Debt Management During the Coronavirus Outbreak


The coronavirus pandemic has had a negative financial impact on the majority of Americans. In fact, TransUnion, one of the three main credit reporting agencies, conducted a study in April 2020 that found 61% of consumers have been affected. U.S. consumers have accumulated a lot of debt during the crisis.

If you’re struggling to keep up with credit card payments, or are in danger of defaulting on a mortgage, auto, personal, student, or business loan, there may be options available to you. Here are some tips and steps that are worth considering.

Contact Your Lenders

Reaching out to your lender, whether it is a credit card or loan issuer, can be beneficial. The company may offer hardship programs. These “accommodations” include a temporary delay in payments, adjusting amounts due, or reducing interest rates in exchange for paying back debt over a set period of time. Enrolling in a program can avoid negative statements on your credit report if you are late on a payment.

It’s best to know how much you can afford to pay, given your current situation, before contacting your lenders. Be sure to inquire specifically about hardship programs, potential financial consequences, and if enrolling in one affects your credit limit. Also, ask what happens if you are still experiencing financial trouble when the hardship program ends.

Dealing with Debt Collectors

If you have debt in collections, try to negotiate a repayment plan you can afford. Debt can be disputed if you don’t think it belongs to you—by calling or writing to the debt collector. Collections actions must stop once you send a written request, until the company can prove you owe the debt. The Fair Debt Collection Practices Act prohibits debt collectors from harassing debtors with, for example, threats or frequent phone calls, or garnishing Social Security or VA benefits.

Contact a Credit Counselor

Seeking financial advice from a credit counseling agency can help you find ways to manage your debts. A counselor can provide advice on adjusting your expenses and is knowledgeable about emergency hardship programs. They can also steer you towards debt management options, such as consolidation and fixed repayment plans. Fees are often charged for such programs, so be sure these are stated upfront, along with any potential impacts on your creditworthiness.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act

The CARES Act included forbearance to homeowners struggling to pay federally backed mortgage loans due to the COVID-19 crisis. Foreclosures and evictions were frozen as well, initially until later this past March, but extended until at least December 31 as the pandemic continues. Some counties and municipalities also declared a moratorium on property tax foreclosures and tax sales. In addition, the CARES Act suspended federal student loan payments until September 30, 2020. And many state governments, and utility companies themselves, have issued moratoriums suspending shutoffs and waiving late fees for customers who don’t pay utility, phone, and internet service bills; the length of time varies by agency and company.

OakTree Law Can Help

Our Los Angeles bankruptcy lawyers can provide assistance whether you are facing bankruptcy, foreclosure, or a range of other financial issues. If you are stuck with high amounts of debt, we can find solutions tailored to your unique financial situation. We’re proud to serve our clients in Southern California during the coronavirus pandemic. If you need financial assistance, feel free to contact us at 562-219-2979 to set up a consultation.