Unemployed because of COVID-19? What you need to know
Monday, 29 June 2020
The lethal coronavirus outbreak has dealt a severe blow to the U.S. economy, quickly throwing millions of people out of work as businesses across the country locked their doors or curbed operations.
More than 30 million Americans filed new claims for jobless benefits over six weeks in March and April 2020. No doubt many had never before lost a job.
What should you do if you find yourself unemployed during the COVID-19 crisis?
First, know that help is available, even for gig workers, freelancers, and others who wouldn't normally qualify for unemployment benefits. You also might get a temporary break from paying your mortgage or student loans.
Here are some of your top questions answered:
How will the CARES Act impact me if I am unemployed?
The Federal CARES Act, signed into law in March in response to the global outbreak, takes broad steps to support workers, businesses, and the economy.
The new law boosted and expanded unemployment benefits, offering emergency pandemic jobless benefits that include an extra $600 a week beyond the amount eligible workers would normally receive under state programs. It also allows states to provide an extra 13 weeks of federally funded unemployment payments. In addition, the CARES Act supports gig workers, independent contractors, and other self-employed people who wouldn't qualify for regular jobless benefits.
Will I qualify for unemployment?
Jobless payments can go to those who are fully or partly out of work because they've been diagnosed with the coronavirus or advised to self-quarantine, or for other related reasons. These include closure of their workplace, death of the family's breadwinner, and caring for an infected family member or a child whose school has closed because of the outbreak, the Department of Labor notes.
Even though the federal government is funding these crisis jobless benefits, those seeking it must apply through their states. Click here to find out how to reach your state's unemployment office.
What if I can't pay my mortgage and rent?
The CARES Act provides relief for those with federally backed mortgages. A "federally backed mortgage" is defined as a first or second mortgage on a 1-4 family home issued, purchased or backed by one of the following entities: Fannie Mae or Freddie Mac, VA, FHA, or USDA. In addition, regulators have encouraged lenders to work with homeowners whose mortgages don't fall into one of these categories.
Homeowners struggling because of the outbreak, who are covered by the CARES Act, can ask their mortgage servicer for a forbearance. A forbearance is a temporary pause of the borrower's duty to make full mortgage payments and the mortgage creditor's right to enforce any delinquency. You may be able to pause payments for up to a year, and you won't face extra interest or fees. However, you are still required to repay any missed or reduced payments in the future. Be sure to also ask your mortgage company about the terms for making up the payments later.
At the end of the forbearance, your options can include paying all of your missed payments at one time, spread out over a period of months, or added as additional payments or a lump sum at the end of your mortgage. Depending on the kind of loan you have, there may be different forbearance options. For example, if you have a Fannie Mae, Freddie Mac, FHA, VA, or USDA loan, you won't have to pay back the amount that was suspended all at once—unless you are able to do so.
You might also check to see whether your state government has imposed a halt on foreclosures or offered other mortgage relief or help, such as a ban on cutting off utilities. (No matter the type of mortgage or state laws, check with your lender to see what help it will offer.)
The CARES Act also protects renters whose landlords pay federally backed mortgages. If your landlord has such a loan, you can't be evicted for not paying rent for 120 days starting March 27, 2020, the Consumer Financial Protection Bureau noted, adding that many states also have suspended evictions during the crisis.
Do I have to continue paying my student loans?
The new law provides student loan relief as well. Federal student loan payments were automatically stopped for March 13 through September 30, 2020, although borrowers can choose to keep making payments. The government has set interest rates on various federal school loans at 0% for that time.
If you made a student loan payment after March 27 and you're strapped for cash, you can request and receive a refund. Your loan service should contact you by sometime in August to let you know when you'll need to start making payments again.
If you're a student facing greater financial hardship because of the outbreak, your school may work with you to help provide the support needed to remain on the rolls. If you're unsure how the new law affects your student loan, call 1-800- 4-FED-AID for information.
How can I manage my budget on minimal funds?
No matter how dire your finances may look due to being unemployed, you can take steps to keep them on track. Review your budget and see where you can cut costs. Try an online spending tracker and other digital financial tools to see a snapshot of your spending habits and better understand how your expenses compare to your budget.
Take advantage of local, state, and federal programs meant to support workers, borrowers, and small businesses, if applicable. Inquire with your creditors and utility companies to find out what support they can provide, such as holding off on payments. Do your best to prioritize your bills and keep a payment calendar so you don't incur late fees.
Don't bury your head in the sand and hope things improve on their own. Instead, look forward by drawing upon available resources as you—and the world—work through these stressful times.
The content provided is for informational purposes only. Neither BBVA USA, nor any of its affiliates, is providing legal, tax, or investment advice. You should consult your legal, tax, or financial consultant about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA USA or any of its affiliates.
Links to third party sites are provided for your convenience and do not constitute an endorsement. BBVA USA does not provide, is not responsible for, and does not guarantee the products, services or overall content available at third party sites. These sites may not have the same privacy, security or accessibility standards.
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