I’ve Been Called Back to Active Duty in the Army. What Do I Do About My Car Payment and Bank Loans? – Larry


“Dear Steve,

I have been called back to active duty. I do not make as much on active duty as I did on the civilian side. I am currently selling my house but even with it gone I don’t make enough to pay my car note and my bank loans.

How do I fix this without bankrupcy or repositions? The out of debt companies that I have found only deal with unsecure loans. Is there a program for soldiers like myself?


Dear Larry,

I assume from the tone of your email that you are single and not leaving a spouse behind to live in the house, drive the car or pay the bills.

First, let me say that I really appreciate and thank you for the sacrifices you are and will make to serve in our armed forces. When people say that members of the military are unsung heros, they really are.

Any answer to your situation lies within the Servicemembers Civil Relief Act (SCRA) which provides some protections to be entering active duty in the military. While the Servicemembers Civil Relief Act provides you with some protection you need to remember that the protections only extend to debt incurred prior to returning to active duty.

Regarding the Car:

A servicemember who, prior to entry into active duty, entered an installment contract for the purchase of real or personal property (including motor vehicle), is protected under the SCRA if the servicemember’s ability to make the payments is “materially affected” by the military service.

The servicemember must have paid, prior to entry onto active duty, a deposit or installment under the contract.

The seller is then prohibited from exercising any right or option under the contract to rescind or terminate the contract, to resume possession of the property for nonpayment of any installment due, or to breach the terms of the contract, unless authorized by the court.

Regarding the Bank Loans:

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The SCRA limits to 6 percent interest on credit obligations incurred prior to military service or activation, including credit card debt, for active duty servicemembers.

The SCRA clearly states that no interest above 6 percent can accrue for credit obligations (that were established prior to active duty or activation) while on active duty, nor can that excess interest become due once the servicemember leaves active duty – instead that portion above 6 percent is permanently forgiven. Furthermore, the monthly payment must be reduced by the amount of interest saved during the covered period.


While the SCRA provides you with some protections, such as the loss of the car to repossession if you meet the criteria, you need to think about what will happen if you park the car with a friend and then return to deal with the amount back due at that point.

You could pay less on the car now but that won’t stop it from being a crisis to deal with when you get back. Talk to the lender and ask them what options they may have since you are being called up to active duty.

While these are your rights it does not mean that the banks will play nice and follow them. Take this recent story out of Michigan for example:

“Bank of America violated, we believe, the Servicemembers Civil Relief Act (SCRA),” said Rupprecht’s attorney, Julie Gafkay.

The SCRA protects military personnel from civil action, such as car repossession, while they are in a military action. Gafkay believes Bank of America repossessed Rupprecht’s 2004 Dodge Neon while the serviceman was in Iraq.

Rupprecht got a late payment notice after his military pay was not put into his account, and once the money was there, the lawsuit states Rupprecht called from Baghdad.

Gafkay says Rupprecht called on a satellite phone in a combat zone, asking Bank of America to reinstate payments and to take the money he owed from his account. Bank of America refused.

She says a collection agency, also named in the lawsuit, is trying to collect $11,000. It’s a legal dispute between a soldier and large financial institution that is also getting $25 billion in bailout money from the federal government.

“They are receiving a handout from the very government that he is over there fighting for!” said Gafkay.

A spokeswoman with Bank of America says due to the lawsuit, they cannot make a comment at this time.

You can also read and listen to this NPR story for more SCRA horror stories.

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If you have a problem with any creditor while you are on active duty, find your local military Judge Advocate General (JAG) office where you are located and ask for help. The JAG office deals with these issues all the time.

I’m not positive if this guide is still current but here is a link to the Servicemembers Civil Relief Act Guide that might be helpful for you.



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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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