Welcome to the A-B-Cs of Bankruptcy & Debt Relief for Real People.
Hello I’m Gary Ray Fraley. I’m a California State Bar Certified Bankruptcy Law Specialist in Sacramento California. I have been representing consumer and business clients in bankruptcy matters since 1978 when I founded the Fraley & Fraley law firm.
Today I am going to discuss with you the 13 Things you need to know to survive a job loss due to COVID-19 coronavirus, or any reason for that matter.
If you are watching this video, you have either lost your job or are trying to make sure you are prepared if it happens.
One of every 5 workers in America has now lost their job since the covid-19 coronavirus pandemic started.
Over 36 & 1/2 MILLION unemployment insurance claims were filed as of May 9, 2020. And it is still going up. That does not count all of the people who couldn’t get through to State unemployment offices.
Estimates are that jobs losses could go as high as 32% or more. Right now, more people have lost their jobs than in the whole of the great recession of 2008. Job losses could exceed the great depression of the 1930s.
People who think their industry is safe are going to be surprised when they find themselves out of work. Every job in our economy is dependent on other jobs in that same economy.
This is like dominos standing in a line. When the first one falls, it takes down the second one which in turn takes down the next one and on down the line.
All kinds of jobs in the hospitality and travel industry have been lost. That includes restaurant and hotel jobs, theaters, airline jobs, theme parks, and just about every industry that relies on those industries to survive.
In the Retail Industry, you can expect many “Brick & Mortar” businesses will close for good. Sales of high ticket items such as vehicles, appliances, televisions and jewelry are going to be down dramatically. Many businesses were “on the edge” even before COVID-19.
Other industries like meat packing plants are slowing down or even coming to a standstill. Factories that produce goods for America and for export are going to end up reducing employees or even closing due to lower demand.
No one who has had their income cut dramatically is “dying” to go out to a restaurant and spend money they don’t have. People who are counting every dollar to survive are not going to go out to restaurants, theatres, buying cars, TVs, appliances, airline tickets or cruises. They are going to hang onto whatever they have for necessities such as food, rent or mortgage payments, utilities, health insurance and vehicle payments.
Many people who have had reduced income or lost their jobs are “living on credit cards.” That debt will have to be paid with money that may not be there even if the job does come back. The high interest credit card debt will in many cases, be too much for most people to live with.
Despite wishful thinking, our economy will not return to “normal” anytime soon. You can’t switch off the economy and turn it back on like a light switch.
Everything is going to have to be restarted, one step at a time. Coming back to anything close to where we were before the pandemic hit will take years.
Sadly, many jobs are gone forever.
So, what do you do if you’ve lost your job? Here are the top 13 things you need to know and do to keep your head above water.
1. Apply for unemployment immediately. With millions of claims being filed, the State unemployment websites have been overwhelmed to the point that they are crashing. You need to be persistent. The best day to apply for unemployment is on Tuesdays. The best time to try to apply online is very late at night or early in the morning. If you’re applying at 4 AM, 95% of the people applying are not going to be doing it at that time in the morning. There is the old proverb that says “the early bird gets the worm.” Be the early bird.
2. Because of the Covid-19 coronavirus legislation passed by Congress and signed by the President March 27, 2020, there is now $600 per week supplemental unemployment from the Federal Government. That is on top of the state unemployment payments. The normal one week wait for it to start has been waived so you get your benefits calculated from the day you were laid off.
Additionally, if you are self-employed, or live on income from doing Gigs, you can file for unemployment and get the $600 per week in Federal payments even though you would normally not qualify for unemployment.
3. Do not stick your head in the sand and pretend everything’s going to be wonderful in a few weeks or months. It isn’t. Recognize that, at some point, you may have to get rid of your debts by way of bankruptcy. If you don’t need to, that’s great, but millions of people are going to have to do so when they cannot find sufficient work to pay their living expenses.
