disclaimer stampThis website is not intended to be a legal advice resource. It is only meant to be used for educational reasons. Please don’t take any action or refrain from taking any action based on what you’ve read on this website. This website, article, or link may contain outdated, incorrect, or irrelevant information. It is your obligation to speak with an expert attorney who can apply current legislation or laws to your personal situation in a professional manner.

There is no attorney-client relationship formed by using this site or communicating with Law Office of D.L. Drain or any of our employees. Please read the complete disclaimer for additional information.

It is vital that you seek legal advice from a qualified attorney on your individual situation. It will almost certainly cost you less to seek advice before acting than it will to repair your mistakes.



Beware: laws change and this web site may not have the current information. Do not rely on the Internet for accurate legal advice.


Beware: laws change and this web site may not have the current information. Do not rely on the Internet for accurate legal advice.

The mortgage crisis of 2008 through 2012 (this happens every 15 to 20 years)

Statistics from 2005: Foreclosures, which are a major indicator of the health of the housing market, can rapidly increase, causing harm to families and communities. When compared to any other comparable indicator, such as gains in property ownership, the number of mortgage loans issued, or even the ratio of foreclosures per mortgage, the rate and quantity of foreclosures might escalate at an alarming rate. Home ownership has increased by only 3.6 percent in the last two decades, but foreclosures have increased by 335.6 percent. The sub-prime (hard money) mortgage market is directly to blame for the huge spike in foreclosures (which means greedy lenders and realtors who know for certain the borrower cannot afford the home). As of the third quarter of 2003, 6.6 percent of sub-prime mortgage loans were in default, or about one out of every 15 loans. This is in stark contrast to the prime lending rate, which was 53 percent for the same time period. Joint Center for Housing Studies, page 12 (March 2004).

The unfortunate reality is that few borrowers are aware of the risks around borrowing money, purchasing a property, or using credit cards.

Instead, they trust the word of those who profit from their ignorance – realtors, brokers, lenders, and credit card firms. Their inability to comprehend these difficulties is leading to foreclosure, wage garnishment, and bankruptcy.

It’s extremely unlikely that someone will contact you with an offer to “fix your problems” without making a lot of money or taking title to your house.

The majority of these folks are in the business of profiting from your misery. As long as you understand their aim, you are free to do whatever you choose. Hundreds of people have been led to believe that these “rescuers” are their friends. Never make that mistake again. Check for prior litigation with the Attorney General’s Office, the Better Business Bureau, the Clerk of the Court, and Google their name.

If they claim to be a non-profit, be skeptical. If they claim to have federal “grants,” be skeptical.

hand reaching toward money, with X through itKeep track of everything you do with them. Keep copies of all documents and videotape their pledges. Always read anything you sign before signing it, and maintain a copy of everything. Before you sign, seek advice from someone who isn’t connected to the rescuer.

The majority of these scams target minorities, individuals with low income who can’t afford to speak with an attorney, and those who are simply too obstinate to believe that anyone could possibly defraud them.

Attorneys, disbarred lawyers, realtors, brokers, and CPAs are just some of the people who have prayed on innocent people. Richard T. Berry, a convicted felon and disbarred lawyer, is an example. “Why Pay a Lawyer” is run by Mr. Berry. He is not allowed to practice law in Arizona, and he is not allowed to prepare any documents. But he continues to work in Arizona, even from the Arizona State Prison.  Mr. Berry numerous sanctions by Arizona bankruptcy judges on multiple occasions.

Never put your trust in anyone to “work out your problems.”

The moral of these stories is to always verify with licensing organizations to determine a person’s current status and past history before hiring them. People in distress, in my experience, wait far too long to seek assistance. When they do seek assistance, they do not check the reliability of the helper’s background or the veracity of their assertions. Maintain direct contact with your lender. No contract with an attorney should prevent you from speaking with another attorney or seeking counsel from someone else for your case. If you have any questions regarding an attorney’s behavior, contact the Arizona State Bar.

Bankruptcy is not always the best option.

To learn more about your choices, speak with an expert bankruptcy attorney. Even if the house sells in a trustee’s sale, it’s likely that the Olsens will collect some money when the trustee’s sale is done. See below for an explanation of excess sales revenues, which are funds left over after a trustee’s sale.

