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Bankruptcy Basics
Bankruptcy Judges Division
Administrative Office of the United States Courts
APRIL 2006
Revised Third Edition
For cases filed on or after October 17, 2005

Contents

Introduction

The Discharge in Bankruptcy

Chapter 7. Liquidation Under the Bankruptcy Code

Chapter 13. Individual Debt Adjustment

Chapter 11. Reorganization Under the Bankruptcy Code

Chapter 12. Family Farmer Bankruptcy

Chapter 9. Municipality Bankruptcy

Chapter 15. Ancillary and Other Cross-Border Cases

SCRA. Servicemembers' Civil Relief Act

SIPA. Securities Investor Protection Act

Bankruptcy Terminology


SCRA
Servicemembers' Civil Relief Act

General Provisions

There are three primary areas of coverage under the SCRA: (1) protection against the entry of default judgments; (2) stay of proceedings where the servicemember has notice of the proceeding; and (3) stay or vacation of execution of judgments, attachments and garnishments. 50 U.S.C. app. 521, 522 and 524.

Protection Against Default Judgements

Section 521 of the SCRA establishes certain procedures that must be followed in all civil proceedings in order to protect servicemember defendants against the entry of default judgements. These procedures are outlined below:

If a defendant is in default for failure to appear in the action filed by the plaintiff, the plaintiff must file an affidavit1 with the court before a default judgment may be entered. The affidavit must state whether the defendant is in the military, or that the plaintiff was unable to determine whether the defendant is in the military.

If, based on the filed affidavits, the court cannot determine whether the defendant is in the military, it may condition entry of judgment against the defendant upon the plaintiff's filing of a bond. The bond would indemnify the defendant against any loss or damage incurred because of the judgment if the judgment is later set aside in whole or in part.

The court may not order entry of judgment against the defendant if the defendant is in the military until after the court appoints an attorney to represent the defendant.

If requested by counsel for a servicemember defendant, or upon the court's own motion, the court will grant a stay of proceedings for no less than 90 days if it determines that (1) there may be a defense and the defense cannot be presented without the defendant's presence; or (2) after due diligence the defendant's attorney has not been able to contact the defendant or otherwise determine if a meritorious defense exists.

The court may, in its discretion, make further orders or enter further judgments to protect the rights of the defendant under the SCRA.

If a judgment is entered against the defendant while he or she is in military service or within 60 days of discharge from military service, and the defendant was prejudiced in making his or her defense because of his or her military service, the judgment may, upon application by the defendant, be opened by the court and the defendant may then provide a defense. Before the judgment may be opened, however, the defendant must show that he or she has a meritorious or legal defense to some or all of the action.

Stay of Proceedings Where Servicemember Has Notice

Outside the default context, and at any time before final judgement in a civil action, a person covered by the SCRA who has received notice of a proceeding may ask the court to stay the proceeding. 50 U.S.C. app. 522. The court may also order a stay on its own motion. Id. The court will grant the servicemember's stay application and will stay the proceeding for at least 90 days if the application includes: (1) a letter or other communication setting forth facts demonstrating that the individual's current military duty requirements materially affect the servicemember's ability to appear along with a date when the servicemember will be able to appear; and (2) a letter or other communication from the servicemember's commanding officer stating that the servicemember's current military duty prevents his or her appearance and that military leave is not authorized for the servicemember at the time of the letter. The court has discretion to grant additional stays upon further application.

Stay or Vacation of Execution of Judgements, Attachments and Garnishments

In addition to the court's ability to regulate default judgments and stay proceedings, the court may on its own motion and must upon application: (1) stay the execution of any judgment or order entered against a servicemember; and (2) vacate or stay any attachment or garnishment of the servicemember's property or assets, whether before or after judgment if it finds that the servicemember's ability to comply with the judgment or garnishment is materially affected by military service. 50 U.S.C. app. 524. The stay of execution may be ordered for any part of the servicemember's military service plus 90 days after discharge from the service. The court may also order the servicemember to make installment payments during any stay ordered.

Additional Protections

Several additional rights are available under the SCRA. For example, when an action for compliance with a contract is stayed under the SCRA, contractual penalties do not accrue during the period of the stay. 50 U.S.C. app. 523. The SCRA also provides in most instances that a landlord cannot evict a servicemember or dependants from a primary residence without a court order. In an eviction proceeding, the court may also adjust the lease obligations to protect the interests of the parties. 50 U.S.C. app. 531. If the court stay the eviction proceeding, it may provide equitable relief to the landlord by ordering garnishment of a portion of the servicemember's pay. Id. Under the SCRA a servicemember may terminate residential and automotive leases if he or she is transferred after the lease is made. 50 U.S.C. app. 535. A court may also extend some of the protections afforded a servicemember under the SCRA to persons co-liable or secondarily liable on the servicemember's obligation. 50 U.S.C. app. 513.


Footnotes

1. The requirement for an affidavit may be satisfied by a statement, declaration, verification, or certificate in writing subscribed and certified or declared to be true under penalty of perjury. 50 U.S.C. app. 521(4). return to text