New York state unemployment numbers are at their highest levels since the Great Depression thanks to COVID-19. Nearly 1.5 million New Yorkers filed for benefits last week, leaving the New York Department of Labor completely overrun with new claims. They are doing what they can to streamline the filing process. However, it’s no wonder that many New Yorkers are reporting significant problems with filing claims and receiving their unemployment benefits. With so many recently unemployed New Yorkers living paycheck to paycheck, we are guaranteed to see personal debts skyrocket during this very uncertain time. Sadly, even the coronavirus pandemic will not stop the debt collectors and big banks from trying to get their money. Governor Cuomo and the state of New York has decided to step in where they can, but the sad reality is that many New Yorkers who were doing just fine before the crisis will be in dire financial straights in the months ahead.
For those who owe money to the state of New York, the good news, for the time being, is that the governor has extended the current hold on the collection of student loan debts, medical debts, and other state referred debts until later in the year. This hold could very likely be extended again, and during this hold, no interest will accrue on the debt, and all collection fees will be waived. New York State Attorney General Letitia James said, “New Yorkers need to focus on keeping themselves safe and healthy from the coronavirus and therefore can rest assured that state medical and student debt referred to my office will not be collected against them for at least 30 days. This is when New Yorkers need to rally around each other and pick each other up, which is why I am committed to doing everything in my power to support our state’s residents. During this crisis, my office will not add undue stress or saddle New Yorkers with an unnecessary financial burden.” Money owed to the state is on pause for the time being but is only part of debt trouble for most consumers.
If you have substantial credit card debt and find your credit card company harassing you on the phone or threatening to sue, there is some additional good news for now. The New York Court system is closed because of the virus. All non-essential functions of the court have been suspended until further notice. Your credit card company can’t file a new case to go after your unpaid debts during the coronavirus crisis. But this is only a temporary fix, creditors will be waiting when the crisis passes and while the debt for millions of New Yorkers grows. While the CARES Act and other government programs have helped, something more substantial must be done to improve the American consumer avoid financial catastrophe in the months ahead.
Overdue bills will come due for millions of struggling New Yorkers soon enough. Too many of our neighbors will be looking at the genuine possibility of losing their home through eviction or foreclosure and having their wages or even stimulus checks garnished by creditors. With businesses and income that might never return millions of consumers who never thought they might need it will be turning to Chapter 7 or Chapter 13 bankruptcy as their only option.
Bankruptcy is never an easy decision, but it will be the only choice for many debtors dealing with the financial fall out of the coronavirus crisis. A wave of bankruptcy filings is likely to follow the wave of infections, but the stigma of bankruptcy shouldn’t keep New Yorkers from getting the debt relief they are entitled to. Significant bankruptcy reforms are already being discussed in Washington. Already most people will keep their home in bankruptcy while discharging most of their unsecured debts at the same time. But with a flood of filings coming, even more, should be done to help New York consumers facing bankruptcy. These bankruptcy protections are likely to be expanded, but now you have some time to weigh your debt relief options. If your credit card debt is becoming unbearable, or if you are concerned about losing your home, it may be time to contact a credit counselor or bankruptcy attorney. If you live in New York, please contact our offices at 212-244-2882 or [email protected] to arrange a free phone or virtual consultation.