In order to combat the COVID-19 pandemic, all but three states have ordered all non-essential businesses to close. Most of the country’s people are in lockdown in their homes, and millions have therefore lost their jobs. Since March 15, nearly 10 million people have filed first-time jobless claims. All of this means that for millions of Americans, managing their debt has suddenly become unmanageable. If you find yourself in this situation, don’t despair. You still have options. In this blogpost, we will look at ways of dealing with different kinds of debt, and explore bankruptcy options.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act that President Trump signed on March 27, 2020 suspends payments on federal student loans for six months, until September 30, 2020. During that time, interest will not accrue, either. This suspension is automatic, so you don’t need to fill out any forms or formally request it. The CARES Act also stops collection actions, wage garnishments, and treasury offsets; and it prohibits negative credit reporting due to your student loans. The payment pause and interest waiver includes Federal Parent PLUS loans in addition to Federal Stafford Loans, Federal Grad PLUS loans and Federal Consolidation Loans. It is important to remember that this only applies to loans owned by the federal government. It does not apply to private student loans, student loans acquired from state lenders, or, if you have consolidated your student loans through a third-party lender.
Mortgage, Rent Payments, and Foreclosures
The CARES Act provides for forbearance of mortgage payments. It also provides for a 60-day foreclosure moratorium for federally backed mortgage loans like Fannie Mae and Freddie Mac, as well as FHA-insured, VA-insured or guaranteed loans, and FDA guaranteed loans. This covers almost all household mortgages; many banks and mortgage companies have suspended all foreclosure proceedings as well. In the state of Wisconsin, Governor Tony Evers issued an emergency order on March 27, 2020 banning all evictions and foreclosures for 60 days, thereby including any mortgages not covered by the CARES Act and extending protection to renters. If you are a renter, you are still responsible for your monthly rental, but if you cannot pay it, your landlord cannot begin eviction proceedings. The best course of action is to talk to your landlord to see if you can work out some kind of agreement. Wisconsin has also instituted a moratorium on utility shutoffs.
Credit Cards and Other Loans
Many credit card issuers are offering assistance to consumers during the COVID-19 outbreak in various forms. Available help includes credit line increases, collection forbearance, and skipped payments. You should check the website of your credit card companies to see what help you could possibly receive. Banks, credit unions, and other financial institutions are offering loan extensions and deferred payment options, among other things, if you’ll have trouble making payments on a personal loan or small business loan. A number of auto loan companies are offering payment delays as well.
Another option to consider right now is bankruptcy. The CARES Act modified the Bankruptcy Code making it easier for individuals to file for Chapter 7 bankruptcy, as well as making changes to Chapter 13 bankruptcy. If you are a sole proprietor or self-employed person, the Small Business Reorganization Act that went into effect in February 2020 could also be a source of relief for you. It extended the amount of secured and unsecured debt you could have in order to qualify for the streamlined bankruptcy offered
in Chapter 11. If you have ever considered filing bankruptcy, now may be the time to follow through on it. Contact one of the experts at Burr Law to discuss your situation.
The COVID-19 pandemic is changing all of our lives in significant ways. The ways in which you have always managed your debt may no longer work for you. There are options available to you, though. If you are concerned about your debt situation, you should contact the professionals at Burr Law. We’re here to help your finances survive this coronavirus.