When you enter active duty, significant legal benefits and protections are available to you and your family under a federal law called the Servicemembers Civil Relief Act (“SCRA”) and under the California Military and Veterans Code (“CMVC”). These laws cover a broad range of matters, including reduction of interest rates, termination of residential or automobile leases and cell phone contracts, protection from eviction and shutoff of utilities, rights to maintain or reinstate life or health insurance, deferral of payments and taxes, and certain protections in court and administrative proceedings. Below is an overview of those laws and how to obtain the protections and benefits provided by them.
A. When the Law Applies and Who It Protects Generally.
Active Federal or State Service. The SCRA protects National Guard members called to active federal service under Title 10 or Title 32. The CMVC provides similar—and in some cases greater—protections to National Guard members called to active federal service orordered into full-time active state service by the Governor of California.
Period of Military Service. In virtually all cases, for purposes of the law, you are considered to be on active duty from the date you receive your orders to report for military service rather than the date you actually report for duty. This means that most protections are not available for obligations entered into after you receive orders.
Spouses and Dependents. Many of the benefits of the law are available to your spouse and dependents, including protection from eviction or foreclosure of property and shutoff of utilities, the right to terminate leases and cell phone contracts, and deferral of payment of income taxes.
In most situations, the protections of the law are not automatic; they require some action on your part. For example, to obtain a reduction of your mortgage or credit card interest rates, you must send your lender/creditor a written request and a copy of your deployment orders.
B. Reduction of Interest Rate on Pre-Service Debt
Under the law, interest rates on credit cards, installment contracts, mortgages, or other obligations incurred before you were called to active duty (except federally insured student loans) are limited to six percent (6%) during your period of active service. Any interest above the 6% amount is forgiven.
Obtaining the Interest Rate Reduction. To obtain the reduction, you must provide each creditor written notice of your call to active service and a copy of your military orders, no later than 180 days after your release from active duty. However, it is strongly recommended that you send out notice immediately upon being activated to secure this important right.
Automatic Reduction. The interest cap is automatic if you provide the proper notice. You do not have to prove to the creditor that your military service materially affected your ability to pay the interest charges under the contact. However, as discussed below, a creditor may apply to a court for relief from the 6% cap if it believes your ability to pay was not materially affected by your deployment. It is rare for a creditor to do this, but it is possible.
A sample letter containing the required information can be found at the end of this Guide.
C. Termination of Residential or Automobile Leases
If you are leasing or renting property or a vehicle, the law allows you to terminate that lease upon your call to military service under the circumstances described below. However, you must have signed the lease before your call to active duty.
- Home or Business Property Lease
You may terminate a lease for premises occupied by you or your legal dependents and used as a residential dwelling or for professional, business, agriculture, or similar purposes, so long as your period of military service is at least 90 days.
- Motor Vehicle Lease
You may terminate any lease of a motor vehicle used by you or your dependents for personal or business transportation if you are called to active duty for a period of at least 180 days. No early termination fees or charges may be collected and you may be able to make payments on any amounts due at the time you provide notice.
To terminate the lease, you must provide written notice of termination and a copy of your military orders by hand delivery, U.S. mail, or private carrier, and then must return the vehicle within 15 days.
Termination is effective when notice of termination is delivered and the vehicle is returned.
Deferment of Motor Vehicle Lease: California law also permits you, your spouse, or your legal dependents to defer payments on vehicles leased before you were called to active duty, without the fear of breaching the lease or repossession of the vehicle. However, the lender is permitted to extend the term of the lease by the number of months the lease was deferred.
To terminate or defer the above leases, you must provide written notice of termination and a copy of your military orders. If you are terminating a motor vehicle lease, you must return the vehicle within 15 days of the notice.
D. Termination of Landline Telephone or Cell Phone Contracts
If you are called to active duty, federal law allows you (and anyone else included in a family plan with you, if they will relocate with you) to terminate any landline telephone contract or cell phone contract. California law extends the right to terminate cell phone contracts to your spouse and dependents too.
The telephone service provider may not impose an early termination charge, and if your period of relocation is less than three years long and you re-subscribe to the telephone or cell phone service within 90 days after your period of relocation ends, the service provider must keep your telephone number available for you and may not impose a charge for reinstating service (other than the usual charges for installation or for equipment).
