Information is current as of April 23, 2020.
By Mario Gutierrez, NYLAG’s Director of Financial Counseling.
As the nation continues to deal with the fallout of the coronavirus (COVID19) pandemic, it has shown once again the precarious nature of those who live paycheck to paycheck, earn low-wages, or are experiencing poverty.
It’s clear that things will likely not go back to “normal” anytime soon. As the economy starts to sputter as a result of constricted consumer spending and social distancing, many more will be affected.
But there are options. Now is the time to take action to ensure you are in the best financial place you can possibly be. NYLAG’s only non-legal program, financial counseling, has deep expertise around financial planning for a crisis. In fact, we started in 2009 when the then financial crisis happened, helping thousands restore their economic stability.
CRISIS FINANCIAL PLANNING-WHAT TO DO RIGHT NOW.
- Prioritize bills – Whether your job has been affected or not, take a look at all of your bills and identify which ones are critical and those that you may not need to pay immediately. Do check in with service providers as some may be offering assistance or an option to temporarily skip payments. For example, NY State’s major electric and gas utilities have agreed to not cut power or heat from customers unable to pay their bills during the virus pandemic. https://www.governor.ny.gov/news/after-weeks-demanding-approval-governor-cuomo-announces-fda-gives-new-york-state-authority
- Reduce spending – You should start reducing nonessential and discretionary spending in the event things get worse. These expenses can include entertainment, certain food items, and luxuries. Those savings should be stuffed away in a savings account as an emergency fund in the event you lose income in the next few weeks or months.
- Reach out to credit cards – As a result of the COVID-19 pandemic, many financial institutions have put in place payment deferral programs or have agreed to waive some of their fees. In addition, these institutions may also offer hardship programs or other debt management options. Contact your creditor for details. Check out this live page on assistance banks are providing: https://www.forbes.com/sites/advisor/2020/03/12/list-of-banks-offering-relief-to-customers-affected-by-coronavirus/#5ec2fc083ee3. For those who do not have a credit card, you may want to consider opening one up for additional flexibility. Please consult with a financial counselor to ensure this makes sense for your financial circumstances.
- Change how you pay student loans – The Cares Act (more info below) has a provision that automatically suspends all payments due on certain federal student loans until September 30, 2020. Interest will not accrue during the suspension of payment and there will be no negative effect on your credit. For more information you can check out https://www.studentloanborrowerassistance.org/what-the-cares-act-means-for-repayment-of-federal-student-loans/. Private student loan borrowers and federal student loans borrowers not covered by the CARES Act, still have some relief. On 4/7/20 the New York Department of Financial Services announced an agreement with the largest private student loan services in NY to provide relief for borrowers not covered by the CARES Act. Details are still being worked out and more information can be found here: https://www.dfs.ny.gov/press_releases/pr202004072. For federal student loans that are not covered under the CARES Act or the New York State agreement, there are two ways you can temporarily suspend your payments: deferment and forbearance. With deferment, you may be able to avoid interest accrual, while with forbearance you won’t, which means your debt will grow. A best practice during forbearance is to pay down the interest portion so that the debt will not grow.
- Remove auto-debit payments – If you think you will experience a cash crunch, you should consider removing auto-debit payments for your bills and other utilities. This way you can provide yourself with more flexibility to prioritize expenditures.
Please be on the lookout for price gouging and scams related to the Coronavirus. It is illegal for businesses to take unfair advantage of consumers by selling goods or services that are “vital to the health, safety, or welfare of consumers”. If you see any price gouging, you should file a complaint at https://www1.nyc.gov/site/dca/consumers/file-complaint.page#onlinecomplaint. Services that offer products that can “cure” the virus should be avoided. You can find more information at https://www.consumer.ftc.gov/features/coronavirus-scams-what-ftc-doing.
On March 27 the CARES Act went into effect. The three key ways it helps is through Economic Impact Payments, enhancements to Unemployment Benefits, and Small Business Assistance.
