If you're in the military and have defaulted on a car loan, the Servicemembers Civil Relief Act (SCRA) provides you with special protections against the repossession of your car. Your creditor might still be able to repossess your car, but it's right to do so is limited. If a car-loan lender violates the SCRA when repossessing your car, you have certain remedies.
The SCRA prevents car-loan lenders from repossessing your car without a court order while you're in military service. To qualify, you must have signed the loan agreement—and paid at least the deposit or first installment payment—before you entered military service. (50 U.S. Code § 3952).
If the creditor chooses to go to court to get an order of repossession, it faces further difficulty. The court may do one or more of the following:
Make the creditor return payments to you. The court might require the creditor to return to you all or some of the payments you previously made to the lender before it will allow the creditor to take the car back.
Stay the repossession proceedings. At your request, the court must suspend (stay) the repossession proceeding, usually for at least 90 days, if you can show that your military service prevents you from making payments. Even if you don't ask, the court may decide on its own to stay the proceeding, depending on the circumstances.
Require an equity payment. The court may also order the creditor to pay you the difference between the value of the car and the balance of the debt, if applicable, before it allows the creditor to repossess the car. This is called an equity payment.
The SCRA covers the following individuals who are in military service:
The SCRA covers you during the time you are in military service, beginning with:
Coverage under SCRA terminates up to 90 days after you are discharged from active duty, leave military service, or upon your death.
Your car-loan lender does not have to get a court order if you signed a waiver. The waiver is not legal unless it is:
For the waiver to be legal, you must have signed it during or after your period of military service. If you signed the waiver before you entered military service, it becomes invalid when you enter military service.
If a creditor repossesses, or attempts to repossess, the car in violation of the SCRA, it can be subject to criminal penalties. You might also be entitled to remedies. For instance, if a creditor obtains a judgment against you in violation of SCRA, you might be entitled to have that judgment set aside. You can also sue the creditor privately for damages and attorneys' fees.
The Department of Justice (DOJ) has authority to pursue creditors who violate the SCRA. You can request that the DOJ look into the matter on your behalf. To do so, you should first seek assistance from your Armed Forces Legal Assistance Program office. If you believe that a creditor has violated your rights under the SCRA, or if you have questions concerning whether the SCRA applies to your situation, you can contact your local AFLAP by going to U.S. Armed Forces Legal Assistance.