Dealing with debt issues during the Coronavirus/ COVID-19 pandemic?

With a lot of uncertainty or the craziness that’s out there right now. And you know, with all of this uncertainty that causes a lot of anxiety, not only on, for our physical health. How’s that going to turn out, but also the financial type issues and repercussions of all this. I watch the news, I see schools closing and I see people not being able to go to work. Obviously, it’s going to have a pretty immediate impact on a lot of families in our country. You know Dave Ramsey often cites a statistic that a study that was done by CareerBuilder. A number of years ago, I think in 2018, they did the study that showed that 78% of Americans live paycheck to paycheck. And, you know, with that being the case. You know 80% of us out there are going to run some serious financial trouble if we’re even missing one paycheck. And so, to kind of help to ease some of that anxiety.

I want to talk about how to deal with some of the debt issues that you may have. While we’re dealing with this whole coronavirus issue. You know that there’s gonna be reduced hours that people are working, there’s going to be layoffs. So I wanted to share some things that you should focus on, some of the things you should not focus on. When it comes to paying your debt and bills. That we should deal with food, utilities, shelter, and transportation to deal with those things. If you can’t pay all of your bills. All of a sudden you don’t have a paycheck or your paycheck has been reduced. You need to focus on those types of things first, you have to have food, shelter, transportation to get a job, and you need to get kids to school. 

You got to build up a home, you gotta pay the rent, the mortgage. Those are the things you need to focus on. I want to break ‘em down a little bit further and give you some of my thoughts on things to focus on. In general, I’m on the agreement but obviously to focus on utilities. I’ve noticed some utility companies are already coming out and offering some type of relief for people that are struggling.

SRP announced that there’ll be no power shutoffs for non-payment, and they’re going to waive all late payments that may be incurred during this time period. They didn’t say exactly when that cut-off is, but it’s good to know that if you’re in a situation. Where you can’t pay your power bill or if you can’t pay the full thing, or least if you have SRP they’re not going to shut your power off.

But my recommendation is to focus on the utilities, focus on the rent. Focused on secured debts like mortgages and car loans, and the reason why is not only do you need a place to live, you need your power, you need water. But things like if you’re not paying your car payment. If you’re not paying your house payment, those are secured debts. They have assets attached to them, there’s collateral there. And so if you make those payments, they can repossess your car, they can start the foreclosure on your home. 

Now I’m comparing those and contrasting those with unsecured debts, like credit cards, medical bills, most personal loans, those are unsecured debts. And if you don’t pay those debts, they could ding your credit, but there’s not really anything right now that they can take from you. They are not tied to any car or any specific asset they could actually come in. And take that asset from you if you’ll fall behind on those payments. Now there are going to if you fall behind to credit cards. You’re going to start getting the collection calls, and the phone calls and all the aggressive behavior that they start to show when you miss a payment. The reason why they’ve become so aggressive, and the reason why they’re so loud and there so annoying is because they don’t have a lot else they can do until they file a lawsuit against you, obtain a judgment against you, and only then can they start to garnish your wages or garnish your bank account. 

So, unless you’ve done all those steps, you’re not at any risk of running into a wage garnishment, or bank levy, and they’ve got to have those judgments. And I can tell you, it takes quite a while for most creditors to get to that point. Most credit card companies once you go delinquent on that, they will do internal collections up to 6 months before they’ll charge off the account. Once they charge off the account, most credit card companies nowadays will package it up to a portfolio, and sell it at a discount to a debt buyer who may sue you or two down the road. I mean, it could literally be that far away. Focus on the secured debts if your income is limited, particularly if it’s going to be just a temporary amount of time.

Focused on secured debts, car loans, home loans, and try to keep them current. Whether it’s unsecured debts, like credit cards and medical bills, or whether it’s secured debts like car loans and home loans. My recommendation is to communicate with a creditor a lot. Over-communicate with them right now, particularly with all the craziness going on, most of them have some type of program or some type of relief that they’re offering people to be able to try to get through this difficult time. You know that this isn’t going to last forever, we hope not. But there may be a few months here where things are going to be pretty tough.

And so communicating with them, that “Hey I got laid off”, or “They cut my hours in half and I’m not going to have the money I normally have to be able to pay those bills”. It’s imperative that you reach out to ‘em. If you do that, with a car loan will they repossess very quickly and even in a normal situation? They don’t repossess until you’re to 2 or 4 months behind on the payments. And with a home loan, it’s usually 3 to 6 months behind on the payments. And even then, the foreclosure process takes forever. It takes, you know, maybe 3 to 6 months from now before anything like that would actually happen. So, communicate with your creditors, reach out to unsecured creditors as well, let ‘em know what’s going on. This is particularly true if you have a student loan debt. If they’re federal student loans, there’s going to be programs available. 

You may have heard some of what President Trump has announced that he’s waving interest during this time. I’ve haven’t seen anything that has all the details on that.  I know that if you go to the Naviance website, they have some information there. Basically they’re saying they don’t know what the details are for that particular program yet, but they’ll release it when it comes out. I’ve read a couple of things that were not going to be reducing your payment, but the payments that you make right now are going to all be going to the principal. One thing I did think there if you have some extra cash, tax refund, something like that you can spare it may be a good time to put a bunch of money on to your student’s loans. Cause 100% of it is going to go to the principal. So, that’s kind of really just in a nutshell what I wanted to share about. You know, to try to help reduce some of the anxiety that’s out there. Focus on the things that are most important, focus on keeping a roof over your head, keeping your car, keeping the lights on, deal with the credit cards and that later, but communicate to them, what you’re doing while you’re going through this struggle and I think you might be surprised at how they’re going to be willing to help you out