To take advantage of these laws, you must deliver notice of termination and a copy of your military orders, and tell the service provider the date you want the service to terminate. This notice must be sent via certified mail, return receipt requested. Any mobile devices must be returned to the service provider.
A sample form letter containing the required information can be found at the end of this Guide.
E. Deferral of Payments for Deployments
The revised CMVC§ 800 gives you an additional benefit if you are called to active duty.
In addition to any other benefits provided by law (such as reduction of interest rates to 6%), the law allows you to “defer” (delay without interest or penalty) payment on certain debts and obligations for as long as 180 days. The law applies only to obligations you incurred before you were called to active duty. (You cannot defer or delay obligations you enter into while on active duty. For example, you will not be allowed to “defer” auto loan payments on a car you purchased while on active duty)
- Deferrable Obligations
- Credit card payments.
- Retail installment contracts (for example, furniture or appliances contracts)
- Revolving charge accounts (credit cards)
- Mortgages or deed of trust payments
- Up to two automobile loans
- Auto leases (the company will extend the term of the lease by the period of thedeferral)
- Property taxes and assessments on your primary residence
- Obligations owed to a utility company
- Period of Deferral
You may defer payments on any of the above obligations for the lesser of:
- 180 days
- The period of active duty plus 60 days.
- Required Notice
To take advantage of this benefit, you must send each company that you want to defer payments to:
(1) A letter signed by you, under penalty of perjury, requesting a deferral of the financial obligation you have. Note that deferral is only of amounts due after this notice. (A sample notice is attached to this Guide.)
(2) If asked, you must provide proof that your regular employer does not provide you continuing income, which, together with your military pay, exceeds 90 percent of the amount you earned before the call to active duty. (If your regular employer does provide you with such continuing income, you will not be eligible for the delay or deferral).
Your employer must provide this information on request within 5 days.
- No Interest or Penalties.
During the period of deferral, no interest may be charged or accumulated on the obligation and there can be no penalties assessed. In other words, the interest you would otherwise have been paying during the deferral period cannot be accumulated and added to the amount you owe, and no additional interest can be assessed as a result of the deferral.
No adverse credit report may be made, and the deferral cannot be the basis for denying or revoking credit. Additionally, the property subject to the deferred obligation cannot be repossessed or foreclosed on.
F. General Relief from Financial Obligations
California law allows you to obtain a court order to grant you relief for debt, obligation, liability, tax or assessment on the ground that your military service materially affected your ability to comply with the foregoing (this does not include family support). This relief is only available through the courts, but a JAG can assist you with this process.
To obtain this relief, you must apply to the court during your active military service or within 180 days after the end of your service. It is highly recommended you seek this relief as soon as you get your orders.
The court may grant the following relief if it finds your ability to pay is materially affected by military service.
- Real Estate Contracts.
The court may stay payments due under any real estate contract, mortgage or deed of trust (e.g. for your home or business property) for a period up to the remaining life of the contract plus the period of your military service.
During the period of the deferment, you must continue to make escrow payments for insurance and taxes (unless you separately obtain a deferral of the tax obligation). Also, you will be required to pay the balance (principal and interest) due and unpaid as of thedate of termination of military service (or the date of your application) in equal installments over the life of the stay at the rate of interest prescribed in the contract. No other charges, fines or penalties may be assessed for the delay in payment.
Example: MSG Delta has a 30-year mortgage on his home, on which he has been paying for 10 years. His monthly payment of principal and interest is $2,200 (a 51⁄2% annual interest rate). Upon his one-year deployment, he applies to the court for relief from the mortgage payment on the ground that his military pay is substantially lower than his civilian income. The court may order that the enforcement of the real estate contract is stayed, and that the amount that would have been due during his deployment ($26,400 [12 x $2,200]) may be paid in equal installments over 21 years (the 20-year balance of the mortgage plus the one- year deployment) at 51⁄2 % interest. Alternatively, the term of the loan can be extended by the length of the service. If the home is sold or refinanced, however, the entire amount must be paid.
- All Other Contracts and Obligations
Similar to mortgage deferral, the court may stay the enforcement (collection) of other debt, obligation, liability, tax or assessment (including, for example, assessments on your home for bonds) for the period of your military service.