If you are asked to do something that you believe is unethical or illegal, refuse.

Man with open mouthThis is one of hundreds of such stories: in early 2006, Maria E, an elderly woman, used her own money to put a down payment on a $175,000 house, and then made all of the bills and landscaping. Initially, a realtor and a mortgage firm proposed that she utilize the credit of a friend of the realtor to acquire the house in order to qualify for the loan (she was living on social security). (This is referred to as FRAUD by those who are paying attention.) The residence was bought in the name of a friend of the agent. After the financing was funded, the realtor’s acquaintance promised to convey the house to Maria. Maria thought the house had been deeded into her name after she paid the down payment and made all the payments for a while. Instead, it turned out that the buddy deeded the house to an investor, who subsequently evicted Maria and deeded the house to another investor.

Keep in mind that these people are in the business to make money. They are profiting off the equity in your home that you are losing.

To learn more about your options and obtain counsel, speak with an expert foreclosure lawyer. You may be able to retain the services of an attorney for advice or assistance. To apply for advice from the Volunteer Lawyers Program, call Community Legal Services at 602-258-3434 if you have a low income and are eligible for free legal assistance.Ensure that all communications are documented or confirmed in writing.

Keep track of who you spoke with, when you spoke with them (day and time), their phone number, and what they said.


Some persons will default as a result of bad advice (from a lawyer or otherwise) or stubbornness on a problem.

The most cost-effective strategy to avoid a foreclosure or trustee’s sale is to pay the whole amount due, including past payments, late fees, penalties, and trustee fees, before the Trustee’s Sale date. Don’t assume that everyone is in default because they can’t afford to pay their bills on time. If you want to save your home and have the means, it’s usually advisable to pay them and then go to court to resolve the concerns.

Request the “reinstatement” amount in writing, and keep a copy for your records.

Reinstatement: Send the full amount to the lender by certified mail with return receipt requested (arranged at the Post Office) so you can confirm that you sent the money and that the lender got it. BE SURE TO HAVE IN WRITING FROM THE LENDER AND TRUSTEE THAT THE TRUSTEE’S SALE HAS BEEN CANCELLED IF YOU PAY ALL THAT YOU OWE. If you’re having problems getting the lender to inform you the exact amount due on the date you’ll be able to pay it, hire a lawyer.

Is it possible for you to qualify for the amount you owe (arrears required to reactivate the loan), including past due mortgage payments?

If you are eligible to refinance, you must make the necessary arrangements, sign the necessary documentation, and pay your lender before the Trustee’s Sale date. To check if you qualify, contact a few different lenders . If you are already behind on your payments (in default), getting refinancing can be difficult or impossible.

Get competent legal advice on your liability on this second loan. ( Arizona Anti-Deficiency Flow Chart)

Do not agree to a high-interest short-term loan unless you are positive you will be able to make the new payments.

Getting a short-term loan with a high interest rate is almost always a bad idea because the payments will be too expensive, your debt will grow, and your home will still be lost.

Even if a Trustee’s sale has begun, you still own your home and have the option to sell it.

You can sell your house yourself before the Trustee’s Sale date. If your property sells for much more than you owe, you may be able to pay off your mortgage and costs while also receiving money to help you find a new place to live and cover moving expenses. Consult with a few reputable realtors to get a realistic estimate of how much you might be able to get if you sell the house. Always speak with a licensed realtor whom you have contacted based on the recommendations of others.

Even if they claim to be a lawyer, never use the services of someone who comes to your door to “assist” you.

The number of times I see homes in a trustee’s sale where there is enough money to pay off all the creditors and leave extra for the homeowners is remarkable. The issue is most likely that the homeowner has no idea how much their home is worth. Use a licensed realtor who contacts you, not one who contacts you.

If you can afford it, you should catch up on your payments as soon as possible.

If your lender has to take additional legal measures, you will be responsible for all of the fees, so stopping the process now by paying what you owe will save you lot of money. Make plan to catch up on your payments if at all possible.

Lenders are not required to offer payment plan, but they must accept the whole amount owed, including fees and charges.