The Economic Impact Payments are direct payouts to many citizens and residents who have income below an amount based on their filing status and qualifying children. Here is a list of people who do not need to do anything else in order to get the payment:
- People who filed a tax return for 2018 or 2019 with direct deposit information
- Recipients of Social Security retirement, disability, and Supplemental Security Income, or survivor benefits who do not have dependent children under 16
- Recipients of Veteran’s benefits
There is a Non-Filers: Enter Payment Info tool on the IRS.gov website that many of NYLAG clients may need to use in order to get their payment. For individuals who are not required to file taxes and do not receive the benefits listed above, the IRS needs some more information about you in order to issue a payment. This can be done here: https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here. You can also get more general information at https://www.irs.gov/coronavirus/get-my-payment-frequently-asked-questions.
It is important to clarify that the Economic Impact Payments are not taxable and can only be garnished for child support debt but not for other federal debt such as student loans or past tax debt. Also, these payments will not count as resources for benefits under means-tested federal benefits programs such as Medicaid, SSI, SNAP, or housing assistance.
Be aware that scams related to grants or Economic impact Payments (commonly known as “stimulus payments”) are on the rise in the way of calls, texts, and emails. Learn how to keep your personal information protected and avoid tax-related fraud and identity theft: https://www.consumer.ftc.gov/blog/2020/04/coronavirus-stimulus-payment-scams-what-you-need-know.
The Act has also strengthened unemployment benefits in two ways. The enhanced Unemployment Benefits provides 39 weeks of benefits (used to be 26 weeks) plus an additional $600/week until 7/31/2020. If you are a freelancer or self-employed worker, you are eligible for temporary unemployment benefits under the Pandemic Unemployment Assistance provision. More information can be found at https://labor.ny.gov/ui/cares-act.shtm.
The CARES Act did provide assistance for small businesses. However, the main recourse for many of our clients who are sole proprietors and independent contractors is no longer available. The Economic Injury Disaster Loan (and advance) has been tapped out. Congress is working on the second round of assistance and we will ensure our clients are aware of these developments.
- SNAP and food pantries – For those facing a financial strain, the Supplemental Nutrition Assistance Program (SNAP), could be extremely helpful. It provides a cash benefit for food to help supplement those expenses. More information can be found here – https://www1.nyc.gov/site/hra/help/snap-benefits-food-program.page. Also, all recertifications for SNAP benefits have been postponed indefinitely. You can also consider checking our local food pantries, which you can find here: https://www.foodbanknyc.org/get-help/.
- HFLS – The Hebrew Free Loan Society is offering the Coronavirus Financial Impact Loan to qualified individuals who have faced financial challenges due to the outbreak. Applicants need to have a co-signer and there are income limits. This loan has no costs or interest and more information can be found at https://hfls.org/loan-programs/#corona.
- Self-care – The ever-changing situation is causing a lot of uncertainty and stress. As financial counselors, we know that financial stress impacts not only individual’s and families’ long-term financial well-being, but also their physical and mental health. NYC Well can connect individuals to free, confidential mental health support. They can speak to a counselor via phone, text, or chat; and if needed get referrals to mental health care providers. For more info on NYC Well: https://nycwell.cityofnewyork.us/en/.
- Housing – Fannie Mae and Freddie Mac are suspending all foreclosure sales and evictions of borrowers, expanding of its forbearance program, and making additional disaster-related loan modifications. They are also suspending the reporting of delinquencies to credit bureaus. More information here: https://www.washingtonpost.com/business/economy/fannie-mae-freddie-mac-to-suspend-foreclosures/2020/03/18/0f8ee80a-693d-11ea-b313-df458622c2cc_story.html. NYLAG has already posted on rights and protections for renters, which can be found here: https://www.washingtonpost.com/business/economy/fannie-mae-freddie-mac-to-suspend-foreclosures/2020/03/18/0f8ee80a-693d-11ea-b313-df458622c2cc_story.html.
- Undocumented residents – Unfortunately, most of the relief will not reach undocumented residents. The New York State Young Leaders Council (NYSYLC) has launched an emergency fund for undocumented residents and accumulated resources tailored for this population, which can be found here: https://www.nysylc.org/undocufunds.
These are scary times, but you do have some control. The steps and resources above can help to make a hard situation just a little bit better.
NYLAG’s financial counseling team is here for you. To learn more and get in contact, click here, visit our coronavirus resources page, and/or call our free NY COVID-19 Legal Resource Hotline at (929) 356- 9582 or click here.