How should you handle your creditors if you experience an unexpected drop in income, a layoff or loss of that part time job that was keeping you afloat?
In March, 2020, the economy in Georgia and throughout the United States took a huge hit with the spread of the COVID-19 corona virus. Over the course of a week, the narrative from Washington changed from “we have this under control” to “do not leave your home.” Professional sports leagues have shut down, restaurants have discontinued in location seating, airlines have parked airplanes and just about every type of business was and is being affected.
No doubt you are feeling the pinch. Relief from the government – if it comes at all – will be short term and incomplete.
Meanwhile, creditors may hold off pursuing collection for a short time, but you should assume that they will not be so quick to forgive late payments and defaults once the immediate crisis passes.
While the unprecedented speed of the corona virus damage to our economy is, hopefully, a rare event, unexpected job losses or reductions in income are not so rare. No matter what the circumstances you need a plan to deal with your creditors. How do you handle the phone calls? Who do you pay first? When is it time to give up collateral? When might bankruptcy be an option?
The key to surviving this, or any unexpected disruption in income, will be knowledge and communication. First, you need to find out if your creditors have any programs to help you weather emergencies. In the case of financial hardship due to the corona virus, you should check the web sites of creditors to see if they are offering deferments or other relief. Even if there is nothing on the web site, you can call to ask.
It is always better to ask about a deferment or other relief while you are still current. If the creditor representative indicates that you will be expected to make payments as usual, you can make the decision about what to do. In the case of a “buy here, pay here” vehicle lender, for example, you may choose to keep that debt current to avoid a repossession.
I would also advise you that credit card debts should be at the bottom of your list. Credit card creditors cannot use “self help” to take you property and the only course of action they have other than collection calls would be to sue you. If the courts are shut down, lawsuits are going to be delayed and judges are likely to be unsympathetic to a credit card company who sues an individual during the Covid 19 crisis.
You may be surprised to learn that we usually do not recommend the bankruptcy option while your financial situation is unsettled. Bankruptcy works best when you can see with a high degree of certainty what you will be facing financially in the next six to twelve months. The bankruptcy law also uses a 6 month look back to evaluate your level of “disposable income” and your reality 6 months ago may be very different than it is currently.
At Ginsberg Law Offices, we have been working with and counseling honest, hardworking men and women in the Atlanta area about financial problems for over 25 years. We are standing by to answer your questions and help restore your peace of mind.