Take Advantage of COVID-19 Financial Offerings to Avoid Bankruptcy
Rock Law Firm
The United States during the COVID-19 pandemic is a time of economic uncertainty and financial challenges for everyone. The nation is faced with forced business closures, lay-offs, and dissolution of entire job-providing corporations. Since the Arizona “stay at home order” went into effect on March 30 following the March 19th social distancing order that mandated the closure of businesses where large groups congregate, it has forced thousands of Phoenix-area residents to file for unemployment and focus on ways to save money. While this is a tragedy for the entire nation, those who were already teetering on the border of filing for bankruptcy may find reprieve in the generosity of many debt collectors as a result of the current situation. In today’s post, we will discuss just a few ways you can use the COVID-19 financial impact to avoid bankruptcy.
We should begin by stating that if you are also out of work due to COVID-19, these tips may help you stave off bankruptcy, but may not rescue you. If you are fortunate enough to be bringing in income during this time, these tips can help you recover and avoid bankruptcy completely. At Rock Law Firm, we are committed to helping every Arizona resident find the financial freedom they deserve. If you are facing bankruptcy, give us a call for your free consultation.
File taxes and use return wisely.
Despite the deadline for federal tax filing being extended to July 15th, if you have not already done so, it may be beneficial to file your taxes as soon as possible. Not only can your return help you catch up on past-due bills, but any amount owed will not be collected upon until after the COVID crisis has ended. Use this to your advantage to complete the task and have one less pending bill. If you get a tax return, this year’s returns are expedited to help Americans keep their homes — use it. Your tax return can help you get caught up on bills, even if your bills have been paused. Filing your taxes will also allow the most accurate information to be used to generate your COVID-19 stimulus check.
Use your stimulus money to catch up.
According to the US government, at some point this spring US taxpayers should be receiving a stimulus check to help revive the economy in the wake of business closure and unemployment. However, instead of using this money buying material goods or entertainment while you are quarantined, use the money to pay down past due balances and catch up on near-due bills — even if your bill collector is offering postponement. Using your stimulus money to pay your bills will help reduce the amount you have to come up with once the world returns to normal and will help prevent further financial turmoil if you end up being furloughed or laid-off as well.
Pay attention to the small print.
In this trying time, many bill collectors are offering reduced payment amounts, delayed payments, and payment forgiveness. While these may seem like blessed gifts, be wary and pay attention to the details. Some postponements will require full back pay once normal life resumes, putting you in a worse position than you are now. Some offer to simply tack your payment on to the end of your contract, which can greatly benefit you. For example, if your auto lender allows you to skip a payment, ask if that means the next month will be a double payment or will they simply take this month’s due amount and add it at the end of your loan. If the amount due next month will simply be doubled, don’t take the deal. If the lender or bill collector will extend your contract and keep your monthly amount the same, take them up on their offer. Just keep in mind that if it sounds too good to be true, it probably is. Ask questions and make sure you have all the details before taking the deal.
Pay student loans if you can.
Student loan lenders have automatically placed everyone in a forbearance status and extended payment due dates out to September to give their debt holders an opportunity to recover from COVID-19 without worrying about their student loans. These lenders are offering 0% interest during this time as well, which makes it incredibly tempting to set aside this payment completely. However, this gives those who are behind the opportunity to back pay payments to get out from under late fees and insurmountable interest payments that don’t even allow you to touch the principal. Even if you are unable to make your full payment, it is a wise idea to take advantage of this time and make interest payments to help reduce the amount you will owe the next time you have a payment due. If you are currently caught up on student loan payments and are able to apply any money to the principal balance — even $20 — it will help drop your interest and payments in the long run.
Take bill gifts.
Many vehicle insurance companies, cell phone carriers, and utility companies are giving "gifts" of percentages off your bill, which you can use to your benefit in saving money on your bills this month. Any allotted money that you have that is not required can be put toward a past-due bill or one that does not have forgiveness. For instance, if your car insurance provider notifies you of a 20% reduction in this month’s bill for all policyholders, use the money you would have spent on that bill — even if it’s only $20 — and apply it to your utility bill instead of ordering a pizza. Use their generosity to get caught up.
Make a shelter plan.
Current Arizona executive order, signed by Governor Ducey, enforces the delay of eviction actions for renters and homeowners facing foreclosure. This order applies to those who are quarantining at home and have taken a significant pay cut. Due to the economic hardship, the order protects residents from losing their homes for 120 days and prevents landlords and banks from taking action to remove tenants from properties during the COVID crisis. Arizona established Rental Eviction Prevention Assistance to provide renters with financial help during this time. At the same time, federal actions prevent foreclosure action to be taken prior to May 18, 2020. However, this does not mean that you are authorized to simply stop paying your rent and mortgage and “squat” in your home until you are forced out. This delayed action policy gives you the opportunity to catch up financially if you are able, or to at least make a plan. Attempt to negotiate payment plans or use this time to find a practical place to live that will help prevent bankruptcy and/or homelessness.
Stay in and spend wisely.
Normal daily life can get quite expensive in little amounts. Purchasing gas, vehicle maintenance, morning coffee, a quick lunch, dinner with friends, drinks at the bar, a movie rental — it all adds up. While you are sheltered at home, either working from home or collecting unemployment, now is the perfect time to use the opportunity to stay in and save money. Use online grocery order and pick-up to order only what you need and prevent browsing store shelves to save money and prevent becoming the next COVID-19 casualty. Use the things you have at home for entertainment and take note of the areas you aren’t spending money. By hunkering down and spending wisely, this time spent at home can actually help you save hundreds of dollars that can be applied to past-due bills and allow you to come out even on the other end of the quarantine.
The economic crisis caused by COVID-19, while still largely unmeasurable, is sure to be devastating for the nation. However, if you play your cards wisely, it may be a time that you can take advantage of to prevent bankruptcy — or at least postpone it and allow the impact to be lessened. Here at Rock Law Firm in Tempe, we are on your side and want to help you through your financial uncertainties and help provide clarity. Contact us for your free consultation today.