You will be required to pay the balance due and unpaid at the date of termination of military service (or the date of your application) in equal installments over the period of the stay at the rate of interest set forth in the contract or other obligation. No other charges, fines or penalties may be assessed for the delay in payment.
Example: 1LT Victor has a contract to purchase an automobile with a three-year loan at a 5% interest rate. The monthly payment is $550. One year after buying the car, she is deployed for 18 months. Unable to make the payments because of a reduction in her income, she applies to the court for relief. The court may order that the contract is stayed for the period of her military service and the amount due at the end of her deployment ($9,900 [18 x $550]) shall be paid over the 18 months following the end of her military service at 5% interest.
State and federal laws may give you additional options, including bankruptcy, if you are having a hard time meeting your financial obligations. If you are considering bankruptcy, please consult with JAG or a civilian attorney.
G. Protection from Eviction
The law provides certain protections for you, your spouse, or your legal dependents against eviction from a residential dwelling (house or apartment) during the period of your military service.
The landlord must apply for and obtain a specific court order of eviction, and cannot rely on a 3-day notice or any provision of the lease or rental agreement. If the court issues the requested eviction order, it must stay (i.e. postpone) the effective date of the order until 30 days after the end of your military service unless it concludes that your ability to comply with the terms of the rental agreement was not materially affected by your military service.
Note that your obligation to pay rent is not forgiven as a result of your military service. Although you have protection against eviction for non-payment of rent, you and your spouse (if a party to the rental agreement) will remain responsible for any unpaid rent.
To obtain the protection of this stay, you or your representative must apply to the court for the stay. The court may require partial payment of rent as a condition to issuing the stay.
H. Protection from Shutoff of Utilities
You may apply for and receive protection against shutoff of utility services (water, electrical, gas, sewer and garbage) to your household for a period of 180 days. The account must be in your name or the name of your spouse.
Unpaid Rates and Charges. Although your household is protected against shutoff of utilities for non-payment, it does not forgive the amounts due (unless these are waived by the service provider). However, the service provider must establish a repayment plan allowing payment of any past due amounts over a reasonable period not to exceed one year after the end of active duty.
To obtain this protection, you must give the service provider written notice, enclosing a copy of your military orders.
A sample letter containing the required information can be found at the end of this Guide.
I. Protection from Foreclosure or Repossession
The law provides protections for you and your legal dependents against termination of contracts for purchase or lease of real or personal property (such as a home or car) and foreclosure or repossession of the property. Under this law, the creditor cannot terminate such a contract based upon non-payment or breach, and cannot repossess or foreclose upon the property without a court order. The law extends protection against non-judicial foreclosure to nine months after the end of your period of active service.
J. Life and Health Insurance Protection
Your call to active duty entitles you automatically to life insurance coverage under the Servicemembers Group Life Insurance (SGLI) program (discussed below in Section IV). You are also entitled, upon return from active duty, to reinstatement of any employer- provided health insurance coverage if you return to your former job. The law also makes you eligible for the following insurance benefits.
a. Life Insurance
The law allows you to apply for protection against cancellation of a qualifying life insurance policy and for deferment (i.e. postponement) of premiums and other payments that would otherwise be due during the period of your military service and two years thereafter. The total amount of life insurance protected under this law may not exceed the maximum Servicemembers Group Life Insurance (SGLI) benefit, regardless of the number of policies.
To obtain this protection, you must send written notice to the insurer with a copy to the Secretary of Veterans Affairs. Upon receipt, the insurer must provide certain information about the policy to the Secretary of Veterans Affairs, which is used to determine whether the policy is eligible for protection.
Benefits of the Law. If the Secretary determines that the policy qualifies, the insurer may not cancel the policy for non-payment of premiums at any time after the application is received by the Secretary. This protection remains in effect for the period of your military service and for two years thereafter. You have up to that two-year period to pay any unpaid premiums.
Premium Payments Federally Guaranteed: If the policy qualifies, payment of the premiums is guaranteed by the United States, but you remain responsible for any unpaid premiums and the government may later recover from you any premiums paid on your behalf.
b. Health Insurance
With some exceptions, the law also gives you the right to reinstate any health insurance policy covering you and/or your dependents that was in effect at the start of your military service and that you terminated during the period of your service. (This does not apply to employer-provided health insurance programs, which are covered by the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), discussed below under Section III.)
