The following is a list of suggestions for individuals who are now facing income loss and reductions due to the Coronavirus:
1. Look at your budget. When there is an income interruption it is inevitable that your spending will have to adjust. The priorities should always be meeting the day to day living expenses and health needs of you and your family. Mortgage and rent payments should be made before paying other debts.
2. Reach out to your creditors. If you can’t afford to make payments on your mortgage, rent, utilities or credit cards, reach out to the creditors to explain your situation and request whatever relief they will offer. You are not alone in this situation. We expect that many lenders and utility companies will offer programs to address the effects of the coronavirus situation. Keep a record of your communications. If a lender or utility company offers you relief, make sure to request it in writing.
3. Monitor state and federal assistance programs. Congress is in the process of implementing stimulus programs. States are also likely to offer assistance. These programs will be rolled out as this crisis continues. Continue to monitor all programs and make sure that you seek any assistance that you qualify for.
4. Do not take on expensive debt. It may be inevitable that you will have to rely on credit cards to help get you through this situation. Try to avoid high interest cards. Stay away from payday and title loans that carry absurd interest rates.
5. Avoid dipping into retirement savings to pay debt. When there is an interruption in the household income, there is a tendency to dip into retirement funds to pay outstanding debts. Retirement funds are beyond the reach of most creditors. Don’t withdraw or borrow money from retirement accounts to pay credit cards and other unsecured debts. Those debts can either be paid later, negotiated or discharged in bankruptcy.
6. Know that there is relief out there to address your debts. While no one knows how long things will be disrupted due to the Coronavirus, like the great recession of 2008, this too shall pass. If you do fall behind on your mortgage, rent or other debt, and your lender refuses to work out a reasonable solution, relief is available under the Bankruptcy Code. The bankruptcy laws are intended to give the honest debtor a fresh start. It provides a safety net for individuals and business that are affected by this crisis.