The financial impact of the coronavirus pandemic and resulting economic disruptions are staggering. Millions of Americans are facing unemployment, reduced hours, or—if they’re self-employed—a decline in revenue. As many businesses and financial institutions have been encouraged to work with consumers during this difficult time, you should not hesitate to contact your lenders, your landlord, or your utility providers if you or your household are facing hardship due to COVID-19.
Below, we’ve answered several common questions about managing finances during this challenging time.
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If you are unable to meet your minimum monthly payments for credit cards, you should contact your lender before you miss any payments in order to avoid or reduce penalties and work out a plan. Credit card companies are well aware of the difficulties that borrowers are facing and many of them have implemented programs to accommodate the flood of calls from customers.
What are my options when it comes to credit card payments?
Available options vary by lender. Common terms that credit card companies are offering include:
- Waivers on late fees
- Monthly payment deferrals
- The option to change your monthly due date
Contact each of your creditors to determine whether they are accepting inquiries through an online format or a dedicated telephone line. Remember, they would rather work out a mutually beneficial plan than risk not collecting anything if you default or go into bankruptcy.
The additional benefit of contacting your creditor is that they will be able to tag your account with a special code to indicate that your financial difficulties (resulting in a missed or late payment) are due to the COVID-19 pandemic.
What happens if I don’t pay my credit card bill?
If you haven’t contacted the creditor prior to missing a payment or making a partial payment, then you’ll likely be charged a late fee and interest. It also could be reported to the credit bureaus as delinquent and hurt your credit score.
This is why it’s so crucial to be proactive and notify your creditors right away. If you have already entered into an agreement with your creditor—whether a deferment or a forbearance—then any decreased or suspended payments will not be considered delinquent and will not affect your credit.
That said, the three major credit bureaus are currently offering free weekly credit reports to U.S. consumers through April 20, 2021, so you can and should continue to monitor your credit reports, as needed.
If you have questions about debt management, including the possibility of filing for bankruptcy, ask a lawyer for free in the Coronavirus Legal Center.
How your student loans are affected depends upon whether they are held by a federal or private lender. In either case, if you know that you will be unable to make your payments, the best approach is to contact your lender and inquire about what your options are.
You don’t have to make loan payments when a loan is in deferment or forbearance, and the lender will not report late payments to the credit bureaus. Data reported to credit bureaus by your lender, as required by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, will not cause your credit scores to go down.
What are my options for federal student loans?
As a result of the CARES Act, federal student loans should automatically be subject to the following terms (effective from March 13 through September 30, 2020):
- Administrative forbearance, temporarily suspending monthly payments
- 0% interest rate
- Interest will not accrue
- Direct deposits will be automatically suspended
- Any payments made between March 13 and September 30, 2020 are refundable (contact your loan servicer to arrange a refund)
Payments will immediately resume once the forbearance ends. If you wish to continue your federal student loan payments, you can request to be taken out of the administrative forbearance at any time.
The administrative forbearance will not affect public interest loan repayment options. See your federal loan servicer’s website for additional information.
What happens if I don’t pay my federal student loans?
For federal loans, all of the terms listed above apply regardless of account status. The federal loans covered by the CARES Act include:
- Defaulted and current Direct Loans
- Defaulted and current FFEL Program Loans
- Federal Perkins Loans
During this period, there will be no garnishment of wages for missed federal loan payments.
What are my options for private student loans?
Private loans are not covered by the CARES Act.
If you are current on your private student loans, then you can contact your loan servicer directly in order to determine what your options are. While some companies are making decisions on a case-by-case basis, others have created a streamlined process for borrowers.
Options vary by lender, but some common terms include:
- 90-day forbearance
- Economic hardship forbearance
- Unemployment deferment
- Lower monthly payments
What happens if I don’t pay my private student loans?
This depends on your lender and whether you have taken steps to contact them and work out a plan. Following the lead of the federal loan program, some private lenders are providing:
- Disaster forbearance for varying lengths
- Administrative forbearance
- Suspension of collections
Be advised that forbearance status will be shared with credit reporting agencies.
There may be additional protections, depending on the state in which you reside. New York and California, for example, have reportedly been working on agreements with various private student loan lenders. If you have questions about the CARES Act or state and local laws in relation to student loan debt, ask a lawyer.
What are my options as a renter?
If you’re worried about not being able to pay your rent, you should have a frank discussion with your landlord. Many landlords are worried about losing rental income, so they may be more open to a creative solution. Below are some of the options that might be worth considering:
- Deferred rent. Your landlord could agree to accept deferred rent payments over a longer period of time.
- Bartering. You could agree to perform services for the landlord, such as landscape maintenance or simple repairs in exchange for discounted rent.
- Rent suspension. If you are a long-term tenant and have a good relationship with your landlord, they may wish to let you skip a rent payment altogether.
Ultimately, it will be up to your landlord to decide what option they are most comfortable with. Regardless of the arrangement, be sure that the details are outlined in a Rent Payment Plan.
If I don’t pay rent, can I get evicted?
States across the country have implemented moratoriums on evictions and foreclosures. In many states, if COVID-19 has impacted your ability to cover rent, then your landlord may be forbidden from evicting you. This doesn’t forgive your rent obligation, but it should allow you to stay in your current home. If you have questions about eviction or you’ve had other challenges with your landlord due to COVID-19, ask a lawyer.
I can’t pay my mortgage, what are my options?
As a result of the CARES Act, individuals with federally-backed mortgage loans (which include FHA, VA, USDA, Fannie Mae, and Freddie Mac) can request a forbearance by contacting their mortgage servicer.
Borrowers who are experiencing financial hardship as a result of COVID-19 can defer their mortgage payments for up to 180 days and may apply for an extension of up to 180 additional days. Although interest will continue to accrue, there will be no penalties or fees associated with the forbearance.
As with all other financial considerations, it is always preferable to contact your lender before missing a payment.
What if I don’t have a federally-backed mortgage?
In addition to the federal protections, many states have issued a suspension of non-emergency civil cases, which typically includes evictions and foreclosures. Most of the court closures are tied to the ending of shelter-in-place orders, thus foreclosures may begin once courts return to normal.
Some states have also secured broader protections. In California, for example, JPMorgan Chase, Wells Fargo, Citigroup, U.S. Bank, and ~200 state-chartered banks, credit unions, and other servicers have agreed to allow a 90-day forbearance period on mortgage payments, when the borrower has experienced job loss or financial hardship as a result of COVID-19.
Each bank will have its own process for the borrower to request a forbearance and provide supporting documentation, so be sure to contact your lender directly.
Ask a lawyer
If you are unsure about how to access the various programs under the CARES Act or need other legal advice relating to the coronavirus pandemic, we’re here to help. You can access free legal advice and key documents for protecting your finances and legal rights in our Coronavirus Legal Center. You can also reach the Rocket Lawyer CARES support team toll-free at (877) 885-0088, Monday through Friday, from 6 am – 6 pm PST.