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Bankruptcy and the SCRA

Anyone can run into financial difficulties, and members of the U.S. armed forces are no exception. However, because they are tasked with the monumental responsibility of defending the nation, laws are in place to protect them during civil matters like lawsuits, foreclosure, and even bankruptcy. 

The Servicemembers Civil Relief Act (SCRA) is a federal law that evolved from the Soldiers’ and Sailors’ Civil Relief Act. Its purpose is to protect active-duty military personnel from losing their homes, facing default judgments, or being divorced without their knowledge while they are fighting for the freedom of the nation. Those covered by the SCRA include members of the  

  • U.S. Air Force, Army, or Navy 
  • Marine Corps 
  • Coast Guard 
  • National Guard 
  • National Oceanic and Atmospheric Administration (commissioned officers) 
  • Public Health Service (commissioned officers) 

Under the SCRA, all administrative and judicial actions that could have a negative impact on a military member must be suspended during their period of active duty. There is a general understanding that this protection applies to civil judgments, evictions, credit card and mortgage interest rates and even divorces, but people often wonder how the SCRA treats bankruptcy cases, which emphasize deadlines and penalize those who do not fulfill their agreed-upon obligations. 

A review of the SCRA, the Federal Rules of Civil Procedure, and the Federal Rules of Bankruptcy Procedure all confirm that proceedings that originate in a bankruptcy court receive the same consideration as any other civil action. This means that: 

  • In adversary proceedings or contested discharge actions that the military member is aware of, there is a stay of proceedings when they submit a document to the bankruptcy judge stating that their military obligation prevents them from attending court. 
  • Plaintiffs such as creditors cannot obtain a default judgment until they provide an affidavit as to the defendant’s military status. Debtors on active duty are entitled to a 90-day stay of proceedings and possibly extensions that the court deems reasonable if their military service is for a more extended period. Failure to verify military status before compelling a servicemember to attend court is a serious offense under the SCRA. 
  • Active-duty military personnel cannot be subjected to a default judgment until they have been appointed an attorney to handle matters on their behalf. If the attorney is unable to contact them, then any decisions made by counsel are not legally binding on the servicemember. 

If you are an active-duty member of the U.S. military who plans on filing for Chapter 7 bankruptcy, then contact a New York bankruptcy attorney. Your attorney will ensure that your valuable obligation does not jeopardize your protection from creditor actions and that when you come home, you receive the debt relief you need. 

Jayson Lutzky is a New York bankruptcy attorney. If you are considering filing for personal bankruptcy, then contact Mr. Lutzky’s office at 718-329-9500. He offers free initial in-office consultations. Get your fresh financial start today!

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