How do I pay my Bills if I’m out of Work due to a Stay-At-Home Order?
The efforts to contain the Coronavirus pandemic have pushed hundreds of thousands of people out of work. Without consistent income, paying your bills can be difficult if not impossible. Below you’ll find some strategies for working with your creditors and deciding which bills are the most important if you can’t pay them all.
File for unemployment
It’s not necessary to have been fired for you to seek unemployment benefits in Colorado. You may be eligible if your hours have been cut, or if you’re only temporarily out of work and you’ll be returning to the same employer (known as job attached unemployment). Be aware that the state is currently being flooded with unemployment applications, so save your application often.
Reach out to your creditors
Many creditors such as mortgage servicers, auto lenders, and credit card companies are offering assistance to individuals financially affected by the pandemic. So far the offers have been vague, the most likely concessions will be for your lenders on your home and cars to allow you to move a monthly payment to the end of the loan and for credit cards to temporarily reduce your interest rate.
Triage your finances
Depending on how long your employment is affected, you may come to a point where there simply isn’t enough money to go around. The decisions regarding which creditors get paid and which do not can have long term consequences and will require a strategy.
If you are renting, paying your landlord should be among your highest priorities. Unlike mortgage lenders, most landlords are simply not in a financial position to weather the loss of rental income due to the high expenses associated with the rental property itself. You are likely to be evicted fairly quickly if you stop paying your rent (although there are temporary holds on evictions in some counties). That said, a frank conversation with your landlord might buy you some time.
Car payments should be another high priority item. You’ll have more flexibility with a nationwide loan servicers like Toyota, Ally, or Santander than you will with a buy-here-pay-here lender, but their sympathy is limited. They will feel obligated to protect their interest in the collateral (your car) and can move quickly to repossess after only a few missed payments.
There are more tools for dealing with your mortgage than any other type of loan. While the servicer is not inclined to allow you to skip multiple payments without taking action, they do have formalized loan modification systems in place leftover from the last financial crisis. In a loan mod, your servicer can change the terms of your loan to your advantage. They will commonly reduce your interest rate which will result in a lower monthly payment, or wrap missed payments back into the loan which will bring you current. You can work directly with the mortgage lender on a loan modification, or reach out to the Colorado Foreclosure Hotline for free assistance.
While credit cards and other unsecured loans are almost always the most aggressive when it comes to collecting debts, they should generally be your lowest priority. If neglected long enough they will sue you and attempt to garnish your wages and take money from your bank account, but if you’re not working and don’t have any money in the bank account these are empty threats. If you own a home the consequences of a judgment against you are more significant as judgment creditors can place liens against your home. Either way, you should speak with an experienced debt relief attorney about strategies for dealing with unsecured creditors.
You should call your student loan servicers about forbearance, which will temporarily stop or reduce your payments. This is fairly easy to accomplish with federal student loans, and because the federal government is working to waive interest on these loans, it won’t wind up costing you much in the long run. Unfortunately, you are at the mercy of the lender if you have private student loans as they tend to be much more difficult to work with. Regardless of whether your loans are public or private, you should do what you can to avoid defaulting outright because this will result in significant fees being added to your balance.
Despite your best efforts, you may dig yourself into a financial hole during this unsettled period. Fortunately, there are a number of tools available to help you get back on your feet once you do get back to work including debt settlement and repayment plans; Chapter 7 bankruptcy, a court process designed to wipe out most types of debt; and Chapter 13 bankruptcy, a court structured repayment plan which can stop a foreclosure or repossession and give you as long as five years to get caught up on payments.
Offers for debt settlement and debt repayment plans often sound too-good-to-be-true. According to the Consumer Financial Protection Bureau "a U.S. government agency that makes sure banks, lenders, and other financial companies…
Attorney Clark Dray has been practicing law for more than 10 years and is licensed to practice before the state courts of Colorado and the Federal District Court of Colorado. He graduated from The Ohio State University Moritz College of Law in 2009. Clark is a member of The National Association of Consumer Bankruptcy Attorneys, Colorado Consumer Bankruptcy Association, and the Trust & Estate