Make contact with the lender to see if you can come to an agreement on how much you’ll pay and when you’ll be able to catch up. If you demonstrate that you will be receiving a big sum of money soon or that your income will be increasing shortly, you will be more likely to be able to catch up and then continue making If you and the lender come to an agreement on a repayment plan, be sure the agreement is in writing. You should write to the lender to indicate that they have decided to accept payments instead of initiating any legal action, as well as the payment amounts and dates. Include the name and phone number of the individual who agreed to payment by phone. It’s better to send the letter certified mail and keep a copy for your records.

If your mailing address has changed, make sure your lender knows how to contact you so that you are alerted if the house is to be sold. Even if you’ve given your lender this information in writing, you should still file a Request for Notice with the County Recorder’s office in the county where your home is located. If you are able to come to an agreement with your lender to catch up on your payments, make sure to make all of your payments on schedule and retain record of your payments.

Consider how you might be able to get more money to make up for missed payments.

Someone in the family may be able to assist by working part-time or full-time. People may be able to borrow from relatives on occasionally. Provide written documentation to your lender that your family can now afford the house payments if you are able to make arrangements. This may be a signed agreement to rent out a portion of your property that specifies the amount of rent that will be paid to you, or a pay stub from a family member to demonstrate increased income. If a relative agrees to lend you money, get a written agreement and consult an attorney about a secured loan (a promissory note and deed of trust). If you have to file for bankruptcy, this may help to protect your relative’s investment.

Any delinquency can lead to foreclosure or trustee’s sale being initiated by the lender.

If you purchased a house and signed a Deed of Trust giving a lender a security interest in it, the lender can begin the process of selling the house at a Trustee’s Sale I f you are in default. Default is when you do not perform what you promised to when the loan was given–the legal process can begin. This usually occurs when you become behind on your payments. It could also happen if you don’t pay your property insurance or real estate taxes, or if you don’t keep the property in good repair.

The process of trustee’s sale or foreclosure in Arizona is governed by Arizona state statutes.

Typically, the lender (the person or corporation that provided you the money to buy your property or a company that subsequently takes over the mortgage) will issue a demand for payment. This is usually stipulated in the contract. If the lender delivers this notice by certified mail, you should be aware that even if you do not pick up the certified letter, the process of forcing the sale of your house might continue.

The process of a foreclosure or trustee’s sale

What a lender must do to start a trustee’s sale – our office procedures


Beware: laws change and this web site may not have the current information. Do not rely on the Internet for accurate legal advice.

If you are unable to make your mortgage payments, your lender may initiate foreclosure proceedings by filing a Notice of Trustee’s Sale & Substitution of Trustee with the County Recorder’s office. This Notice establishes the date, time, and location of the Trustee’s Sale of your residence. By certified mail, you should get a copy of this Notice of Trustee’s Sale as well as a Statement of Breach. This Notice MUST include at least 90 days between the day the notice is recorded and the sale date.

IMPORTANT NOTE: Even if you do not accept the certified mail, the sale will go on.

  • This is called reinstating the loan (bringing it current).  The law is very specific as to the property owner’s rights and what the trustee must do with regards to accepting payment to cure all the arrears. These rights also apply to all junior lienholders (other lenders secured by your home).

    There are some very specific steps to follow in order for the lender/servicer to provide the property owner with the exact amount necessary to cure the arrears.

    • First you must contact the lender/servicer/trustee (best to contact all three) in writing and request a reinstatement through and including a specific date when you are sure you will have the money to pay the arrears.
    • The trustee is required by law to respond to your request for a reinstatement (cure of the arrears or payoff – Arizona Revised Statues: 33-803.01). Include a request for them to identify where you should make the payment and what form (e.g. cashier’s check).

