Financial hardship can cause stress for any homeowner, but for people in the military, duty and deployment could potentially make keeping a home out of foreclosure even more difficult and complicated.
Thankfully, the federal government has passed laws, including the Servicemembers Civil Relief Act, to provide protection for military servicemembers during their periods of uniquely challenging employment. Some states, including North Carolina, also provide benefits. In North Carolina, military servicemembers can potentially rely on state law, along with federal law, to help them avoid one of the greatest concerns that comes with financial difficulties—losing a home to a foreclosure.
The unique circumstances in which military personnel serve can create additional financial strain, even beyond that frequently found in civilian life. When reservists and guard members are called to active duty, they occasionally suffer a significant reduction in their income when compared to their everyday, civilian jobs. While deployed, military servicemembers frequently find it challenging to communicate with those back in the United States due to the distance, time difference and technological limitations. Accordingly, deployed personnel trying to defend against a foreclosure, repossession of a vehicle, or eviction, might be unable to participate in the process as they would if they were back home.
Congress has taken specific steps to help ensure that a commitment to military service does not worsen a servicemember’s financial position. Military personnel are protected against the above scenarios and many more by the federal Servicemembers Civil Relief Act (SCRA) during active duty and, for certain situtations, some time afterward. (For more details about the protections that the SCRA provides, see Legal Protections for America's Military: The Servicemembers Civil Relief Act)
The SCRA can help military personnel avoid—or at least delay—a foreclosure while serving their country.
Loans originated prior to active duty. If the servicemember took out the home loan prior to going on active duty, absent a waiver signed by the military servicemember or a court order, a lender may not foreclose on, seize, or sell the home of a military servicemember while on active duty. So, the lender can't pursue a nonjudicial foreclosure, unless it gets a waiver. Congress has further protected military personnel during their time of reintegration to civilian life by extending the period of protection for a year after active duty. (50 U.S.C. App. § 533). (To learn more, see Foreclosure Protections & the Military: When a Servicemember Gets a Mortgage Before Active Duty.)
Loans originated after the beginning of active duty. Military servicemembers who’ve taken out a home loan after going on active duty receive a reduced level of protection. A court cannot enter a default judgment—a court ruling when one party to a lawsuit fails to answer the suit or appear in court—against military personnel on active duty until an attorney has been appointed to represent the servicemember. The court may postpone proceedings for 90 days or more if the court determines that the servicemember’s presence is necessary to defend the case. (50 U.S.C. App. § 521). This protection can be very important when facing a judicial foreclosure. (To learn more, see Foreclosure Protections & the Military: When a Servicemember Gets a Mortgage After Active Duty.)
North Carolina law provides protection against foreclosures that basically mirrors the SCRA.
Foreclosures in North Carolina are typically nonjudicial, meaning a lawsuit and court proceedings are usually not required. But in a North Carolina nonjudicial foreclosure, state law requires an initial hearing before the clerk of court in the county where the property is located. At this hearing, the clerk of court must confirm that the debt is valid, the homeowner is in default, foreclosure is allowed under the deed of trust, that proper notice has been given, and that the foreclosure is not barred by law. (N.C. Gen. Stat. § 45-21.16). (Learn more about North Carolina foreclosure laws and procedures.)
State law not only prohibits nonjudicial foreclosure proceedings against active duty military members, but as an added protection, prohibits the clerk of court from conducting the initial hearing required before starting the nonjudicial foreclosure process. In order for the clerk to conduct the hearing, the lender must provide an affidavit affirming that the foreclosure will not occur while the homeowner is on active duty or within 90 days thereafter. (N.C. Gen. Stat. § 45-21.12A).
In order to receive protection, personnel must meet one of the following duty status definitions, which mirror the SCRA:
Guard members performing state duty under Title 32, aside from the limited protection during national emergencies, are generally not protected under the SCRA or North Carolina law.
As with the SCRA, the loan in question must have originated prior to military service. (N.C. Gen. Stat. § 45-21.12A).
North Carolina law does not prevent a court from pursuing a judicial foreclosure. North Carolina law only provides protection against nonjudicial foreclosures.
North Carolina law also provides protections for military servicemembers in other situations, such as early termination of residential lease agreements. (N.C. Gen. Stat. § 42-45). Military servicemembers facing other financial challenges should discuss their situation with an attorney, as covered in more detail below.
The SCRA and North Carolina law can help military servicemembers and other protected government employees avoid or delay foreclosure. Military defense counsel (a military attorney independent from the normal chain of command specifically designated to represent servicemembers confidentially), or a civilian attorney with experience in military law can help you understand how potential protections apply to your specific circumstances.
Military servicemembers should meet with military defense counsel or an experienced civilian attorney, rather than a JAG (Judge Advocates General are military attorneys in the normal chain of command at the base where they serve) at the base legal office, to discuss the SCRA and their situation confidentially. Some financial troubles might impact a servicemember’s security clearance or result in administrative or disciplinary action, so confidentiality can be very important.
Be sure to ask your attorney to look specifically at North Carolina state laws regarding foreclosure of your North Carolina home. Because military attorneys come from many different states, your military defense counsel might not be immediately aware of any additional protections that North Carolina provides.