How To Reduce Or Delay Paying Your Bills During The COVID-19 Crisis

The COVID-19 pandemic is wreaking havoc on the finances of many people. Over 22 million workers have become unemployed in a short period of time. Unemployment benefits are available for laid off workers, freelancers, independent contractors, and gig workers, but the availability of some of those benefits has been delayed due to the crush of applications and the need for unemployment offices to create and install new payment systems.

In the meantime, bills are piling up for financially strapped individuals. Many creditors are willing to help you through this difficult time. But the key is to reach out to the creditors before you fall into default, explain your situation, and ask for hardship assistance.

Creditors are receptive now to granting financial help, as they are under tremendous regulatory, governmental, and PR pressures to help affected individuals. And the recent CARES Act enacted by the federal government on March 17, 2020, provides various protections and benefits for individuals and small businesses.

It’s best to request accommodation before you fall behind in your payments. Otherwise, this could ultimately hurt you credit score.

The accommodations typically fall into deferred payments and waived payments. Deferred payments mean that you don’t have to make the payment now, but that you will have to do so at some later agreed upon date. A waived payment means that you don’t have to repay it.

The following provides some advice on how to reduce or delay paying your crucial bills.

Rent

Rent is one of the biggest expenses for individuals.

In many states now, including California and New York, landlords are prohibited for some period of time from performing evictions on renters who can’t pay their rent because of the pandemic.

The Department of Housing and Urban Development has also stopped eviction proceedings of tenants who occupy properties it owns.

With so many renters feeling the economic strain, a number of landlords have been willing to consider the following accommodations:

• Temporary rent relief for 1 to 3 months
• Acceptance of partial payment for overdue rent
• Lowering of the amount of rent moving forward
• Allowing use of the tenant’s security deposit toward rent

Landlords do not want to be looking for replacement tenants in this environment, so they may be willing to make some accommodations.

A phone call or email to your landlord explaining your situation is the best first step. Here is a sample email that you can send to your landlord, which you can tailor to your individual situation:

Dear ______:

As you know, I am a tenant at your property at [Address, City], Apt #___. I am writing this email to let you know that due to the COVID-19 pandemic, I am suffering financial hardship. [I have been laid off from my job.] [My freelance work has been severely affected by the pandemic.] [I have had to file for unemployment benefits, but due to the crush of applications to the unemployment office, my payments have been delayed.]

I have been a good and responsible tenant in the past, and I want to continue being a good tenant, but I am respectfully requesting the following financial accommodation from you to help me get through this difficult time:

• Waiver of the next two (2) months of rent while my finances improve
• Lowering of my rent thereafter going forward to $___ a month

If you would be kind enough to grant me these accommodations, that would be a great step forward for me personally to resolve my financial problems. I would be very grateful for this assistance.

Thank you. I hope you and your family are staying healthy.

Sincerely,

[Name]

Credit Cards

Most credit card issuers, including Bank of America, Capital One, and Wells Fargo, are granting one or more of the following concessions to cardholders who are suffering financially from the pandemic:

• Deferring required payments for a month or more
• Waiving late fees
• Waiving interest or lowering the interest rate
• Implementing an extended payment plan
• Increasing credit limits

The first step is to contact the credit card issuer. Their phone number is on the back of your credit card. It may difficult to get through, as many cardholders are calling them. Check their website for ways to notify them through email or through an online submission form.

To avoid an accommodation hurting your credit score, ask that your payments be marked “current” on your credit file rather than “delinquent.”

If you can’t quickly get an accommodation, try to at least make the minimum payment set forth on your statement to avoid a hit to your credit score.

Mortgages

The CARES Act provides for a 60- or 180-day moratorium on payments due on federally backed mortgages (such as from Fannie Mae or Freddie Mac).

In California, some 200 banks have offered a 90-day deferral on mortgage payments. Lenders in other states may follow the California example.

The key again is to contact your lender as soon as possible and see what accommodations are available.

Gas and Electric Bills

Many utilities are granting accommodations to people who can’t pay their gas or electric bill right now. A number of utilities are suspending shutoffs for non-payment. Some states have implemented prohibitions on shutoffs for 90 days.

It’s best to reach out to your utility to explore what options may be available to you. At the very least, utilities should be willing to enter into an extended payment plan.

Phone and Internet Service Bills

Many phone and Internet service providers are willing to grant some concessions. Verizon, AT&T, and Comcast are each waiving some fees, promising not to cut off service for some time, and/or providing cheaper service alternatives.

Many of these companies don’t want to lose customers during the pandemic, so you may be able to negotiate a 50% or more savings on your phone and Internet service bills.

Car Payments

Ford and other automakers are allowing some customers to defer payments on their existing car loans. Some car companies are also offering new car buyers the option to delay their first payment on their car loan by 90 days.

Bank lenders, such as Bank of America, are offering 90 to 120 days of deferrals on auto loans. But this doesn’t happen automatically—you typically need to apply on the bank’s website for the deferral. Deferral payments will most often be added to the loan principal and payable at the end of the term of the loan.

Reach out to your auto loan service provider to see if they will defer or reduce some of your payments.

Taxes

Under the CARES Act, all individuals can now defer paying any federal income tax that was previously due on April 15, 2020, to July 15, 2020, without incurring any penalties or interest.

To get the $1,200 stimulus payment from the government, most individual must have filed their 2018 or 2019 tax return with the IRS.

If you are filing your 2019 tax return with the IRS before July 15, 2020, you don’t have to pay any taxes owed until July 15, 2020. If you need more time beyond July 15, 2020, to file your tax return, you can request an extension by filing IRS Form 4868.

The CARES Act granted the extension for federal tax filings and payments, but it is expected that many states will also provide for that extension for state tax requirements.

Student Loans

The CARES Act gives some relief to borrowers under certain student loans. For designated federal student loans, you don’t have to make any principal payment until September 30, 2020 (although this is a deferral, and thus the principal payment will have to be made at some point). Interest is waived entirely until September 30, 2020, and does not need to be repaid for those federal student loans.

Since only certain student loans are covered by the above, you should contact your loan servicer and ask what accommodations are available. You should also check the Federal Student Aid website at www.studentaid.gov.

The studentaid.gov site provides this additional guidance:

“If you’re in a short-term financial bind, you may qualify for a deferment or forbearance. With either of these options, you can temporarily suspend your payments….

Because of the impact on interest and potential loan forgiveness, it might be worth exploring another repayment plan before you consider deferment or forbearance. For example, your payments could be more affordable if you change to an income-driven repayment plan.

Contact your loan servicer to find out if another repayment plan might be the best option for you.”

But be sure to consider that any deferred interest obtained could be added to the principal of your loan (causing more interest to accrue over time) unless the lender waives the interest entirely and permanently. Certain lenders are required to permanently waive the interest as described above and other lenders may be willing to follow suit.

Other Bills

Now is the time to reassess what services you are paying for and budget for the new financial reality. Consider the following:

• Can you cut the cord on your TV services?
• Do you really need a landline phone?
• Do you really need multiple music streaming services?
• Can you cut down on takeout food?
• Are there cheaper alternatives for some of the services you are paying for?
• Are your service providers willing to renegotiate payment amounts?
• Is it time to quit smoking cigarettes given how expensive they are?

You should especially review any automatic payments that are made from your checking account.

Conclusion

Cash is king right now, so do what you can to conserve cash for essentials like groceries, medicine, and phone bills. Try to build up an emergency fund. Prioritize your payments and get deferrals and waivers from creditors as suggested in this article.

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