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Laws Can Protect Returning Military Personnel

April 2, 2007



Here I’m featured in BANKRATE MAGAZINE discussing tax law and military personnel.



Laws can protect returning military personnel 
Friday June 2, 6:00 am ET  
Amy Crane

Overseas military duty, particularly in Iraq or Afghanistan, is tough enough. But coming home offers its own set of difficulties, from readjusting to family life to getting a handle on financial issues that cropped up during deployment.

While federal and state laws extend special consumer protections to members of the military on deployment, these protections are somewhat scattershot, poorly enforced and not widely understood by many military personnel or civilians, says Michael Spak, co-author of “Servicemember’s Legal Guide: Everything You and Your Family Need to Know About the Law” and a professor at Chicago-Kent College of Law at the Illinois Institute of Technology.

“The military does a poor job of telling individual service people what their rights are and that they have access to a military attorney at no charge,” says Spak.

Many enlisted service members are young, away from home and not very financially savvy when they are deployed, and don’t take advantage of programs that allow them to knock interest down on credit charges, defer student loan payments, and temporarily avoid actions such as eviction and divorce proceedings, among others.

“Even if you’re aware of the benefits you have when you deploy and return from deployment, they aren’t always easy to understand, so many people don’t take advantage of them,” says Chris Michel, CEO of, a Web site designed for active- and reserve-duty military personnel.

“The Internet has helped a lot, but you still need to take care of these matters before you leave because you likely won’t get reduced interest on your loans if you don’t write a letter to the lending companies documenting your situation, for example,” he says.

Consumer protections 
Many consumer protections for active-duty personnel and reservists have been in force since the Soldiers’ and Sailors’ Civil Relief Act was signed into law during World War I. It was re-enacted during World War II and modified during Operation Desert Storm. An updated law, the Servicemembers Civil Relief Act, was signed into law in December 2003.

Here’s an overview of the provisions of this law, as well as other federal laws that aid service members:

Stays on civil litigation, including bankruptcy and divorce. Any service member currently on active duty can request a postponement of civil actions, including divorce and bankruptcy. This stay also applies to court-ordered judgments, wage attachments and garnishments.

The service member’s commanding officer needs to write a letter to the court and the plaintiff’s attorney stating that he or she is unavailable due to military commitments. These postponements expire once you are discharged from active duty or within 90 days of termination of active duty.

Reduction of loan interest. If you took out a loan prior to being activated as a member of the reserves or before you entered active-duty military service, you can have the interest on these loans reduced to 6 percent. This can include interest rates on credit cards, mortgages and even some student loans. The burden of proof is on the creditor to prove that active-duty service hasn’t materially affected the consumer’s ability to repay the loan at the original interest rate. Loan contracts that are signed once active duty begins aren’t covered under this provision.

Eviction protection. Skyrocketing rents in many parts of the country had limited the effectiveness of lease termination and eviction protection provisions in the old law. Under the new law, service members and their families can’t be evicted due to nonpayment of rent while on active duty on rental payments up to $2,400 a month. Any service member whose permanent-duty station is changed, or who is deployed for three months or longer from his or her permanent-duty station, can break a lease without penalty.

Student loan relief. As part of a budget act passed by Congress in February, reservists and active-duty members of the military deployed away from their permanent-duty stations receive a deferment for up to three years on student-loan payments. In addition, lenders must waive accruing interest on these missed payments.

Life and health insurance. Subject to approval by the Department of Veteran Affairs, service members may obtain deferments of life insurance payments during military service and for two years afterwards. Once the service member leaves active duty, he or she has two years to catch up on the premiums and the interest charged.

Vehicle lease termination. The older law had no provision for terminating car leases, leaving deployed service members stuck making lease payments on cars they couldn’t drive. Now, any active duty service member who is deployed away from his or her permanent duty station for at least six months can terminate a car, truck or other vehicle lease without penalty.

Identity theft. Identity theft can be an especially difficult problem for deployed military personnel because they might not even be aware of problems occurring while they are overseas. Amendments to the Fair Credit Reporting Act, or FACTA, allow any members of the military who are deployed from their regular posting to place an “active duty alert” on their credit reports.

In order to place the alert, according to the Federal Trade Commission, or FTC, you or your designated representative need to call the toll-free number of one of the three major credit reporting companies and request an active duty alert. It doesn’t matter which company you contact, because the law requires them to notify each other of these alerts. You or your representative will have to provide information to verify your identity, including your Social Security number, address, etc.

The active duty alert provides two important protections. Most importantly, any business that is approached about granting credit in your name must verify your identity before issuing that credit. Secondly, credit reporting agencies must remove you from their prescreened marketing lists for credit cards and insurance for two years. While the active duty alert generally lasts for a one-year period, you can extend it if your deployment lasts longer than one year.

Be aware that these protections will minimize — but not eliminate — the threat of identity theft. To be extra sure that there aren’t any problems, authorize your spouse, parent or other financial representative to pull a copy of your credit report periodically while you’re gone and scan it for any suspicious activity.

Other. Reservists and active-duty military members enjoy other protections related to civilian jobs and tax filings. For information on these issues, see these Bankrate stories:

• Jobs: “Johnny comes marching home to new financial battles;” “Law protects reservists’ jobs”  
• Taxes: “Tax guidelines, new breaks for military taxpayers”

For more information, the military operates a legal information portal, which covers topics such as consumer and contract issues, family law, immigration, landlords and tenants, how to get free legal assistance as a member of the military, and many other topics. More information on the Servicemembers Civil Relief Act can be found on Reservists can find information specific to their concerns at

Take action 
It’s important to remember that a particular provision of the law won’t protect you unless you invoke it. You must proactively notify lenders, landlords, leaseholders and others in writing with information including your account number, your personal information, the nature of your military service, and the length of your deployment in order to take advantage of the law.

Make sure to keep copies of all letters and statements you receive as proof that you notified these creditors. Send letters “return receipt requested,” so you can be sure they are received.

Getting ready for deployment is a busy time. But if you can take care of potential problems before they surface, you’ll make things a lot easier for you and your family, both while you’re gone and when you come back. Plan to sit down with your spouse, parent or friend who will be handling your finances while you are gone.

“There are quite a few family members who have never had to handle the household budgeting and pay the bills who have to deal with these responsibilities when they are totally unprepared,” says Laura Taylor, director of education and community relations for the Greater Washington Center for Financial Education. So if you haven’t had a budget before, work on one together before you leave.

Deployed reservists and active-duty military receive bonuses in the form of combat pay, extra allowances and other benefits, but those extra funds may not kick into paychecks right away and may not be immediately reversed upon the end of deployment, creating potential headaches. Shannon Nash, CPA, a former military spouse and author of “For the Love of Money,” suggests military families save any extra pay rather than spending it.

“Take this extra windfall and use it to fund an IRA, start or increase your contribution to the military retirement system, save to buy a house, or fund your kids’ college education,” she says. “Do anything but spend it, because once you’re used to spending at a higher level, it will be very difficult to return to the regular pay left post-deployment.”

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