 TITLE: How to Avoid Filing for Bankruptcy During COVID-19 CONTENT: Alternatives to Filing Bankruptcy\n---------------------------------\nIf you worry either type of bankruptcy may be in your future, and reducing expenses and adding income isn't giving you enough extra money to cover your debt obligations, now is the time to explore your alternatives and any available relief options. Here are a few strategies that may help you avoid filing:\n*   **Put major payments on hold.** To help address the economic strain caused by the COVID-19 outbreak, the federal government stepped in to enact legislation and provide guidance that assists homeowners. New laws contain expanded protections for homeowners with federally backed mortgages. If you don't think you'll be able to meet your home mortgage payments, contact your lender. You may also be eligible for a forbearance plan, which can reduce or suspend your payments for up to 12 months. Federal student loan payments have also been suspended until at least September 30, 2021. Without having to pay these large monthly obligations, you may be able to meet your other expenses.\n*   **Look into expense breaks.** Local governments are also helping people make ends meet right now. Visit your state, county or city website to find out about options you have that may help you lower your necessary bills. For example, in response to the COVID-19 outbreak, utility providers in California have enacted provisions such as payment assistance programs as well as discounts on service. Find out what you can get in your state, and then apply. Every little break counts.\n*   **Consider a hardship program.** If you can't pay the minimum to your credit card accounts or loans, contact your lenders directly and ask if they can work something out with you. Many credit card companies are assisting their customers right now, so don't delay.\n*   **Enter into a debt management plan.** Nonprofit credit counseling agencies help consumers repay their credit card debts. Counseling consultations are free, and include a detailed review of your income, assets, expenses and liabilities. Your counselor will work with you to develop a plan based on your needs and goals.  \n    If a debt management plan (DMP) makes sense, it will be presented as a sound option against bankruptcy. DMPs are arranged so you can be free of much of your debt in no more than five years (though not all types of debt are covered). With DMPs, you make one payment to the agency and they distribute the funds to your accounts. Credit counselors can sometimes negotiate lower interest or a lower payoff amount, though paying less than the full amount owed could hurt your credit. Find a member agency though the National Foundation for Credit Counseling or the Financial Counseling Association of America.\n*   **Get help from friends and relatives.** If members of your family or close friends are in a better financial position than you are, this may be the time to turn to them for assistance. They may agree to lend or even gift you enough money to get by. If you borrow money from family members or friends, be sure to document the agreement, noting your repayment plan and any interest.\n*   **Borrow against your home equity.** If you've amassed a substantial amount of equity in your home, you may also consider using it to help you stay afloat. A home equity line of credit (HELOC) could give you access to up to 85% of your home's appraised value, at a low interest rate. You can use that money to pay your bills until you get back on your feet. Just keep in mind that you could lose your home if you can't keep up with equity payments.\n*   **Tap into your retirement account.** When finances are tight, taking money out of your retirement savings can be a tempting way to bridge the shortfall. Under normal circumstances there is an early withdrawal penalty of 10% of what you take out before the age of 59½, but if your financial hardship is related to the pandemic, the CARES Act waives that penalty. You may be hit with a higher tax bill, though, and withdrawing retirement savings can reduce the amount of money you have for your retirement years. That's why you should only consider this step if bankruptcy seems like the only other option. END