When Lt. Col. Ted Smith (name changed to protect identity) was deployed for two tours to Iraq and Afghanistan, he left his wife and three children behind, as well as a house that had a pending foreclosure.

As he fought overseas, letters arrived that threatened to begin the foreclosure process that would leave his family homeless.

With the help of a lawyer and a special federal law called the Servicemembers Civil Relief Act, he was able to freeze the foreclosure while he concentrated on his military duties. His family was allowed to continue living in their home.

'He would've lost his house,' said his attorney, Charles Gallagher III of the real estate, insurance and business law firm Gallagher and Associates in Florida. 'We brought that motion before the court saying, 'We ask for a stay under the Relief Act because he's been deployed and he's got no choice here.''

The court granted the stay and froze the case while he was gone, and when the serviceman returned home, he had the option of applying for more time to deal with his debt.

'The court can extend that stay or have that stay be longer than the deployment period,' Gallagher said.

How The Law Protects Military Men, Women

The law offers military members protection to postpone, suspend, terminate and reduce their debts or delay court appearances so they can focus their full attention on military or professional responsibilities without fearing foreclosures or other problems related to debt.

They can also:

  • Reduce many of their interest rates to 6% on things such as credit cards and mortgages

  • Ward off automobile repossessions

  • Get security deposits returned

  • Have protections against rental agreements, evictions, civil judicial proceedings, automobile leases, life insurance, health insurance and income tax payments.

The law also allows soldiers to get security deposits back, break leases, delay court appearances and even dismiss cell phone contracts.

The act requires a certain amount of red tape if lenders want to chase after military men and women. For example, if service members obtained mortgages before they entered into military service, then the Relief Act requires that their lenders get court orders before they can foreclose on homes while they're on duty -- and for nine months afterward. Since the law will most likely favor an active soldier, court orders are difficult to acquire. If they are acquired, soldiers can explain their financial hardship.

'In court proceedings, if you can show you're unable to meet the obligation because of service, the court can hold the proceedings and may even adjust the amount you owe to the lender,' said California real estate and business litigation attorney Elena Rivkin Franz of Mlnarik Law Group.

Similarly, if you're active in the service and your monthly rent is less than $2,975 per month, your landlord can't evict you or your dependents from a home without a court order. If an eviction action is filed against you or one of your dependents, the court must temporarily freeze the proceedings or adjust the amount of your financial obligation if you can show that you have been unable to meet your financial obligations under the lease because of your military service.

Who's Protected?

The Relief Act protects all members of the Army, Navy, Air Force, Marine Corps and Coast Guard who are on active duty status or who are absent from duty as a result of being wounded or being granted leave. It also applies to some National Guard members and active-service commissioned officers of the Public Health Service or the National Oceanic and Atmospheric Administration.

Sometimes the Relief Act also offers certain protections to dependents, including spouses, children and individuals who have been given financial support for the past 180 days. Civilians and contractors aren't protected, however, nor are people who bought houses while they were active.

At least a third of service members face a decrease in pay once they're called to duty, and the Relief Act eases that burden.

Is It Helping?

The Relief Act has teeth, and hefty lawsuits are being filed against companies who violate it. Under the terms of one settlement (which must be approved by a federal court in Virginia), a towing company must pay $75,000 in damages and repair the credit of 26 service members whose cars were towed while they were on duty.

Experts predict banks will become more cautious when foreclosing on the homes of service members. In 2011, the U.S. Department of Justice reached a settlement of more than $2 million with Bank of America for wrongfully foreclosing on service members without court orders. And according to the Justice Department's website, in February 2012, J.P. Morgan Chase, Wells Fargo, Citigroup and Ally Financial 'agreed to conduct a full review, overseen by the Department of Justice’s Civil Rights Division, to determine whether any service members were foreclosed on in violation of the Servicemembers Civil Relief Act since Jan.1, 2006.'

If violations are found, the Justice Department said in a press release, 'Wells Fargo, Citigroup and Ally will be required to provide any service member who was a victim of a wrongful foreclosure a minimum payment of $116,785 plus the service member’s lost equity and interest.' Also, 'J.P. Morgan Chase will provide any service member who was a victim of a wrongful foreclosure either his or her home free and clear of any debt or the cash equivalent of the full value of the home at the time of sale,' the press release said. Other compensation may be required as well.

Legal help is generally free when soldiers find their nearest legal office at legalassistance.law.af.mil. Help and money may be available to service members if they've already been foreclosed on or if they've been paying interest rates higher than 6%.

For more information about the Relief Act, see servicemembers.gov.