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Coping with Debt During the Covid-19 Crisis.
You are not alone. Many people are experiencing anxiety over the potential strain on their personal finances due to the coronavirus outbreak. If you find yourself struggling to pay your bills or loans on time, the “Coronavirus Aid, Relief and Economic Security Act” (the “CARES Act”), which President Trump signed into law on March 27, 2020, may provide you with some additional relief. There are also other steps you can take to help manage your debt during the pandemic.
1. Know your rights under the CARES Act, which impacts federally-held student loans and government-backed mortgages.
Your federally-held student loans are automatically suspended until September 30, 2020.
The CARES Act has suspended payments and interest on federally-held student loans until September 30, 2020. Nonpayment during this six-month period cannot be used to negatively impact a person's credit score or qualification for loan forgiveness. The law states that “each month for which a loan payment was suspended” will be treated as if “the borrower of the loan had made a payment.” It also suspends any wage garnishment or tax refund reduction for people who have defaulted on their federal student loans.
The CARES Act does not, however, apply to student loans under the Federal Family Education Loan Program that are owned by commercial lenders or Perkins Loan Program that are held by educational institutions. The law also does not apply to private student loans owned by banks, credit unions, schools, or other entities. These entities may be offering some accommodations for their borrowers. If you are in a situation where you need assistance, it is best to make contact and ask for relief. Immediately document that communication including the date and time of the contact, who you communicated with, what was said by both you and the lender. Ask for a letter or email documenting any agreement that is made.
Your government-backed mortgage allows you to request and obtain forbearance from payments for up to one year.
The CARES Act directs mortgage servicers of government-backed mortgages to offer up to 12 months of forbearance, in up to 180-day increments, to borrowers affected by Covid-19 pandemic. This includes loans from the Federal Housing Administration, Department of Veterans Affairs, Department of Agriculture, Home Equity Conversion Mortgages (reverse mortgages), Native American and Hawaiian home lands loans, HECM/reverse mortgage loans and Fannie Mae and Freddie Mac loans. Servicers must also offer up to 90 days of forbearance relief for government-backed multifamily mortgage loans, provided the landlord-borrower extends renter protections to tenants.
A forbearance is not automatic. You must call your servicer and attest to a financial hardship caused by the coronavirus outbreak. However, according to the law, the servicer must grant forbearance without requiring any documentation to support your plea of hardship.
Additionally, services are prohibited from initiating or moving foreclosures forward for 60 days – starting from March 18, 2020—except for vacant and abandoned properties.
2. Contact your credit card companies and other lenders.
If you’re unable to pay your bills on time, contact your credit card companies and other lenders to let them know about your situation due to the COVID-19 outbreak. These financial institutions may be able to offer a variety of options to help you. This could include waiving certain fees like ATM, overpayments, and late fees, as well as allowing you to delay, adjust, or skip some payments.
When contacting lenders, explain the details of your situation. Be prepared to discuss your income, expenses and assets. Suggest changing the date of your payment, requesting a realistic payment plan, or asking for a payment extension. Seek clarification on any arrangement and document the conversation. Under the CARE Act, if a lender agrees to modify or suspend a payment, it must report you as paying in compliance with the loan during the time period it agreed to modification (if you comply with the agreement).
3. If you're being contacted by a debt collector, understand your rights.
The Fair Debt Collection Practices Act (the “FDCPA”) prohibits a debt collector from using unfair practices in trying to collect a debt. The law provides that debt collectors cannot:
Use abusive or bad language
Call you an unreasonable number of times
Call over and over until you pick up
Call you before 8 a.m. or after 9 p.m.
Call you at work if you have asked them to stop
Threaten to harm you, your property, your reputation, or someone else
Threaten to tell someone about your debt
Talk to others about your debt without your permission
Say that they will sue you when they have no intention
Lie about who they are or pretend to be a lawyer or the government
Suggest that you have committed a crime
Say that you will be arrested, or that you will go to jail if you don’t pay
Lie and say that the papers they sent you are legal papers from the court
Suggest that they can take your benefits money
Ask you to pay more than you owe
Share your debt information in other ways
If you need help dealing with a debt collector, you can contact us. You may be entitled to damages under the FDCPA.
4. Check your credit reports, then check again.
Check your credit reports routinely to make sure the statements are accurate and that any delinquencies have not been improperly reported. The CARES Act specifically forbids negative credit reporting for all COVID-19-related consumer credit accommodations, except accounts charged-off previously. If you discover inaccurate, incomplete or obsolete information on your credit report, the Fair Credit Reporting Act (the “FCRA”) gives you the right to dispute it with the credit reporting agency. We explain how here. The law further provides that the consumer reporting agency must correct or delete inaccurate, incomplete, or unverifiable information. If you need assistance disputing information on your credit report, contact us. You may be entitled to damages under the FCRA.
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