How To Manage Overwhelming Debt Payments During Covid-19
The economy was already struggling with the beginning of 2020, and a lot of businesses were trying to push through with little resources. However, COVID-19 came and rapidly spread around the globe, wreaking havoc and forcing governments to enforce total or partial lockdown to slow down the spread. A worldwide government lockdown caused a major strain on everyone. Many people either got laid off from their jobs or had their income slashed in half. As a result, many people found themselves unable to fulfill their financial obligations, such as personal loans, auto loans, and mortgages.
All these sudden debts are hard to manage, but in this article, we are going to guide you on how to manage payment for your debts.
Make a List
First of all, you need to have a better understanding of your financial situation, and how much money you are in debt for. Listing all your debts and the debtor will allow you to see the big picture, which will help tremendously when you are making decisions. For example, deciding on which creditor to contact so you can work a different payment plan that fits your current situation. Additionally, a list will make it easy for you to evaluate what your priority payments are. For instance, a priority payment is paying your rent on time, so you can make sure you have a shelter and you are not risking eviction.
Seek Bank’s or Government’s Assistance
Everyone is feeling the financial peril that this pandemic put on the economy. Therefore, some banks and financial institutions are accepting applications from people who are seeking loan extensions or deferrals on their mortgage. On top of that, banks already started deferring auto loan payments until next year and waiving some transaction fees on expedited checks. So make sure to check with your bank and inform them of your situation so they can assist.
Besides, you can check the government’s response packages. For instance, employment insurance programs, or welfare assistance programs, as they can support you financially. The government is well aware of how economically disastrous COVID 19 is, so they made these programs increase the financial benefits given to people. But your application might take time until it gets through due to the high volume of the applications being made during this crisis.
File for Bankruptcy
If your debts are overwhelming, bankruptcy could be one of your options. When you file for bankruptcy your debts are eliminated. Bankruptcy is filed when either a business or an individual are unable to settle their debts. Once a petition is filed, the court then settles the whole debt or a part of it. For instance, many people were hospitalized because of COVID-19, some incurring around $70,000 in debt from medical bills, and they are unable to pay these bills. However, if they file for bankruptcy, it relieves them from paying these medical bills. There are different types of bankruptcy filings, for instance, some would lead the court to appoint a trustee who becomes in charge of selling some of your property to settle your debts. However, there are types of filings that allow you to keep your property. According to Attorney Tristan Brown, 99% of the people who file for the right bankruptcy chapter, do not lose any property in the process. We recommend consulting with a lawyer who is familiar with bankruptcy cases so they can guide you during the filing process.
New Budget Plan
Your spending plan has to adapt to your new situation. You will have to adopt a new lifestyle change that matches your new financial circumstances.
First of all, housing is a priority that you need to keep up with its payments, so make sure that you can pay your mortgage or rent on time. Or if you will not be able to pay for them, make sure the property owner is aware of your new financial situation, to avoid eviction. Secondly, make sure you are keeping up with your utility bills so you avoid energy shut off or not qualifying for energy assistance programs. Additionally, evaluate what counts as luxuries that you can live without, and get rid of it. For instance, you could reduce the number of times you order take out, and try to cook your favorite take out meals at home.
Additionally, you can seek assistance from a credit counseling agency. The agencies are not for profit and they’ll offer you initial budgeting sessions without charging you anything. Credit counselors are going to help you manage your expenses so you can pay for your debts much faster. Moreover, credit counseling could help you enroll in a consolidated debt program where they settle all your debts, and then devise a plan for you to pay your debts monthly with a lower interest rate. You will be charged a fee if you use this program. It’s worth mentioning that you have to pay close attention to what credit company you deal with, some of them may ask you to withhold on paying your bills for several months so they can use it as leverage to settle for less.
Use Your Stimulus Check Wisely
Stimulus checks are relief money paid to taxpayers to provide them with spending power. These checks are to help stimulate the economy when consumers start spending. You qualify for a stimulus check when you file your tax returns, even if you have no taxes, it's recommended that you file for it so you are not overlooked when stimulus checks are given. Make sure you use this money to pay off some of your debt, but don’t rush to pay off your credit card as you can ask for a break, and instead keep the money for other priority debts.
COVID 19 was devastating for the economy on a global scale, and a lot of people have felt its sting. As a result, a large number of people are in debt or going through some major financial hardships. Consequently, many institutions and the government are creating solutions to provide financial assistance to those who need it. All you have to do is assess your situation, and then follow the aforementioned options to ease up your debt burden.