Here, learn how to minimize and deal with debt caused by COVID-19. This article provides tips and resources for dealing with various types of debt, including housing debt, student loans, credit cards, and medical bills. It also covers topics such as debt collection, garnishment, repossession, and being judgment-proof. If you have been financially impacted by COVID-19, this article can help you understand your options for managing your debt.
First Things First: The Basics
This page links to resources that can give you information on how to deal with common types of debt. However, there are a few things you should always keep in mind:
- Keep track of your spending: Know where your money goes and what you get for it.
- Communicate with creditors early: If you think you will miss a bill, many service providers and lenders will work with you.
- Prioritize bills: If you know that you cannot pay all of your bills, figure out which are the most important and focus on paying those. If possible, work out a deal with the service provider to help preserve your credit rating.
- Apply for benefits: The earlier you apply for unemployment, food assistance, housing assistance, etc., the earlier you can get help. If you have lost income due to COVID-19, don't wait. Apply now.
- Be patient but persistent: Many government agencies, utilities, lenders, and other service providers are overwhelmed right now. You may have trouble contacting them. Don't be discouraged and don't get angry. Keep calling, emailing, and trying to communicate until you have resolved your issue.
- Don't panic: Panic can lead to bad decisions. Don't let stress lead you to fall for a scam, make unhelpful purchases, or cave into unscrupulous debt collectors.
Consumer Finance Protection Bureau
The CFPB is a wealth of consumer information. Visit Protecting your finances during the coronavirus pandemic for tips on bill payment strategies, links to financial counseling services, and more.
Utilities and Internet
On March 27, 2020, Congress passed the CARES Act. Among other things, the CARES Act paused student loan payments, stopped collections on defaulted loans, and set interest rates to 0% for 60 days. Since then, the federal government has repeatedly extended this relief.
We are now likely in the final extension. The government had planned to end the pause on December 31, 2022, and replace it with loan forgiveness of up to $20,000 per borrower. However, lawsuits blocked the loan forgiveness plan, at least for now. Payments will now resume 60 days after the lawsuits are resolved or on September 1, 2023 -- whichever comes first. Borrowers will get notice before payments resume.
See the Federal Student Aid website for more information.
*Note that the the pause on payments does not apply to private loans. Contact your loan servicer for information on private student loans.
See Steps to Take if You Cannot Pay Your Credit Cards from the Consumer Financial Protection Bureau.
See information on Surprise Medical Billing.
Lender and Service Provider Programs
The credit monitoring company Experian has put together this list of lenders and service providers who may be able to work with customers on debt: COVID-19 (Coronavirus) Credit Card and Debt Relief.
Debt Collection and Garnishment
Texas has strict rules that govern garnishment. Many types of property are protected. If your property was garnished or seized illegally, see the Exempt Property In Debt Collection guide to learn how to get it back. Also see Protect Your Social Security from Garnishment to learn how to stop your bank from handing over protected social security payments.
- Texas Appleseed's Debt Collection Rights Toolkit
- The Consumer Financial Protection Bureau's How do I stop automatic payments from my bank account?
Being Judgment Proof
You are judgment proof if you do not have any income or assets that a creditor can legally take. Read What "Judgment Proof" means for more information.
Depending on where you live, you may be able to get information, counseling, and even representation for your tax debt. Contact the following organizations to see if they provide services in your area and how to qualify:
Please note these are not tax preparation services.
- Lone Star Legal Aid Low - Income Tax Clinic (East Texas): See how to apply here.
- Texas RioGrande Legal Aid - Texas Taxpayers Assistance Project (Southwest Texas): See how to apply here.
- Legal Aid of NorthWest Test - Low Income Tax Clinic (Northwest Texas): See how to apply here.
- Texas Tech University School of Law Tax Clinic (Panhandle Area): To apply, call 806-742-4312.
- Texas A&M University School of Law - Low Income Tax Clinic (Ask about service area): To apply, call 817-212-4123.
- South Texas College of Law Tax Clinic (Houston) - To apply, call 713-646-2990.
Credit Rating Protections
The CARES Act offers some credit rating protections for those who work out a deal with a lender due to COVID-19 hardship:
- If you are current on payments and get an accommodation, your will show that you remain current until the accommodation ends.
- If you are delinquent and get an accommodation, your will show that you remain at the same level of delinquency until you catch up on payments or the accommodation ends. For example, if you are 30 days late and your lender gives you a forbearance, your will show you as 30 days late until you catch up or forbearance ends.
- If you are behind on payments but catch up during your accommodation period, then your should update to reflect your account status as current.
Note that these protections do not apply to charged off loans. Credit cards are charged off after 180 days of nonpayment. Most other loans are charged off after 120 days.
Also, credit reporting companies are not yet sure how they will implement the CARES Act rules. Be sure to check youroften to make sure that it is accurate. Transunion, Experian, and Equifax will all provide free weekly credit reports through December 31, 2023. If there is something wrong with in your credit report, you can dispute it with the report provider.
For more information about forbearance and credit reporting under the CARES Act, see Enforcing the CARES Act Credit Reporting Protections from the National Consumer Law Center.
Get information about debtor rights in the debt collection process.
This article provides information on how to deal with a debt collector.
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