As a bankruptcy lawyer, I’m not usually the most popular gal at a cocktail party. Financial worries are often seen as taboo for discussion. However, during this strange time of “social distancing,” many hardworking families are being impacted financially in a very real way. The loss or interruption of employment, large medical bills, and family needs are pulling people in many different directions. And the fact of the matter is that 78% of Americans live paycheck to paycheck. It takes only the slightest unexpected expense to put most families in a troubling financial position.
All that said, in my experience, there are several things to keep in mind and reduce your stress when faced with financial hardship:
- Breathe. Although it may be scary to not pay your bills, you should know that unless and until your creditor sues you, there is little that they can do to you (besides annoy you with phone calls). There is no such thing as a debtor’s prison in the U.S. The sheriff is not going to arrest you if you miss a payment. A foreclosure in Arizona usually takes at least 90 days. Wage garnishment is a long process that takes several months before it can be imposed. You have time to come up with a game plan and figure out how to tackle your debts. Just breathe.
- Prioritize. You want to pay the most important bills first. For most families, that is housing, utilities, groceries, and medications. Once you have an idea of how much money you have coming in, conserve your resources to pay only your most important bills.
- Create a Budget. Figure out what funds you have coming in, what bills you have, and determine if you and your family can live on just the money coming in each month. If you can, try to just live off of what you bring in each month (meaning, just use your debit card or cash to pay bills, don’t use your credit cards). If you can cut certain expenses, now is the time to do so.
- Advocate for Yourself. I know this sounds scary, but most creditors want to work with you and help you get through this difficult time. Pick up the phone, call your creditors, and ask for a forbearance period or alternative payment arrangements. With the current recession, many creditors are being proactive because they realize that the best way to ensure that they will be paid in the future is to work with you.
- Do NOT start liquidating assets. Did you know that your 401(k) retirement account is generally protected from creditors taking those funds? Did you know that Arizona protects a homestead up to $150,000 in equity? I know it may be stressful to have debts, but do not liquidate your nest egg or the assets you have built up to pay your debts without first consulting with a lawyer. There is likely a better way to deal with your debts and protect what you’ve taken a lifetime to build.
- Talk with your trusted banker or accountant. Under the CARES Act (Coronavirus Aid, Relief, and Economic Security Act), there are numerous programs for individuals and small business owners. Talk to a professional to see if you qualify for any additional relief.
- Know your rights. The scariest part of being in debt is that people don’t understand their rights as consumers. The Consumer Financial Protection Bureau has an amazing website: consumerfinance.gov. I strongly recommend reviewing its resources on various debt issues. Importantly, under the Fair Debt Collections Practices Act, you have numerous rights as a consumer (including making a written request to stop collection phone calls), that you should rely on protect yourself from harassing creditors.
If your debt issues are simply too much for you to tackle on your own, consider scheduling a free one-hour consultation to discuss whether bankruptcy may be the best option. Bankruptcy is a helpful legal tool that allows hardworking people who have been met with hard times to hit the financial “restart” button. Call attorney Aubrey Thomas at 928-233-6800 to discuss your options.
*Disclaimer: The information contained in this article is for informational purposes only and is not legal advice. Legal advice should take into account the specific facts of your situation. You should seek professional legal counsel before acting upon any of the information contained in this article.