    • If you do not receive a response within 72 hours then send another request.
    • Keep sending requests every 3 days until you receive a response with the information that you requested.
    • Keep copies of each demand in case you need them later to prove how difficult the lender/servicer/trustee has been to deal with.
    • If the lender/servicer/trustee does not respond after four or five demands then immediately hire an attorney. You can also file a complaint with the Arizona Department of Financial Institutions. In addition, go to the Arizona Corporation Commission’s web site and find the shareholders for each of these entities. Send each of the shareholders a certified demand for information, along with the copy of the complaint that you have filed. If the Trustee is a lawyer than file a complaint with the State Bar of Arizona. Of course, you can always file a complaint in court to ask a judge to make the lender perform as request.
    • Beware – none of these actions will terminate the trustee’s sale.  Once you receive the accounting compare it with your records. If you have not been keeping copies of payments, then you have no proof that you made any missing payments. Most likely it will be the lender’s word over yours.
    • Do not chance losing your home because you are stubborn and will not pay one or more mortgage payments you are sure you paid, but do not have proof. Immediately make arrangements to pay the full amount. Remember that the longer you wait to pay the more the late charges and other penalties you incur.
    • Again, keep copies of all correspondence, keep diary of the person you talked to, including the date and time of the discussion. Confirm all verbal communications by sending a letter, fax or e-mail detailing your understanding of the agreement.
    • Lastly, if the trustee or the lender is not responding to your requests for payoff or reinstatements, or it doing something “shifty”, then you have a right to file for a temporary restraining order in court.

Arizona Revised Statutes Section 33-813Default in performance of contract secured; reinstatement; cancellation of recorded notice of sale.

How do I get a temporary restraining order to prevent the property from being sold? Note that these procedures may change as the court or technology evolves.


If you apply for a restraining order, the court will require proof that the law has been broken.) After a “ex parte appearance,” a “Temporary Restraining Order” is usually obtained (an appearance in court by one party without the other being present). A Temporary Restraining Order is a court order that directs someone to refrain from doing something (in this example, completing the trustee’s sale).

A Temporary Restraining Order takes effect only after the Trustee has been served with notice and an opportunity to be heard by the Court.

The court will then hold a “Order to Show Cause” hearing so that both parties can explain to the court why a more “permanent” restraining order should or should not be issued. This is an excellent moment to give evidence that the Trustee has not provided you with the amount you need to stop the sale, but you must also show evidence that you have the funds to pay all of the overdue mortgage payments, plus fees and costs.

Temporary Restraining Orders are normally issued the same day they are requested and are in effect until the Order to Show Cause hearing.

The hearing on the Order to Show Cause is usually scheduled a few days later. A hearing can be held after the Temporary Restraining Order and Order to Show Cause have been served on the person who is to be restrained to decide if there is sufficient cause for the court to issue a more “permanent” restraining order. A court can compel the restrained person to refrain from performing specific activities (such as finalizing the trustee’s sale until they provide you with the needed information) based on the facts given at this hearing.

In very rare situations a Restraining Order might be in effect for a long time, even several years, after a hearing.

On the protected person’s request, the Restraining Order After Hearing can be renewed for consecutive periods of time, and its length may become permanent.

Make sure to check current statutes for procedures and processes

A.R.S. Section 33-809(E) requires that a no sooner than thirty days after recordation of the notice of trustee’s sale, the trustee shall upon receipt of a written request, provide, if actually known to the trustee, the following information relating to the trustee’s sale and the trust property:1. The unpaid principal balance of the note or other obligation which is secured by the deed of trust. 2. The name and address of record of the owner of the trust property as of the date of recordation of the notice of trustee’s sale. 3. A list of the liens and encumbrances upon the trust property as of the date of recordation of the notice of trustee’s sale, excluding those matters set forth in section 33-438, subsection A.

The trustee may charge a fee not to exceed one-twentieth of the amount the trustee may charge pursuant to Section 33-813. The trustee is not liable for any error or omission in providing the information requested.  A.R.S. Section 33-809(E) provides that beginning at 9:00 a.m. and continuing until 5:00 p.m. on the last business day preceding the day of sale and beginning at 9:00 a.m. and continuing until the time of sale on the day of the sale, the trustee shall provide to any person who requests of the actual bid or credit bid the beneficiary is entitled to make at the sale.

If the trustee is unable to provide the credit bid during the prescribed time period, the trustee shall postpone the sale until the trustee is able to comply with this subsection. Again, the trustee has no liability for the accuracy or completeness of the information.

