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DannLaw COVID-19 Update 12–Finally, a New Stimulus Package

private student loans

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Hello, happy holidays, and welcome to DannLaw COVID-19 update 12. In this edition, I’ll unwrap the details of the long-overdue stimulus package that was just passed by Congress and signed by the President.

While the 5,600-page bill doesn’t contain anything that would set 12 lords to leaping or qualify as tidings of great joy, it does provide some much-needed financial relief and protection for consumers, workers, and homeowners impacted by the ongoing pandemic.

Direct Payments

Like the CARES Act, the new bill funds direct payments to individuals and families. Single adults with adjusted gross incomes of up to $75,000 in 2019 will receive $600. Couples earning up to $150,000 will receive $1,200. People who earn up to $112,500 and file as “head of household” will also receive $600. The payment will increase by $600 for each child under the age of 17 in a family.  People with incomes above these levels will receive a partial payment that declines by $5 for every $100 in income.

If you earned less in 2020 than 2019 and would be eligible for a payment as a result, you will be able to claim the money as a refundable credit when you file your tax return for 2020. Be on the lookout for instructions on how to request the payment when your tax forms arrive—if you don’t ask for it you won’t get it.

According to Treasury Secretary Steve Mnuchin, payments via direct deposit should start showing up in bank accounts within two weeks. If yours is being delivered via the USPS it may take much longer to arrive.

Extended Unemployment Benefits

The bill extends unemployment benefits until at least March 14, 2021, for people receiving state-level benefits as well as those who are receiving checks from the Pandemic Unemployment Assistance (PUA) program which covers the self-employed, gig workers, part-timers, and others who are typically ineligible for regular unemployment payments. Everyone who qualifies for unemployment checks will also get an additional weekly payment of $300 through March 14.

Although it is half the amount provided by the CARES Act, the extra $300 per week will be critically important for families struggling to keep their heads above water as the third wave of the pandemic washes over the U.S. and the wait for vaccines to become widely available continues.

If your benefits have run out, log onto your state’s unemployment website to see if you must do anything to receive the extended aid. According to experts, most states should automatically restart your payments, but I strongly urge you to be proactive and check for yourself.

And I know this will come as a surprise, but you will probably have to wait a few weeks for new payments to arrive.

Mortgage Forbearance

As we’ve noted in previous updates, the CARES Act provides for up to 12 months of payment suspension/forbearance for borrowers with federally-backed loans owned by Fannie Mae, Freddie Mac or insured by the FHA, VA, or the Department of Agriculture. While forbearance is a valuable tool that is helping many families remain in their homes, there are some important things to keep in mind about forbearance:

First, forbearance is not automatic—you must apply. Fannie and Freddie have not set a deadline for accepting applications but if your loan is insured by the FHA, VA, or USDA you must contact your servicer and request an initial Covid-19 forbearance on or before February 28. Click here to learn more about the Fannie/Freddie forbearance process and here for info if your mortgage is backed by the FHA, VA, or the U.S. Department of Agriculture.

Second, and I know I’ve said this numerous times, FORBEARANCE IS NOT FORGIVENESS. At some point, you will be required to make the principal, interest, and escrow payments that have been deferred. Whether you have been in forbearance for some time or intend to apply, you should consult with an experienced mortgage attorney to discuss the financial challenges you will face when forbearance ends. I invite you to contact DannLaw to arrange a free consultation so we can evaluate your situation and begin planning an exit strategy that will enable you to preserve your equity and keep your home.

Third, if you are in forbearance look closely at your monthly statement to make sure it is correct. You should also check your credit report. If your servicer is entering negative information or you notice discrepancies contact us so we can help protect you and determine if you have legal claims that may entitle you to financial compensation.

Fourth, If you haven’t been able to make payments because you lost your job or were laid-off when the COVID-19 crisis cratered the economy but are now back to work you should consider taking your loan out of forbearance before the amount of delayed interest, principal, and escrow you owe becomes unmanageable.

