Advice for Individuals Facing Financial Difficulties Caused by COVID-19

Advice for Individuals Facing Financial Difficulties Caused by COVID-19

We wish everyone the absolute best and hope that you and your family stay healthy during these times.  That is our first priority and has to be yours.  Financial problems can cause massive stress which is hard enough in the best of times, much less these uncertain times.  You must have shelter and food and healthcare and utilities and insurance and sanity (my kids are at home too and sanity seems in short supply) – and only after those needs are met should you worry about debt that is owed.  We are a phone call away if you want to talk through things and will be here to help if and when you need it.

1. REVIEW YOUR BANK AND CREDIT CARD STATEMENTS

Many of us have set up automatic payment deductions from bank accounts or credit cards. Review those statements this week and cancel any unnecessary charges – as my Wife would testify I am notorious for setting up auto payments and then not using the service (sometimes for years I am embarrassed to admit so don’t ask her about my XM Radio bill!)

If your income has been dramatically reduced then cancel ALL automatic payments. Make sure the lender/utility company/service provider has a good e-mail address for you and make sure they send you a statement.

By controlling the timing of your payments you can better insulate yourself from a cash crunch. Think about it, a lender or service provider who is owed money wants it today and not tomorrow – they may hit your bank account for a payment on the 1st of a month even though it is not due without late penalty until the 15th of the month. If they send you a bill instead, then you can initiate payment so it gets there by the 15th.

Speak with one of our experienced bankruptcy attorneys about your individual financial situation.

2. YOU PAID FOR YOUR NEIGHBORS BANKRUPTCY.

Bankruptcy is a difficult and very personal decision but not a judgmental decision. Other than your creditors, almost no one needs to know. Your neighbor or fried or co-worker may have needed some help in the past and you probably didn’t even know and likely would not have judged them for it. If you carry balances on credit cards and have dutifully been making payments for years without getting anywhere, congratulations as you paid for your neighbor’s bankruptcy.

You file taxes right? The law lets you reduce your taxable income and pay less tax by taking a tax deduction for certain things right? Well, credit card issuers take a tax deduction when they don’t get paid their money back.

When you borrow money from a Bank on their credit card they charge you interest of what – 12% or higher? When you loan that Bank your money (which you do every day if you have a savings account) they pay you interest of what – 0.1%!?!

What do you think the Bank does with that interest spread? Of course they pay their business operations and people and support other business and all of that is vital and important. But they also have economists smarter than you and I who are factoring in a certain percentage of accounts that will not be repaid!

Don’t get me wrong, I believe that when you borrow money you pay it back. But it breaks my heart to meet with people who are struggling to keep food on the table or cannot afford to put their kids in sports or dance because they are servicing their debt.

At some point, you may just need to hit the reset button and put all that in your rear view mirror.

Give us a call and schedule a zero obligation free case evaluation to discuss your individual situation and get on the right track.

From an actual Michael D. O’Brien Law client

3. DON’T TOUCH RETIREMENT ACCOUNTS.

Please, please, please – do NOT borrow or withdraw from your retirement accounts. If you think the situation is so desperate that this may be your last option, please call me first! Behind on credit cards – don’t touch retirement! Behind on car payments – don’t touch retirement! Behind on house payments – don’t touch retirement! Call me first. Ultimately, I may agree that this is your last option but don’t make it your first option! (503) 852-9047

Unless you have more than $1 million in retirement accounts (in which case you are not reading this) your creditors CANNOT TOUCH the retirement assets. I have met with literally hundreds of people over the years who thought they were doing the right thing by cashing in retirement to pay bills.

Not only does this put your future at risk, it may create a tax bill for you next year! Does anyone really want to swap a credit card debt for a tax liability?!

Speak with one of our experienced bankruptcy attorneys about your individual financial situation:

Bend Location: (541) 981-5010

4. COMMUNICATE.

This is an unprecedented situation and we are all in this together but no one can help unless you ask for help. So communicate! Do not ignore the situation! Call your creditors and advise them of your situation, ask for a payment forbearance or a reduction in the interest rate being charged. Keep detailed notes of these requests including what you requested and what they promised. If you carry a balance on credit cards and have struggled to pay it down, this should be the FIRST call you make! Advise the lender of your situation (obviously be honest!) and ask that they stop interest accrual and forbear payments.

I have a client who carried a $20k credit card balance with a Big Bank lender and she was facing a divorce and a drop in income. She called Big Bank lender and they agreed to turn her credit card into a five year term loan with 0% interest. That saved her $1000s of dollars and kept her out of bankruptcy Court. But the trick is she did this BEFORE she fell behind and while her credit score was still good. I am not aware of any outright forgiveness of debt or contractual obligations (although the situation changes daily) so you need to assume that this debt will ultimately be paid.

Have questions about your financial situation? We can help!

5. DO NOT TRY TO BORROW YOUR WAY OUT OF DEBT.

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Without a doubt there will be an influx of solicitations from short term lenders, payday lenders, and “debt consolidation” companies – we are already hearing reports from clients that those sharks are circling. These types of loan may provide a short term influx of cash and relief but the high interest rates they charge will put your financial future at higher risk.

Don’t forget that interest rates are designed to compensate a lender for the use of their money and the risk that the money will not be repaid. So, before applying for a new debt consolidation or short term loan, please contact your existing lenders first and ask them for relief and assistance.

If your lender doesn’t have a program to provide relief, then it is unlikely that a new lender will have a solution at a reasonable interest rate – especially in this uncertain environment.

Please contact your existing lenders first and ask them for relief and assistance.

If I can’t borrow, how do I get out of debt? We can help answer this question!

Bend Location: (541) 981-5010

6. DO NOT IGNORE THE MAIL.

If you receive legal paperwork or a Court notice, open the mail and read it. For many people, they instinctively know what is in that letter and don’t want to (or lack the ability to) deal with it. But that only makes the problem worse!

The fear of the unknown is often worse than the known reality. Call me up at (503) 852-9047 and I will explain the reality. It may not be as bad as you think and you may have options. The sooner you deal with the problem the more options exist.

If you ignore a creditor demand letter then at some point they will sue you. If you ignore a lawsuit then they will win a judgment against you. If you ignore a judgment then they may empty your bank accounts or garnish your wages. Once that happens it is extremely difficult to get out of the way of a debt avalanche and many people find themselves completely buried.

Need assistance sorting everything out and getting on the right track?

Most people we consult with do NOT hire us to be their lawyer and we are proud of that.

These people aren’t running off to hire other lawyers – they are getting answers to their pressing questions and we are giving them advice on how to solve the problem on their own. Some people really need our services and then we work with them to determine the best timing for their case. We are not the cheapest bankruptcy attorneys in town and certainly aren’t the most expensive. We strive to educate our clients on all their options before they act and then work to solve their unique financial issue without surprises.