Bankruptcy and the Servicemembers’ Civil Relief Act: Special Protection for Special People

You’re a proud member of the military, protecting all of us back home on a day to day basis, in a very special way.

And we are proud of you as well.

Unfortunately, sometimes  your finances can become a problem while you are serving dutifully.  Nobody wants to file for bankruptcy protection, but sometimes there is no choice.

So how does the law make sure the process is fair to those who are not even around?

In comes the Servicemembers’ Civil Relief Act (“SCRA”) .
The underlying purpose of the SCRA is to enhance and strengthen national defense by ensuring that those serving are not distracted nor unfairly treated by the civil court system during their term of military service.   And those same protections flow over to bankruptcy proceedings.
The SCRA accomplishes that in three primary ways:

1)  Default Judgment Protection

Judgments are often obtained by plaintiffs against debtors who do not respond or file answers to pending litigation.  The SCRA requires that a contemporaneous affidavit be filed by any plaintiff avowing that the Defendant is not an active member of the military.  A court will consider that information when reviewing and deciding whether or not to grant the default judgment request.

2)  Stay Proceedings when servicemember has notice of the pending case

Before a final judgment is entered, a court, upon application by a debtor servicemember, or on its own motion, may stay all proceedings.  That stay would be for at least 90 days, and even longer, once certain information is received by the court, even if the servicemember had actual notice of the case.

3)  Judgment, Attachment and Garnishment stays or vacating of judgments

Even if a judgment is properly obtained against a active duty servicemember debtor, attempts to collect the judgment, through attachment of assets or garnishment proceedings, must, if the servicemember makes the request, or may, on the court’s own motion, stay or vacate any collection orders.  The stay lasts while the servicemember is on active duty, plus an additional 90 days after separation from service.

Here’s how the SCRA applies to Bankruptcy proceedings.

The language found in the SCRA explicitly states that it applies to any action in any court or proceeding.   That includes bankruptcy proceedings.  Additionally, the Federal Rules of Civil Procedure and the Federal Rules of Bankruptcy Procedure also incorporate references to the SCRA.

We’re proud of you and humbled by what you do each and every day for us.  If you are in a position where you need to exercise your rights under the Bankruptcy laws, please reach out and contact a bankruptcy attorney.

It is their privilege to advise you of your rights, and to ensure that your rights under the SCRA are protected along the way!