The main concern of the coronavirus pandemic is, of course, our health. The virus spreads rapidly and can be fatal for vulnerable populations. Local and state governments have issued executive orders compelling Americans to stay home as much as possible, and the federal government has released social distancing guidelines and a nationwide shutdown of nonessential businesses.
As we fight to keep our communities healthy, many of us are struggling with another type of fallout: financial hardship. Business owners have lost revenue and employees have been laid off. With unemployment at an all-time high, countless families are resorting to credit cards and loans simply to make ends meet.
At Lam Law Firm, we are remaining open during the pandemic to continue providing essential services to our clients. Part of that service involves disseminating critical information and publishing insights about our society’s current struggles. To help our clients cope with the economic consequences of COVID-19, we have put together the following compilation of financial resources and strategies. As always, please don’t hesitate to reach out with specific concerns, and look out for Part 2 in the coming weeks.
Protecting Your Credit Score
Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act to help Americans survive the financial impact of the pandemic. In addition to federal payments and low-interest loans, the relief provided by the CARES Act includes limited protection against negative credit reporting. Many people are relieved to learn about this benefit because they are worried that a layoff or unexpected medical expense could worsen their debt situation.
Essentially, your creditors are not permitted to report delinquent payments if you have sought relief from payments due to the pandemic. This means you must communicate with your creditors if you want to avoid negative marks on your credit report.
Additionally, you can only benefit from this protection if you were current on your loan before you sought relief, so you will need to reach out to your creditors before you miss a payment.
Overall, we recommend the following strategies regarding your credit report:
- Communicate with creditors before missing payments
- Do not assume that your financial obligations have been suspended due to COVID-19
- Check your report frequently to protect yourself against inaccuracies and scams (which may be more common amidst the chaos of the national emergency)
Avoiding Debt Collection
During the pandemic, your creditors are still permitted to collect your debt. Even your stimulus check may be vulnerable to debt collection if the IRS deposits it into an account your creditor has levied or plans to levy.
You may, however, be temporarily protected from foreclosure or eviction. In South Carolina, the Governor ordered a moratorium that pauses evictions and foreclosures until May 1st. While this does not forgive missed payments, it does give you more time to find a solution without worrying about losing your home.
For a more long-term solution to debt and drastic collection attempts, we may recommend bankruptcy. All forms of bankruptcy initiate the automatic stay, which freezes your creditors’ collection actions. To learn more about bankruptcy and whether it may be right for you, get in touch with our team.
If you are considering bankruptcy, now may be a good time to file. Bankruptcy courts are still open, and many have adopted flexible protocol that allows filers to submit electronically reproduced signatures and appear at hearings via phone or video chat.
Furthermore, the CARES Act makes several temporary adjusts to bankruptcy, including:
- Allowing current Chapter 13 filers to extend their repayment plans if they experience financial hardship due to COVID-19
- Exempting federal aid (e.g. stimulus checks, grants, etc.) from the Chapter 7 means test and Chapter 13 disposable income calculations
These adjustments will last until March 27, 2021.
The Most Powerful Strategy of All: Reaching Out for Assistance
To protect yourself from the worst consequences of debt, we urge you to get in touch with your lenders as soon as possible. Creditors are much more likely to work with borrowers who are proactive and communicative. If you wait until you are behind on payments to reach out, they will be less likely to provide any form of relief.
Additionally, we highly recommend communicating with creditors in writing. If you opt for phone calls instead, you may:
- Experience exceedingly long wait times due to the COVID-19 crisis
- Suffer from incomplete or biased notes taken by your lender during the phone call
- Have less evidence during a future lawsuit
During the pandemic, many banks and lenders are providing an assortment of relief options for their customers. This relief may involve forbearance, temporary interest rate reductions, and extended terms. You will never know what they’re offering until you ask.
You can also reach out, of course, to Lam Law Firm. We are personally committed to helping individuals and businesses survive the financial impact of the pandemic, and you can trust us to handle your case with the utmost care. We are fully prepared to answer all your questions and help you implement a personalized legal and financial strategy as soon as possible.