Strategies for Dealing with Creditors During a Financial Crisis like the Coronavirus
The COVID-19 pandemic has introduced a set of financial challenges that are unprecedented in modern memory. As the financial implications of the pandemic become increasingly complex, it’s essential to understand how to manage your financial obligations, particularly when dealing with creditors. This article will provide valuable insights and practical advice on how to navigate these challenging circumstances.
Mitigating Immediate Financial Demands
During a financial crisis like the Coronavirus, your immediate needs for sustenance and healthcare should be met first. Prioritize expenditures on essential items like food and prescription drugs. Next, ensure that you continue payments for vital utilities such as electricity, gas, and internet. If your income is stable, continue servicing your debts, making at least the minimum payments and prioritizing high-interest debts.
However, if there’s uncertainty about your income, it’s prudent to have a conversation with your creditors about potential payment deferrals or smaller installments.
Note: Keep abreast of the latest advice on managing your finances during the crisis. For instance, this article on coping with consumer debt as the economy reopens offers valuable insights.
Maintaining Financial Responsibilities Amid Job Instability
If you are fortunate to be in employment during the crisis, it’s advisable to continue making payments towards your debts. Prioritize high-interest debts and make at least the minimum payments. However, if you’re not working due to the crisis, you may find yourself overwhelmed with collection calls for old debts. Remember, you have a right to inform your creditors about your situation and request a pause in these calls.
Understanding the Implications of the Suspended Limitations Act in Ontario
In Ontario, the Limitations Act stipulates a two-year window within which creditors can legally sue you for unpaid debts. However, due to the COVID-19 crisis, the Ontario government has suspended this limitations period, extending the time creditors have to sue. As a debtor, it’s crucial to understand this development as it may impact your financial planning during and after the crisis.
Preventing the Right of Offset
If you’re worried about your bank offsetting your debts with the money in your account, consider opening a bank account in a different financial institution where you have no debts. This can be done easily online, especially with many physical bank branches closed due to the pandemic.
Interpreting Credit and Mortgage Deferrals
As many people grapple with job losses and reduced income due to the crisis, credit and mortgage deferrals have become a lifeline. The Canadian government has established mortgage default management programs for insured mortgages, offering deferrals on a case-by-case basis. Some lenders are also offering deferrals on credit card payments for up to six months.
However, it’s crucial to understand that deferrals do not constitute a waiver of payment. Instead, they simply postpone your payment obligations. Interest continues to accumulate during the deferral period, increasing your overall debt.
Engaging with Your Landlord
If you’re struggling with rent payments, it’s important to communicate with your landlord. You might be able to negotiate a temporary reduction or postponement of rent. In Ontario, the government has put evictions on hold, offering some reprieve for tenants who are unable to pay their rent due to the crisis.
The Impact on Your Credit Score
While it’s understandable to worry about the impact of missed payments on your credit score, remember that your immediate financial needs take precedence. Lenders might report missed payments to credit bureaus, but if you’ve proactively communicated with them about your financial hardship and obtained an agreement for a payment delay, this won’t be considered a missed payment.
Free Credit Report Offers Amid The Crisis
During the COVID-19 crisis, credit bureaus like Equifax and TransUnion are offering free credit reports. These reports can help you monitor your credit situation and understand how your actions during the crisis are being reported by your creditors.
Strategizing For a Potential Recession
The COVID-19 crisis is likely to cause a recession in Canada. This could mean job losses and reduced credit availability. If you’re currently working but have a significant amount of debt, consider proactively addressing your debt situation before the recession hits. This could mean consolidating your debts, adjusting your budget, or even considering insolvency if necessary.
Connecting with a Licensed Insolvency Trustee
During a financial crisis like the Coronavirus, getting professional advice can be extremely beneficial. Licensed Insolvency Trustees can provide free consultations and guide you through your debt relief options. They can help you understand whether you should deal with your debts now or later, depending on your current income and employment status.
In conclusion, dealing with creditors during a financial crisis like the Coronavirus requires a strategic approach. By prioritizing essential payments, understanding the legal changes, and seeking professional advice, you can navigate these uncertain times with confidence. Remember to take care of your health and follow all public health guidelines to protect yourself and your loved ones from the virus.
