Military Debt Collection Protection

Collection and Legal Protections for Members of the Military

Military service offers a number of benefits both during and after you have served. These benefits relate to debt collection, contracts, judgments, evictions, wage garnishments, interest charges, and more. Most of the benefits are extended to those serving in active duty with a few reaching family members and dependents or retired military members.

These legal protections are offered within two pieces of legislation which include The Fair Debt Collections Practices Act and the Service Members Civil Relief Act.

https://www.ftc.gov/enforcement/rules/rulemaking-regulatory-reform-proceedings/fair-debt-collection-practices-act-text
and http://myarmybenefits.us.army.mil/Home/Benefit_Library/Federal_Benefits_Page/Servicemembers_Civil_Relief_Act_(SCRA).html

The Service Members Relief Act has been in place since the Civil War and was last updated in 2003. This act offers a number of protections for active duty military service men and women. Most of the act’s provisions are not extended to dependents, retired military or reservists.

In general the rules apply to debts or contracts that are incurred before you enter the military and rights are activated when you get called up to active duty or join the military. Typically the benefits will expire 30 to 90 days after a discharge.

Key Benefits Include The Following:

  • Protection from court proceedings, evictions, judgments, and foreclosures. It is possible to get a stay of judgment or a delay in proceedings if you are called up to active duty and for up to 60 days after you have been released. This benefit is generally offered to those who would be unable to attend the proceedings due to your service. If you are working locally the use of this benefit will be limited. For eviction proceedings your family and dependents can receive relief as long as your rents are under $1200 a month. This does not give military members a free pass to withhold rent, but can provide assistance in the event of a significant financial hardship.
  • Cancellation of leases, loans and contracts. When you are called to active duty you can terminate contract commitments like auto loans or leases, cell phone or cable contracts, and other commitments like storage units and so forth. If you are deployed or relocated for more than 90 days and the service is not extendable where you are relocated, then you may terminate leases and contracts without termination fees. All amounts owed must still be paid.
  • Credit Reporting. Companies cannot report delinquencies to the credit bureau for using the provisions offered. For example if you terminate a cell phone contract and the termination fees are waived, the company cannot then report to the bureau that you owe the termination fees.
  • Interest treatment. Debts incurred before active duty including mortgages, auto loans and credit cards are typically limited to six percent. This rate will remain in place until one year after a release from active duty. To utilize this provision you must present papers showing you are entering active duty.

In addition to these benefits the Fair Debt Collections Practices Act offers exemptions from garnishments for the military members. There is, however, no protection for garnishments involving owed taxes, child support, alimony or federal student loans. Income that is protected against garnishments from civil matters includes:

  • Veterans Benefits
  • Military Pay
  • Military Pensions
  • Social Security

These provisions are in place to protect those serving our country, but do not advocate non-payment of debts. Amounts you borrow will still be due, but if you are unable to attend court hearings or are relocated unexpectedly, you gain protections that enable you to defend yourself.