Active service members can take steps to avoid financial hardship and prevent legal problems while they're gone, and ensure they have a home and a job when they return.

Two powerful federal laws can help all active service persons handle their legal affairs and reduce financial obligations while on active duty and ensure that the homes and jobs left behind are waiting for them when they return. Below we discuss the following benefits provided by these laws:

• reduced interest rates on existing debts
• special treatment for tenants regarding lease cancellations and evictions
• protection from court actions and repossessions, and
• guaranteed job reinstatement.

Reduced Interest Rates on Existing Debts

The Servicemembers' Civil Relief Act, or SCRA (50 U.S.C. App. § 501 and following), applies to all active duty members of the military, including the activated National Guard and certain members of the Public Health Service. In 1940, Congress decided that sailors and soldiers should be free to serve, whether in peacetime or during war, without worrying about financial or court-related problems at home. In particular, Congress recognized that military pay for many activated reservists would likely be lower than their normal income, making it hard to pay prior debts.

Particularly helpful to members of the military are reduced interest rates on debt, including mortgage payments and credit card debt. Under Section 527 of the SCRA, many active duty personnel are entitled to a 6% cap on debts or financial obligations of any kind (except federally guaranteed student loans). You must meet these conditions to take advantage of this interest rate reduction:

• You took out the loan before you began active duty. For example, a reservist who buys a car in June and is called up the following October is entitled to an interest rate reduction, but a sailor who secures a car loan while on active duty and is then shipped out will not qualify for the reduction.

• Your military service materially affects your ability to pay the loan at the pre-service interest rate. This usually boils down to showing that you make significantly less money now than before you went on active duty.

If you think that your loan meets these requirements, you must write a letter to the lender asking that the interest rate on the loan be changed as of the date your active duty began. Include copies of your orders and paychecks, and evidence that you are now making less money than you did prior to active duty.

The lender must reduce the interest rate on the loan to 6% or less if you've provided this information. (However, lenders can go to court to contest the reduction, which they may do if they think that your income reduction is not so great as to materially affect your ability to pay the interest on the loan. Until the court rules, however, the interest rate must remain reduced.) Once you resume inactive status, the loan will revert to its original rate.

Special Treatment for Tenants

Many active duty members will also be able to terminate lease obligations and avoid eviction.

Cancellation of Residential or Commercial Leases

Tenants who enter active military service after signing a lease or rental agreement have a right to get out of their rental obligations. This is true for both residential and commercial (business) leases. You must mail written notice of your intent to terminate your tenancy, along with a copy of your orders, to the landlord or manager.

• Month-to-month rental agreements. Once the notice is mailed or delivered to the landlord or manager, the tenancy will terminate 30 days after the day that rent is next due. For example, if rent is due on the first of June and you mail a notice on May 28, the tenancy will terminate on July 1. This rule takes precedence over any longer notice periods that might be specified in your rental agreement or by state law. If state law or your agreement provides for shorter notice periods, the shorter notice periods will control.

• Leases. Once the notice is mailed or delivered, the tenancy will terminate 30 days after the day that rent is next due. For example, suppose a tenant signs a one-year lease in April, and rent is due on the first of the month. The tenant enlists or is called up on October 10. If the tenant mails a termination notice on October 10, the lease terminates on December 1, which is 30 days after the first time that rent is due following the mailing of the notice (November 1). This tenant will have no continuing obligation for rent past December 1.

Delaying Eviction for Nonpayment of Rent