ARS Section 33-810 (A). On the date and at the time and place designated in the notice of sale, the trustee shall offer to sell the trust property at public auction for cash to the highest bidder. The attorney or agent for the trustee may conduct the sale and act at such sale as the auctioneer for the trustee. Any person, including the trustee or beneficiary, may bid at the sale. Only the beneficiary may make a credit bid in lieu of cash at sale. The trustee shall require every bidder except the beneficiary to provide a one thousand dollar deposit in cash or in any other form that is satisfactory to the trustee as a condition of entering a bid. The trustee shall not refuse cash as a form of payment of the bidder’s deposit.

Every bid shall be deemed an irrevocable offer until the sale is completed, except that a subsequent bid by the same bidder for a higher amount shall cancel that bidder’s lower bid. The trustee shall return deposits to all but the bidder or bidders whose bid or bids result in the highest bid price.

ARS Section 33-811(A). The highest bidder at the sale, other than the beneficiary to the extent of the credit bid, shall pay the price bid by no later than 5:00 p.m. of the following day, other than a Saturday or legal holiday.  ARS Section 33-810 (A) The sale shall be completed on payment by the purchaser of the price bid in a form satisfactory to the trustee.

The subsequent execution, delivery and recordation of the trustee’s deed as prescribed by section 33-811 are ministerial acts. If the trustee’s deed is recorded in the county in which the trust property is located within fifteen business days after the date of the sale, the trustee’s sale is deemed perfected at the appointed date and time of the trustee’s sale.  ARS Section 33-811(B).

The price bid shall be paid at the office of the trustee or the trustee’s agent, or any other reasonable place designated by the trustee. The trustee shall execute and deliver the trustee’s deed to the purchaser within seven business days after receipt of payment by the trustee or the trustee’s agent made in a form that is satisfactory to the trustee.

ARS Section 33-811(A) If the highest bidder fails to pay the amount bid for the property the trustee, in his or her sole discretion, shall either continue the sale to reopen bidding or immediately offer the trust property to the second highest bidder who may purchase the trust property at that bidder’s bid price.

The deposit of the highest bidder who fails to pay the amount bid shall be forfeited and shall be treated as additional sale proceeds. If the second highest bidder does not pay that bidder’s bid price by 5:00 p.m. of the next working day then the trustee shall either continue the sale to reopen bidding or offer the trust property to each of the prior bidders on successive working days until a bid price is paid.

A highest bidder who fails to pay the amount bid by that bidder is liable to any person who suffers loss or expenses as a result, including attorney fees, plus that bidder may be black-balled from any future trustee sales.

ARS Section 33-810 (B) The person conducting the sale may postpone or continue the sale from time to time or change the place of the sale to any other location authorized by the law by giving notice of the new date, time and place by public declaration at the time and place last appointed for the sale.

Any postponement is limited to no more than ninety calendar days at any one time.

You will not receive any notice of the postponed, continued or relocated sale.  It is the homeowner’s or junior lender’s responsibility to confirm the status of any postponement or cancellation.

ARS Section 33-811(E) provides that the trustee’s deed shall operate to convey to the purchaser the title, interest and claim of the trustee, the trustor and the beneficiary.

ARS Section 33-811(B) provides that the trustee’s deed shall raise the presumption of compliance with the requirements of the deed of trust and this chapter relating to the exercise of the power of sale and the sale of the trust property.

ARS Section 33-811(B) provides that a Trustee shall execute and deliver the trustee’s deed to the purchaser within seven business days after receipt of payment by the trustee in a form that is satisfactory to the trustee.

ARS Section 33-810 (E) provides that the if the trustee’s deed is recorded in the county in which the trust property is located within fifteen business days after the date of the sale, the trustee’s sale is deemed perfected at the appointed date and time of the trustee’s sale.

If you do not make up your payments or file for Chapter 13 bankruptcy, the lender will proceed with the Trustee’s Sale as scheduled. You may still have some options after the house is sold. Recognize that the new owner has the right to refuse your cooperation.

Make Arrangements to Move

The home belongs to the lender (if the lender “bought it back”) or the individual or company who purchased it at the Trustee’s Sale after the sale. The new owner has the right to have you vacate the property so that they can use it.

Occasionally, the new owner will agree to rent to you for a limited period of time.