Benefits of the Law. Upon receipt of the notice from you, the insurer must reinstate the health insurance policy without any waiting period and without any exclusions of pre- existing medical conditions (i.e. conditions that existed as of the date of reinstatement).
To obtain this protection, you must send written notice to the insurer electing to reinstate the health insurance within 120 days after the end of your military service.
A sample letter containing the required information can be found at the end of this Guide.
K. Income Taxes
Combat Zone Exclusion and Extension. If you are deployed to a “combat zone” or “qualified hazardous duty zone,” or you are providing direct support for operations in those areas for which you receive hostile fire or imminent danger pay, (i) you can exclude certain pay from your income; and (ii) most deadlines regarding filing and payment of taxes are extended.
Income Tax Exclusion. If you serve in any combat or hazardous duty zones as an enlisted person or as a warrant officer all of your military pay – including hostile fire or imminent danger pay – is excluded from gross income.
For commissioned officers, the monthly exclusion is capped at the highest enlisted pay, plus any hostile fire or imminent danger pay received.
Extension. If you serve in any combat or hazardous duty zones, virtually all deadlines relating to income tax are extended (including filing your return, paying taxes, establishing an IRA, and applying for refunds). This extension covers you, your spouse (even if filing separately), and your dependents. During the extension period, assessment and collection deadlines are extended and there are no penalties imposed. No back taxes can be collected.
Extension Period. The extension is for the period of your service plus 180 days plus the period remaining to take the action when you were deployed. Thus, for example, if your one-year deployment began on January 31, 2016, and ended on January 30, 2017, you would have until mid-October 2017 to file your 2016 income tax return.
L. Schools and Colleges
If you are granted an academic leave of absence for military service, the school must do either of the following if you request within one year after your release from military service:
❑ Refund the tuition and fees you paid for the academic term during which you were required to report for military service, regardless of whether you were called to military service before or after that academic term had commenced; or
❑ Make arrangements to reasonably accommodate and assist you so that you are able to meet any coursework requirements you missed due to military service.
Additionally, upon request made within one year of your release from military service, the school must restore you to the educational status you had attained prior to being called to military service without loss of academic credits earned, scholarships or grants awarded, or tuition or fees paid (provided the appropriate credit is requested as specified above).
M. Court and Administrative Proceedings
If you are involved in a judicial or administrative proceeding (you have to go to court or appear at some other hearing) before or during your military service, the law gives you the right to obtain a stay of proceedings (which means the proceeding are put on hold) and provides you with certain protections against defaults or other decisions and actions that may harm you if you can show that you are unable to participate in the proceedings because of your military service (as, for example, by an overseas deployment).
The other party to the proceeding may also request a stay of proceedings.
The time to file a lawsuit is also suspended during your military service.
These legal protections apply to any matter in state or federal court or before any administrative agency or board (such as the Workers’ Compensation Appeals Board, Unemployment Insurance Appeals Board, Department of Motor Vehicles, etc.).
- Stay of Legal Proceedings
At any time during your military service, or within 90 days after your military service, you may request a stay of any legal proceeding if your military service materially affects your ability to participate in the proceeding. This means that your military service interferes so much so that you are unable to appear in court for your case. A good example of this is you are deployed overseas and cannot appear in court.
To obtain a stay of proceedings, you must send the court a letter stating (1) why your military service materially affects your ability to appear in court; (2) the date you will be able to appear in court; and (3) a letter from your commanding officer stating that your military duties prevent your appearance and that leave will not be authorized for an appearance.
The court must stay the proceedings if you send the court the above information, unless the court determines that your ability to appear does not materially affect your case. The stay may be for the entire period of your military service plus three months. The court may impose conditions on the stay of proceedings (such as making partial payments of a debt, if the case involves a debt or other financial obligation).
You may apply for an additional stay, if your military service continues past the initial stay period and continues to materially affect your ability to appear in court. Such an application for an additional stay may be made with the initial application, or when it appears that you will be unavailable to appears in court (as a result of your military service). The requirements for an additional stay request are the same as those for your initial stay request.
(2) Appointment of counsel when additional stay refused
If the court refuses to grant an additional stay of proceedings, the court must appoint a lawyer to represent you in the action or proceeding.
2. Protection Against Default Judgments or Orders
Prerequisites to Entering Judgment. Before a court enters a judgment against you, the court must require that the party against you provides the court with an affidavit, under penalty of perjury, informing the court whether or not you are in military service (or that the party cannot determine whether or not you are in military service).
