Military Debt Relief
Over the years, state and federal lawmakers have considered the plight of people in the armed services whose military assignment orders may cause difficulty in meeting certain financial or legal obligations. As a result, laws have been enacted to ease these difficulties and honor these men’s and women’s service to our country.
Your Contractual Commitments under State Law
If you are in the armed forces, you should be aware that Georgia has a new law that allows an active duty service member, under certain conditions that expand on federally-enacted protections, to terminate a residential rental or lease agreement with 30 days’ notice to the landlord and a copy of your orders. O.C.G.A. Section 44-7-22 (Senate Bill 258, passed in 2005) applies if you have entered into a rental agreement, or a modification thereof, on or after July 1, 2005, and you:
- Receive permanent change-of-station orders to a location at least 35 miles away;
- Receive temporary duty or state active duty orders to a location at least 35 miles away for at least 60 days;
- Are released from active duty, during which time you had leased the property, and your home of record is at least 35 miles away;
- Are ordered to move into government quarters;
- Become eligible for government quarters and will forfeit your housing allowance if you do not move in; or
- Receive orders to an area 35 miles or more distant before taking possession of the property.
This law provides that your rent will be prorated to the effective termination date and will be payable on the usual due date, and that you will also not be penalized if you terminate the agreement for one of the above reasons 14 or more days prior to occupancy.
The same legislation (O.C.G.A. Section 46-5-8) permits a service member to terminate a cell phone service contract with 30 days’ notice to the provider if he or she receives permanent change-of-station orders (or temporary orders for over 60 days), or is discharged from active duty, to a location outside the provider’s service area or outside the continental United States.
Another code section, O.C.G.A. Section 44-7-37, extends residential lease protections to immediate family members for whose occupancy, in your absence, you entered into a property lease while on active duty. If you receive orders for a permanent change of station or for temporary duty of over three months, your liability under that lease will not exceed 30 days’ rent—after giving the landlord written notice and proof of your reassignment—and the cost of repairing any damage to the property.
Managing Your Prior Debts While on Active Military Duty
—and other benefits of the Servicemembers Civil Relief Act
Do you know what rights Congress has granted you as an active duty service member? Under the provisions of the Servicemembers Civil Relief Act of 2003 (SCRA), formerly known as the Soldiers' and Sailors' Civil Relief Act of 1940 (SSCRA), in some circumstances you will qualify for:
- A reduced interest rate on mortgage payments, credit card debt, auto and other loans;
- Protection from eviction, including your family members, if your monthly rent is $2,465 or less;
- Release from a home or motor vehicle lease;
- Delay of all civil court actions, including bankruptcy, foreclosure and divorce proceedings;
- The right to vote in your home state of record; and
- Protection from having to pay taxes in two different states.
This federal law covers any member of the uniformed services as you enter active duty and until the day you separate—including Reserve and Coast Guard members called to active duty and officers of the Public Health Service and the National Oceanic and Atmospheric Administration. The law’s protections do have limitations but may be of special interest to you if you are a member of a reserve component called to active duty.
For certain of these provisions, you must be prepared to show that military service has had a "material effect" on your legal or financial situation. In particular, you may have heard of the “Six Percent Rule,” whereby you can request that a lender or creditor lower your annual interest rate to six percent on a debt incurred before entering active duty, if you can demonstrate that going on active duty at a lower rate of pay will materially affect your ability to pay your mortgage or other debt.
You should not expect the SCRA protections to be invoked automatically, as some action may be required on your part. If you want your mortgage or credit card interest rates lowered, you need to send a written request to the issuer of credit, include a copy of your mobilization orders and evidence of the difference in your military and civilian pay, and ask for immediate confirmation that your interest rate has been lowered. You must continue making monthly payments to avoid having your account labeled delinquent.
The creditor may choose instead to go to court but would have the burden of proving that your military service will not materially affect your ability to fulfill your obligation at the higher rate. Further, if your civilian employer has agreed to make up the difference in your previous and your military pay, and your other living expenses have not increased on active duty, you may not qualify for the interest limitation.
Although the interest rate cap does not apply to federally-guaranteed student loans, the U.S. Department of Education has traditionally deferred or suspended loan payments for reserve component military members called to active duty. You should contact your lender or school to inquire about the status of your student loan.
If you have questions or concerns about any of your rights under this act, you should contact your legal assistance office or a private attorney promptly. If you receive notice of a court proceeding against you and your military service prevents your proper representation in court, get in touch with your unit or installation legal office immediately and do not do anything before seeking legal advice.
Each branch of service offers family assistance to military personnel. For example, the Financial Readiness program offered by Army Community Services (ACS) provides information and counseling to assist unit leaders in educating soldiers and their families in personal financial planning. This includes the military pay system, handling a checkbook, and one’s financial responsibility to oneself, family members and creditors. ACS focuses on helping to improve the skills necessary for developing a budget and spending plan, managing debt, evaluating assets and liabilities, and being a more informed consumer.
The following helpful links provide additional SCRA information on:
- Debt restructuring
- Delay of court and administrative proceedings
- Termination of your lease
- Eviction for nonpayment of rent
- Default judgment protection
- Life insurance
- State taxation
- Reinstatement of your health insurance
U. S. Army Judge Advocate General’s Corps
Note: Go to Client Services and Links/ Legal Assistance – then click on:
- Locate Legal Assistance - for more online resources
- Servicemembers Civil Relief Act - for the details of the law’s provisions
Department of Defense – fact sheet on obtaining certificates of military service