Typically, you will be required to sign a signed rental agreement and pay rent. A “lease back with buy” deal should be avoided at all costs. The person that is leasing the property to you may simply be interested in receiving a large down payment and then terminating the lease agreement due to a minor default. You’re still out of the house, and they keep your money.

To avoid eviction, make a written agreement to vacate by a specific date.

The new owner may agree to give you a little more time to arrange to move in order to avoid the new owner going to court to evict you.  There is no legal requirement that the owner do this.

Expect the new owner to give you a Notice to Vacate and then file a Forcible Entry and Detainer action in court to have the court order you to move out.

This increases costs for the new owner, who can ask that you be ordered to pay them, so it costs you more if you don’t move on your own.

Forcible Entry and Detainer Overview

If you receive a notice about a court hearing, we recommend that you go to court at the time set for the court hearing even if you already have moved out.

If possible, be sure that all of your belongings are moved out before the court hearing or at the very latest before the date that the judge orders that the “writ will issue” (usually 5 days after the hearing). If you have not moved by the date that the writ issues, the new owner can have the constable or sheriff come to remove you on that day and is not required to give you any more time to move your belongings. This can make it difficult and cost you more.

Section 33-812(o) of the Arizona Revised Statutes states that a claimant may enter into an agreement with a third party to pay for or assist in the recovery of excess proceeds on deposit with the county treasurer. The agreement must be in writing, signed by the claimant, and acknowledged by a notary public or other person authorized to accept an acknowledgment in accordance with section 33-511. Any agreement made before the expiration of the thirty-day period following the trustee’s sale, but not including the date of the sale, is null and invalid.

Any charge or payment stipulated in a contract must be reasonable.

If the price or payment agreed upon exceeds two thousand five hundred dollars, excluding attorney fees and the costs of bringing the claim and giving the statutorily required notices, the charge or payment is assumed to be unreasonable, and the commitment to pay the fee or payment is unenforceable. Any individual seeking a fee or payment in excess of $2500 may apply to the court for further compensation, but it is the person’s responsibility to show that the additional compensation is appropriate in the circumstances. This subsection does not preclude a claimant from questioning the reasonableness of any fee or payment stipulated in a contract for the collection of excess proceeds or assistance in the recovery of excess proceeds.

NOTE: Be careful if you are contacted anyone involved in this type of business (including lawyers – or those who say they are a lawyer). They may be legitimate, but do your homework first. Never sign anything without first understanding what you are signing and the full effect of what you are signing. Never sign documents the same day that you are offered the “deal”. Take a few days to mull over the value of the services offered. Keep copies of every document that you sign, including business cards, brochures and flyers. There may be a much better deal out there, if you only look.

Many law firms, including this one, assist people in applying for excess sale proceeds. Our firm’s normal fee for obtaining these proceeds (including most court appearances and answering objections) depends on the complexity of the case. We do not charge our clients referral fees, nor do we pay any “finder’s fees” or “third party provider fees” to any company. No one in this firm holds interest in another other company that “assists” people in obtaining the excess proceeds. We would never advise a client, nor request a client to sign an irrevocable assignment of any proceeds. This firm is in the business to practice law, not to invest in real property.

-Diane L. Drain

Additional articles on Excess Sale Proceeds.

  1. Excess Sale Proceeds After Trustee’s Sale


Beware: laws change and this web site may not have the current information. Do not rely on the Internet for accurate legal advice.

ARS Section 33-810 (C). A sale shall not be complete a bankruptcy has been filed prior to the time of the trustee’s sale. If a sale is held it shall be deemed to be ineffective and is automatically postponed to a date, time and place announced by the trustee at the sale.


Beware: laws change and this web site may not have the current information. Do not rely on the Internet for accurate legal advice.

It’s especially crucial to try to work with the VA to avoid being responsible for the entire loan amount, even if your house eventually sells for less than you owe, and to determine whether you’ll be qualified for another VA loan in the future. Failure to pay a VA loan can result in the loss of your VA benefits, pay checks, checking accounts, and tax refunds. Bankruptcy is a possible answer to this issue.


