Lifestyle

Metro Detroit Attorney: How to Stay Financially Afloat During COVID-19

March 15, 2020, 9:34 AM

The writer, a Southfield attorney at the Thav Gross law firm, specializes in financial law, including bankruptcies.  

By Kenneth Gross

We are facing an unprecedented event. Moment to moment we are witnessing the shutdown of economic activity everywhere. The grocery stores are buzzing, and people are scrambling to grab each roll of toilet paper.

Needless to say, rationality is not pervasive. What to do? Focus on the big picture. Like all adversity, this will pass and we will survive. The key is to prioritize on two levels -- health and economics.

The health side has complexities because knowledge is evolving and that may lead to altered guidelines. The solution is to keep abreast of the guidelines and adapt to changes as necessary. The information is readily available.

There are no guidelines on economic problems caused by COVID-19. If you are financially strong and have savings to weather the storm, the money you have in reserve will serve its intended function.

But many people and businesses live without savings. If you are among this massive group, you need a plan.

Postpone Payments

The government has said it is taking steps to make sure cash continues to flow. That's good news, but proceed cuatiously until we have the when and the how. Don't leave yourself without cash, individually or as a business.

For the short term, postpone making payments if necessary so you do not leave yourself without cash reserves. Late payments less than 30 days are not reported to the credit bureaus.


Kenneth Gross: "We just have to ride out the storm."

You can get late fees waived. After 30 days, credit does take a hit, but better to have cash in reserve than to be left without cash and then find your available credit is eliminated by the bank. If faced with only two options – both unappealing – you must select the better of the two.

If you have reserves available on an equity line on your home, take those funds first, the interest rate is lower. If you end up not needing the cash, pay the debt back down. If you have no reserves and no equity line, but cash is available on cash advances against credit cards, make a decision.

The interest rates are appalling, and you cannot afford to pay credit card debt over the long term at 20%+ interest. This, however, is a solvable problem. Trying to pay for food, fuel and housing when you have no cash and no credit does not have a solution.

You also have no assurance that the banks won’t panic in a heartbeat and trim available credit. We learned in the financial crisis, what the banks say and what they do does not always match up. If faced with this situation, it’s better to hoard the cash. Take the advances before available credit disappears. Get through this with cash and then you can figure out the way to eliminate the debt.

The lesson we've talked about many times is true: You need to be debt free and have savings. If that is not where you are at, the lesson is that you need available cash to cover food, housing and transportation. Relying on Uncle Sam to save you is too great a risk.

Good times are ahead, eventually. We just have to ride out the storm. Hang in there. 



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