Our lives were upturned in a couple of days last month with the COVID-19 pandemic. Now we’re looking in the next few weeks (hopefully!) to come out of the “stay-at-home phase” of our current lives and pick up the pieces of our personal finances. In any case, it’s going to take a long while before our economy recovers from this devastation. We are all sharing in a world of hurt. We are all scared.
Many of you may have what is classified as a “non-essential” job, where you are not working and not getting paid. Others of you may have had to leave your employment because you have had to stay home with your school-age children. Or you may be “lucky” enough to still be employed, but are earning less because you are on commission and aren’t making as many sales.
The offices of Horwitz & Horwitz are open during this time, although we are basically working by telephone and email rather than meeting with clients directly. As always, we are ready to discuss your financial issues with you, and give you advice based on your personal situation. Speaking generally, I am going to address problems that many people are concerned about right now:
I’m worried because I can’t pay my rent. Can the landlord evict me?
With so many people in a world of hurt right now, your landlord is most likely willing to work with you. Landlords certainly don’t want to lose good tenants and try to find others with decent credit ratings at this time! The most important thing is to get in contact with your landlord and work something out with them. While currently there is no law in Ohio stopping landlords from taking legal action to collect rent or to try to evict tenants for nonpayment of rent, the Chief Justice of the Ohio Supreme Court has requested municipal courts to limit evictions and foreclosures, and Governor DeWine has issued an executive order demanding that mortgage lenders suspend payments for 90 days, which will then relieve landlords from having to make mortgage payments on the property while they are not getting rent from their tenants.
Most Ohio municipal courts, where evictions are filed, have basically shut down for all but the most urgent matters. Evictions are not considered urgent matters. Dayton Municipal Court, for example, has closed until April 30, 2020. When these courts are up and running again, they are going to face a backload of cases. Hearings on evictions will in all likelihood be scheduled for a couple of months out.
With that in mind, however, you must understand that your rent is not being forgiven. The arrearage will have to be caught up eventually. That means that you will eventually be responsible for your current month’s rent plus some amount to pay off the past due balance. That’s going to be a hard nut to crack if your earnings are less than before.
If you find in the coming months that your past-due rent has reached an amount that you will not be able to handle in a reasonable time, you may find that your best course is to file a bankruptcy. It is an option you may want to investigate, especially if your income remains lower after the initial pandemic has passed.
I can’t pay my utility bills. Can the utility companies disconnect me?
The Public Utility Commission of Ohio has issued an order that utilities such as water, gas and electric companies, cannot disconnect services to you during the COVID-19 emergency. I understand that many of these companies use automatic billing, and that many times they’ve been unable to stop the notices on bills that threaten disconnection. In any case, however, you can be sure that your utilities will not be turned off during this crisis. This includes cell phones and internet connection.
Again, however, you will eventually be responsible for making up the past due charges. It is possible to include these in a bankruptcy. The way it works is that you would continue to pay the ongoing monthly charges and can include the past due amounts in the bankruptcy.
With all my other monthly living expenses, I can’t pay on my student loans. Are the interest rates going to kill me later on?
The CARES Act passed by Congress this past March requires that federally-held student loan repayments be suspended until 9/30/20. It also requires that these loans cannot accrue interest while the payments are suspended.
The Act also mandates zero interest for the next 6 months.
Further, the Act provides that the Secretary of the Department of Education shall consider each month for which a loan payment was suspended as if the borrower had made a payment for purposes of any loan forgiveness program or loan rehabilitation program.
If your student loan is currently in an IDR program (“income-driven plan”), you are entitled to have your loan servicer recalculate your monthly payment based on your current income if you have lost a job or have had your income reduced.
Keep in mind, however, these laws regulate federal student loans only. Some student loans are privately held, usually by banks. These are not necessarily subject to the mandates of the CARES Act.
Under current bankruptcy law, it is very difficult to qualify to have student loans discharged (wiped out). That has resulted in a tremendous burden remaining on even those people who have already filed bankruptcy. In the last several months, however, we’ve begun to see bankruptcy judges who are willing to loosen the privileged status of student loan lenders and allow discharge of student loans. I’m anticipating that the COVID-19 crisis may accelerate the trend toward treating student loans more like other unsecured debts, even if the money for the loan did come from federal funds.
Student loan repayments are going to be hard for people to make in the foreseeable future as the economy slowly recovers. Rent, utilities, food, transportation costs and the other expenses of daily living are going to have to come first. In my opinion, Congress is going to have to find relief for the millions of student loan debtors who cannot realistically ever pay off their loans. And I would expect that relief to come through filing a bankruptcy: either a chapter 7 to completely wipe out the loans, or a chapter 13 to pay it out at the percentage the debtor can afford after his/her normal living expenses over a set number of years.