If the court determines that you are in military service;
a. The court may not enter judgment until after it appoints an attorney to represent you
and protect your interests; and
b. The court must grant a stay of the judgment (for a minimum of 90 days) if the court determines you may have a valid defense against the judgment that cannot be presented to the court in your absence (example, while you are deployed).
If the court cannot determine whether or not you are in military service, it may require the other party to post a bond to protect you from any harm you might be caused by entering a judgment against you.
- Stays of Judgments or Orders.
The court may also stay the effect of any judgment and order entered against you if you can show that your ability to comply with the court’s order is materially affected by your military service. The court may also vacate (i.e. cancel) or stay any order of attachment of judgment or garnishment of your money or property.
You must apply for this relief during or within 60 days after the end of your military service.
- Tolling of Statutes of Limitation. During your military service, all statutes of limitation (the deadline to file a lawsuit) are suspended. This law applies to actions by or against you and includes all administrative proceedings.
N. Child Custody, Support and Arrearages.
The California legislature has adopted a variety of statutory provisions that deal with child custody, support, visitation, and support arrearage (past due child support) matters:
- Custody and Visitation
Family Code section 3047 declares that your failure to comply with custody or visitation orders, as a result of your military service while outside California is not, “by itself”, sufficient grounds to modify a custody or visitation order.
Family courts retain the ability to act in the best interests of children; however, the Family Code provides you with a strong argument in favor of resuming the custody or visitation arrangement you had prior to your deployment.
Deployment, alone, generally will not automatically undue your current custody arrangement or orders. Usually you can step back into the previously existing custody/visitation arrangement without fear that the deployment will automatically undo what existed. (Even if your military service (deployment) is a “substantial distance” from your residence and it materially affects your ability to exercise visitation or custody, where a “necessary modification” occurs, it must be deemed as a “temporary custody order made without prejudice”)
- Child Support
Family Code section 3651 allows you to serve and file a “Notice of Activation of Military Service and Request to Modify Support Order” (CA Court Form FL-398).
This notice requires the court to hold a hearing prior to your deployment, or to essentially stay the child support hearing during deployment. You then have up to 90 days after return from deployment to have the court hearing and reduce the child support “retroactively” to the later of the date of service of the request for modification of child support or the date of deployment. If you fail to make the request within that time, you may lose the right to a child support adjustment.
If you filed CA Court Form FL-398, but were unable to have the hearing to reduce child support prior to deployment, you should be able to get the court to grant you a credit for the amount you overpaid during deployment. The court may either grant you a credit against future child support payments or order the person receiving support payments to pay you back over a reasonable time period.
Keep in mind that because the “time share” with your child or children will essentially go down to “0%” during your deployment, you most likely will not be entitled to a reduction in support even if your income (while activated) was reduced.
In addition to the modification procedures contained in the Notice of Activation of Military Service and Deployment and Request to Modify a Support Order, you may be eligible for a modification based on a change in income due to military activation. To request a modification of support for reasons other than out-of- state deployment, see Form FL-391 Information Sheet—Simplified Way to Change Child, Spousal, or Family Support, for the forms to use and instructions (available on the California Court Website: www.courtinfo.ca.gov/forms/documents).
- Assistance from Local Child Support Agency
Family Code section 17440 requires the Department of Child Support Services to develop its own form so that a local child support agency can file a motion to reduce child support on your behalf, even if you are not present.
The local child support agency is required to file the motion on your behalf within five days of you providing a properly completed form. If you would like the local child support agency to assist you, you may fill out a Notice of Deployment and submit it to the local child support agency. The agency will prepare a request for modification, and you will not need to appear if you are already deployed. The agency must attach the Notice of Deployment to Form FL-398 to show the court that you have authorized the agency to act on your behalf. (You can obtain a Notice of Deployment from any local child support agency.)
Family Code section 17560 allows a local child support agency to compromise “arrearages” (past due child support) that accrued due to your deployment, if you can show that you would have paid less child support if a timely motion to reduce child support had been made.
An offer of compromise “shall be deemed” in the best interests of the state (to resolve the matter) if you can show that the deployment would have reduced your child support payments, but you were simply unable to have a court hearing before your deployment.