Status

The easiest way to determine if someone is an active military member is to check the Servicemembers Civil Relief Act Verification Service. Creditors should always do this before filing a default judgment against anyone, but they sometimes miss this crucial step.

Accounting for the military status of any individual in a legal proceeding is a must under the SCRA. There can be severe penalties for failing to consider whether someone is on active duty. For more information about this aspect of bankruptcy, or any other bankruptcy questions, contact the team at Maxwell. Dunn. We are available to answer your questions!