How to Manage Debt During a Crisis

The pandemic is here. You have debt. What should you do now? We do not live in an ideal world. The reality is that unsecured debt is at its highest level ever. Advising people to pay down unsecured debts is as productive as spitting into the wind. Mortgage debts are considered good debt by most, but they are still debts and like credit card debt, student loans and car loans, mortgage loans have all been rising faster than a bag of Cheetos disappears under a stay at home order! In February, the Federal Reserve Bank of New York announced the overall US household debt broke a new record at $14.15 trillion. So yes, we certainly have debt. Since the pandemic really begin to hit home, greater than 17 million people have filed for unemployment. So how do we manage debt during a crisis?

First, the good news. Check with your state unemployment offices. The federal government is not ignoring the economic realities of everyday Americans. They have begun issuing stimulus checks to help boost bank accounts. They have broadened the qualifications for unemployment to include the self-employed gig economy workers through Pandemic Unemployed Assistance. They have also promised an extra $600 per week in addition to the state’s unemployment compensation. Once the systems catch up with the logjam of new applicants, these measures will allow most individuals to maintain the payments that come due.

As I type these words, the extra $600 a week has not started to flow to those unemployed individuals. Although income may be at or above previous levels when the payments begin, you may be coming up on due dates for house payments and credit cards and car loans and you do not have the money. Because of this novel situation where vast swaths of people have been affected, lenders are putting programs in place to work with you. They may waive fees or allow you delay or skip a payment. This could help bridge the gap between your loss of income and its restoration. If you’re in a debt management program, like Apprisen’s, the program provider will work with your lenders to make the interest rates/payments manageable during a hardship.

And if you do not have a formal budget at all, now is the time to start. Even when your income is restored or if you have been able to continue working and your income has not been affected, I would still recommend getting on an emergency budget. Make sure your needs are paid for and cut out as much of your non-essential items as possible. No one is certain of the future. I am no doctor, but in my opinion the COVID-19 disruptions to our lives and the economy will drag out for awhile. The federal relief options end on July 31^st. Hope for the best but prepare for the worst!

To see what options they have put into place for homeowners struggling to meet their payments. Lenders and loan servicers understand the situation. They have existing policies in place to help struggling homeowners and more policies are being developed internally and in conjunction with the federal response.

Dial 211 or go to unitedway.org for current information on food distribution, help with utilities and other possible resources.

As a non-profit credit/debt agency that also employs HUD-approved housing counselors, Apprisen is here to help. We can walk you through the development of an emergency budget, review a Debt Management Plan to help manage debt during a crisis. Appointments are free and safe with over the phone and video chat options. These times are uncertain, but we will adapt, and we will persevere. This as an opportunity to reflect and become wiser. Look at these unprecedented times as an opportunity to grow, improve your life and come out the other side more financially secure than ever!

Additional Resource on Debt:

Understanding the Main Types of Debt and How to Pay Them Off