The Military Dependent: A Creditor's Blind Spot in the
Servicemember's Civil Relief Act
By: William M. Fischbach III
Creditors have become savvy to the basic protections to military servicemembers under the Servicemember's Civil Relief Act (the "SCRA").For example, the SCRA protects a servicemember from foreclosure on real property secured by a deed of trust, mortgage, or similar security instrument if the servicemember's financial obligation for the property arose before the servicemember's military service.Similarly, the SCRA protects a servicemember from the repossession of personal property--such as an automobile--that the servicemember is obligated to pay for under an installment contract that predates the servicemember's military service.
Many creditors assume--incorrectly--that these provisions of the SCRA apply to the financial obligations of only servicemembers but have no application to the separate financial obligations of their family members.In actuality, the debtor-oriented protections of the SCRA may, under certain circumstances, extend to the separate financial obligations of a servicemember's dependents.To that end, creditors should explore three basic considerations dealing with a debtor who is a servicemember's dependent.
Who is a "dependent" under the SCRA?The SCRA broadly defines the term "dependent" as the servicemember's spouse, minor child, or any "individual for whom the servicemember provided more than one-half of the individual's support" for the preceding 180 days.
When did the financial obligation arise?The SCRA applies to only those separate financial obligations of the dependent that predate the servicemember's period of active military service.Thus, if a servicemember's wife acquires separate title to real property secured by a deed of trust after her husband entered the military, then the SCRA does not apply.Note, however, that the spouse's separate financial obligation need not have arisen during the marriage.Interestingly, Arizona is one of the few jurisdictions that has examined this issue.Tucson Telco Federal Credit Union v. Bowser, 9 Ariz. App. 242, 451 P.2d 322 (1969), held that the SCRA applied to a wife's separate financial obligation for an automobile that she had purchased before her marriage to her husband, who had entered the military after they were married.
How does the servicemember's military service affect the dependent's ability to meet the separate financial obligation?The SCRA protects a dependent if the dependent's ability to meet the financial obligation is "materially affected by reason of the servicemember's military service."While this question may not be susceptible to simple analysis, generally, creditors should examine the dependent's history of compliance following the servicemember's entry into the military.Creditors may request that dependents provide information detailing how the ability to meet their financial obligation has been "materially affected," provided that such requests comply with applicable laws governing creditor-debtor communication.
Creditors must obtain a detailed waiver or court order to proceed with any foreclosure or repossession of property protected under the SCRA.Creditors who fail to do so are subject to civil and federal criminal penalties.Given the potential sanctions for violating the SCRA, creditors should be not only acutely aware of how and when the SCRA goes beyond protecting just servicemembers, but also prepared to work through the issues, most likely with the assistance of knowledgeable counsel.
