04/23/2020
For Clients, Family and Friends, I’ve compiled a guide hoping that it will help you to navigate through debt deferment options available during this crisis time.
General Takeaway: When asking for a debt restructure (i.e. credit card, car payments, mortgage, rent payments, etc.), you must base it upon being financially affected by COVID-19. Also, these financial breaks are not being automatically given. You must do the work to request the deferment of payments and remember getting in touch with people will not be easy given the staff decreases and increase in need. Online requests may be the quickest way for you to get the relief that you need.
Caution: Most of the debt holders (banks, landlords, etc.) will not forgive the debt, at this time. They are deferring payments, such that you will need to ensure that you can agree to a repayment program that you can meet at a later date. Also, be sure to address that you do not want a negative credit reporting for the deferment.
Tenants: In California, per Governor Newsom’s executive order, there is a moratorium on evictions through May 31, 2020, if the tenant is unable to pay rent due to the corona virus. Caution: the tenant must inform the landlord in writing within 7 days after the rent comes due that they cannot pay all or part of the rent due to the virus. Landlord may request documentation of economic hardship, but the tenant need not submit these without such request. It is best to retain the supporting documentation to prove up financial hardship. THE RENT IS NOT FORGIVEN. Unpaid rent will need to be repaid and in a timely manner. I have included the California real estate form addressing the COVID rental agreement, at the end of this document. Check your local City resources to determine any specific city ordinances implemented regarding evictions. A new bill in California (AB 828) has been proposed to require landlords to reduce rents by 25%, among other things. Keep in mind that this has not passed yet and, thus has not become California law, to date.
Mortgages: Federally backed loans, Freddie mac/Fannie Mae. May offer a forbearance plan with a reduction or suspension of payments for up to 12 months, on a 6-month incremental basis. Be sure to request the additional 6 -month extension within the first 6-month request. Late fees may not be imposed. Conventional loans: many major lenders are offering suspension of payments for 3 months, and adding the skipped payments to the end of the loan. Each lender has their specific deferment/forbearance programs in place. Caution: the lenders may report the forbearance on your credit report, and you must enter into an agreement for the deferments. These are not automatic.
CAR LOANS AND LEASES: Car lenders may offer a deferment of 3 months on car loans, with the term of the loan extended by the number of delayed payments. Car leases are being extended by 3 to 6 months, with deferred payments being due at the end of the lease. Caution: Certain leasing lenders are extending leases automatically since they have an overstocked inventory. Car lease financial institutions are not wanting to take the cars back as a result. No place to store them. This may be a good opportunity for you to negotiate a reduced residual value repayment price, if you choose to buyout the car at the end of the lease. The car financial institutions seem to be imposing no late fees, no negative reporting so long as your need is based on financial distress due to the coronavirus.
CREDIT CARDS: Many credit card companies are offering 3 months of deferred payments upon request by you. Applying online may be your best option to obtain this relief. They also may offer waived late fees and no negative credit reporting. Caution: Interest will continue to accrue.
STUDENT LOANS: Federal student loan payments and interest serviced through Navient or FedLoan are being suspended through September 30, 2020. You may be able to ask for a refund if you made a payment after March 13, 2020. Other student loan servicers, many are offering forbearance options.
TAXES: the deadline to file and pay Federal and California state taxes have been extended to July 15, 2020.
***Be sure to contact your creditor(s) to obtain the above-mentioned deferments that may be offered. Do not expect automatic relief. There may be other relief options for you being offered, such as for insurance and utilities, and you should contact them directly to determine if you qualify for any current programs being offered.