4. Take stock of your assets and funds that you may have in reserve. Hang on to every dollar you have like it’s going to be the last dollar you will get because it just may be. If you have things that can be sold, keep that in mind as a last resort if it comes to that point.
5. Determine what bills are important for survival and what are not. Understand that the creditor that is going to holler the loudest is going to be the least important one. Don’t pay them. Paying credit cards at this time is not important. Paying personal loans that you may have is not important.
Paying friends or relatives is not important. In fact, that could be even worse for them if you find that you have to file bankruptcy. They can be ordered by a bankruptcy Judge to give that money back to the bankruptcy trustee to pay other creditors. If you get through this, you can always pay them later. There may possibly be ways to protect those funds, but that can be dealt with when you go to see a bankruptcy attorney.
Forget trying to hide the payments to friends and relatives. You don’t want to double bunk with Bubba in Leavenworth Federal prison.
Paying that type of debt may potentially put you in a position of not having the money later to pay for necessities for you or your family. Hang on to that money. Those debts can be dealt with later. You can pay them when you can. You can file a Chapter 7 bankruptcy to wipe out debts if it becomes necessary. You can even file a Chapter 13 reorganization to pay you debts over 5 years if you find that you have the ability to do so.
6. The only expenses and debts you should pay are those that:
A) Keep food on the table for yourself and your family,
B) Keep a roof over your head,
C) Your electricity, gas and water bills.
D) Pay the vehicle payments so that you have transportation to find a job or go to work.
7. If you have more vehicles with debts on them, choose which 1, or 2 if you have a family, that you truly need to survive. Quit paying on the rest. Consider the cheapest monthly payment and interest rate and the amount of equity you have in the vehicles when you decide which to keep and which to give up.
The world is not going to end if you have to give up the boat, the RV, the motorcycle, the BMW or Mercedes or the car you bought for your son or daughter. The money you don’t spend on these may be the money you can use to save the other vehicles you truly need or keep a roof over your head.
8. If you’re unemployed, apply for food stamps if you qualify. Consider charity food closets if you need to. All religions I know of make a point that we should be humble. As hard as that is, it is something we all have to learn to survive this financial disaster. No one is immune from this process other than the extremely rich and, given the stock market, they may soon be in line with you.
9. Do not borrow money from anyone. Of course, do not lend money to anyone either. It never turns out well for either party.
10. Only if your money to live on has completely run out should you even remotely consider taking money from your IRA, 401(k), 403B, 457 thrift savings plan or from your retirement. Keep in mind that the value of your retirement has probably gone down greatly if it was invested in the stock market. However, it will eventually regain much of its value if you can wait.
11. If you have a job and you need to take money out of your retirement, BORROW that money from the IRA or 401(k) or whatever retirement program you have. Do not cash it out. That way, as you get back on your feet, you can repay that loan at extremely low interest rates and keep the benefits that you will need when you retire. Despite the most recent changes in the law temporarily allowing you to take money out without penalties, cashing these out will normally cost you a large amount of taxes and penalties.
12. If you have room where you live, you may want to consider sharing a place with other family members that you can stand to be around. The same would be true with non-family if you are comfortable and know the individuals well. Do not do that with someone who has lost their job or is likely to lose their job. They can turn into a financial drain on your limited resources. Any bedrooms that do not have paying occupants are an unnecessary drain on your income. Rent them out.
13. If you can’t afford to pay your rent, consider talking to relatives that might allow you to stay with them. Over the last few years, we have seen the comeback of multigenerational households. It may feel embarrassing but, if you haven’t alienated Mom or Dad, or your kids if you are Mom or Dad, they may allow you to stay with them. Just make yourself useful.
I hope this information helps you get through these trying times.
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I’m attorney Gary Ray Fraley. I am a California State Bar Certified Bankruptcy Law Specialist serving clients in Northern California, the Central Valley, the Gold Country and the Bay area.
You can find more information about me and the Fraley & Fraley law firm I founded on my website.
You can reach my office to schedule an appointment at 916-485-5444.