A 2003 Law Provides Relief For Military Personnel. (unknown author) Borrowers — whether for mortgage loans, credit card debt or auto loans — who have been called up for military duty have been given greater financial and legal protections. On December 19, 2003, President Bush signed into law the “Service members Civil Relief Act” (SCRA).  Under this new law, “Service members” are defined as persons on active duty in the military, but also includes National Guard members who have been called up for active duty for more than 30 days.

Military dad and sonIf yourself or a family member have been called into active duty, all of your lenders should be immediately notified, and you must send them a copy of the military orders. Once the lender has been put on notice, it must reduce all interest payments down to six percent, and most importantly, must forgive all pre-service debts which exceeded this six percent cap. It should be noted that this protection applies only to debts incurred before the borrower went into active military service; debts incurred while on active duty are not similarly protected.Since the start of World War II, there was a law known as the Soldiers and Sailors Civil Relief Act of 1940.

That law also required lenders to automatically reduce the interest rate obligations of persons in active military service down to six percent. However, it was not clear that all interest above the six percent cap was to be forgiven.  SCRA clarifies this, with clear language in Section 207 of the Act that “interest at a rate in excess of six percent per year … is forgiven.”

The old Soldiers and Sailors Relief Act was a very powerful tool designed to assist servicemen and women whose income is less while on active duty than what it was in civilian life. However, that law was enacted over 60 years ago, and times have changed. Additionally, various Court cases have given different — and often conflicting — interpretations of that old law. Accordingly, Congress decided to update and clarify the rights of our service men and women.

The stated purpose of SCRA is: To provide for, strengthen, and expedite the national defense through protection extended by this Act to service members of the United States to enable such persons to devote their entire energy to the defense needs of the Nation; and to provide for the temporary suspension of judicial and administrative proceedings and transactions that may adversely affect the civil rights of service members during their military service.

It should be noted that the reduction in the interest rate must be accompanied by a reduction of the monthly payment. The lender cannot require you to continue to pay your same payment each month, and credit more toward principal. In addition to mortgage and other debt payments, the new law provides other important relief to the men and women in our Armed Services.

If a lease was signed prior to the tenant’s enlistment in the military, the tenant has the right to terminate it at any time throughout the term. Military personnel who are ordered to a permanent change of station or to deploy with a military unit for a period of not less than 90 days have the right to terminate leases, even if they were signed while on active service.

The landlord must be notified thirty days before the lease expires, and rent must be paid until the lease expires. The inclusion of a military termination clause in the lease is no longer required.

As their civilian counterparts — must continue to pay rent if the lease is not terminated. However, the Act does provide some protection from eviction. Only a court can order the eviction of the tenant. (Note: this is the law in many states anyway. A landlord generally cannot exercise self-help by evicting a tenant without first obtaining Court approval.) If the Judge determines that the military service has materially affected the ability to pay, the Court must stay (stop) the eviction for a period of three months, unless the Judge finds that “justice and equity require a longer or shorter period of time.”

There are three basic requirements imposed by the law: the landlord is attempting to evict a person who is in military service; The leased premises are used for residential housing by the spouse, children or other dependents of the military person, and the agreed upon rent does not exceed a specific amount per month. Since this is a complex issue, tenants who are on active military service must consult with the legal assistance attorney assigned to their unit. (Note: the dollar amounts will change over time.

For the duration of the insured’s active duty plus one year, the private life insurance policy cannot lapse, cancel, or be forfeited due to nonpayment of payments.

Any attachments or garnishments against the debtor may be stayed or vacated on the request of the military person — or the Court on its own — throughout the time of active duty plus up to 90 days after that duty finishes.

When a lawsuit is filed and the Court determines that the Defendant is on active military duty, the Court is unable to enter a judgment until the Court appoints an attorney to represent the service member’s interests. ‘If an attorney designated… to represent a service member cannot identify the service member, actions by the attorney in the matter shall not relinquish any defense of the service member or otherwise bind the service member,’ according to the law. In other words, lenders beware: if your borrower is on current military duty, your best choice is to wait until his or her service is completed before launching a lawsuit.

As a result, the law extends — and expands — the safeguards that Congress first guaranteed to World War II servicemen and women. Our service men should be able to focus on their military missions without having to worry about their debts.