So many in California are wondering how they will deal with mounting debt during the Covid-19 pandemic. Most people carry some credit card debt on a regular basis, but with the loss of income for so many during the Coronavirus – increasing debt is a real concern. Not having a steady income can mean not being able to pay down student loan debt, small business debt, medical debt or credit card debt for some time. Not having an income also means people want to hold onto the cash that they do have on hand rather than pay down debt. Below are some facts about dealing with mounting debt of all kinds in California during the Coronavirus. If you have any more specific questions regarding debt during the pandemic, please reach out to us.
A Breakdown of Dealing with Mounting Debt in California During the Covid-19 Pandemic
- Credit Card Debt, Medical Debt, and pre-Coronavirus Small Business loans – Many lenders are willing to work with you during these challenging times. Try calling your lender, whether it’s a credit card company or a bank and ask if you can hold off on paying this month’s bill without accruing interest. You can also ask your lender to lower your interest rate. Considering banks are also very nervous during the pandemic, they might not budge – but it doesn’t hurt to ask. Many credit card companies are posting on their websites information about assistance programs including skipping payments and forbearances. A forbearance agreement means the lender allows the borrower to suspend or reduce payments for a set amount of time. If you feel you are drowning in your credit card debt or other kinds of debt – and making payments for the foreseeable future is unrealistic, then a debt settlement might be in your best interest. A debt settlement is a negotiation made between you and the lender that you will pay back a reduced amount of the debt you owe rather than the full amount.
- New Small Business Loans – On March 27, 2020 President Trump signed into Law the “Coronavirus Aid, Relief and Economic Security Act” or the “CARES Act”. One of the key provisions of this Act is that it funds $349.4 billion to guarantee forgivable loans to small businesses affected by the Coronavirus. According to Investopedia, “Through the end of 2020, the act extends Small Business Administration (SBA) loans known as 7(a) loansto any business, private nonprofit, or public nonprofit organization with under 500 employees. Borrowers can receive loans equal to 2.5 times their monthly payroll, mortgage, rent, and debt payment expense, up to $10 million. Borrowers can use these loans for a broad range of business expenses, including payroll, paid sick leave, mortgage, rent, utilities, and payments on existing debts.”
- Private Student Loan Debt – Again, I recommend making a call to your private student loan lender and letting them know about how your life has been impacted by the pandemic. Ask your lender for leniency and see if you can work with them on a plan for when you can realistically begin making payments again. Your lender might be open to a forbearance agreement. There may also be assistance programs that you can take advantage of during these uncertain times. Be sure to ask if you can refinance your loan and/or get your interest rates lowered. For more general information about private student loan debt, click here.
- Federal Student Loan Debt – The CARES Act suspends payments and accrued interest on Federal student loans for 6 months until September 30, 2020. You do not need to apply for suspending your payments, as it will apply to all federal student loans held by the U.S. Department of Education. In addition, there will be a 6-month suspension on wage garnishments and negative credit reporting if you cannot pay your federal student loan because of the Coronavirus impact.
If reaching out to your lenders proves to be fruitless and you are concerned about the repercussions of not paying your mounting debt, then call us at 858-217-5051. We offer a free consultation to go over your particular situation, your debt relief options and to put a plan in place to deal with your debt. For more information on the CARES Act, please visit the US Congress’ website here.
Daniel R. Gamez is a debt attorney serving clients nationwide and focuses exclusively in debt relief. He is licensed to practice in all state and federal courts in California and Texas. Mr. Gamez owns and operates the Gamez Law Firm in San Diego and Los Angeles, and helps people with debt problems all over the country. For more information, please contact Daniel Gamez at 858-217-5051, daniel@gamezl