Foreclosure Moratoriums Extended

I’m pleased to report that Fannie Mae, Freddie Mac, the VA, FHA, and USDA have extended the moratoriums on foreclosures enacted earlier this year. Single-family homeowners with loans backed by Fannie, Freddie, or the VA are now protected from foreclosure through at least Jan. 31. The FHA moratorium will remain in effect until February 28.

In addition to the CARES Act moratorium, the governor of New Jersey issued an executive order in March that prohibits foreclosure-related evictions. Under the order, homeowners cannot be removed from a residence even if a final judgment of foreclosure has been entered and a sheriff’s sale of the property has taken place. The order will remain in effect until two months after the governor declares the COVID-19 crisis has ended. In addition, more than 150 private lenders in the state have agreed to offer relief to homeowners impacted by COVID-19. You can learn more about the programs being offered in New Jersey here.

You can find a complete list of states that have imposed foreclosure/eviction moratoriums here.  Ohio is conspicuous by its absence–the state has done nothing to assist homeowners.

Unfortunately, the CARES Act forbearance and foreclosure programs do not apply to borrowers whose loans are not “government-backed.” That means unless you live in a state that has enacted protections that apply to private lenders foreclosure remains a very real threat. If you are being threatened with or are already in foreclosure, I urge you to contact DannLaw today to arrange a free consultation. We may be able to take steps to slow down the process and help you save your home.

Eviction Relief

The bill extends the CDC-ordered moratorium on evictions until January 31 and provides $25 billion that will be distributed by state and local governments to people who have fallen behind in their rent.

To receive assistance a renter’s household income for 2020 may not exceed more than 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals must qualify for unemployment benefits or have experienced financial hardship — directly or indirectly — because of the pandemic.

We will provide details on how to apply for this critically important aid as they become available.

Student Loans

The Department of Education has extended the federal student loan relief included in the CARES Act, including zero-interest-rate forbearance and a moratorium on collection activity, until January 31.  Here’s an important tip: make your payments if you can because every dollar will be used to reduce the principal on your loan. Follow my advice and you will owe considerably less when the relief programs end.

I do have bad news for people with private student loans: you don’t qualify for the relief programs. That means debt collectors can continue to pursue and torment you during the pandemic.

Renewal of Paycheck Protection Program

Most of the funding in the new stimulus package is devoted to renewing and strengthening the Paycheck Protection Program (PPP) created by the CARES Act. Unlike the original version of the PPP, the revised edition focuses on small businesses, including those with ten or fewer employees, minority-owned firms, and companies located in low-income areas. You can find more info about the restructured program here.

We will provide details of how and where to apply for the new, improved version of the PPP in the coming weeks, but I urge any and every business owner who may be eligible to explore and participate in the program.

Thanks for taking a few minutes to read DannLaw Covid-19 Update 12. As always, we are here to help homeowners and consumers so please feel free to contact us if you need help or advice.

Happy New Year to you and yours and best wishes for a great 2021.

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Marc Dann - Marc Dann Consumer Fraud & Foreclosure Defense AttorneyI was mildly enthusiastic about the CARES Act immediately after it was passed because it appeared to be substantially different from the stimulus plan crafted by the federal government during the Great Recession of 2008.

That package funneled trillions of dollars to the big banks and Wall Street speculators whose unfettered greed nearly destroyed the world’s financial system but did relatively little to help working and middle-class families devastated by the collapse of the housing market. By the time the economy began to turn around 10,000,000 of them had lost their homes.

By contrast, the CARES Act appears to direct $937 billion in aid to where it’s needed most: into the pockets of the more than 20,000,000 million Americans who are now unemployed and the bank accounts of small business owners who are literally hours away from losing everything they have built.

Sure, Congress doled out hundreds of billions of dollars to corporate America, including the airlines who have been ripping off travelers for decades, but the stimulus checks, enhanced unemployment benefits, and small business loan programs funded by the Act will help millions of people weather the Covid-19 storm—at least for the next couple months.

While it appears that Congress got a few things right, there are holes in the legislation that could negatively impact consumers, homeowners and small business owners. In this update I’ll identify the gaps and provide advice on who to deal with or avoid them.

Problems with the Paycheck Protection Program 

As I mentioned earlier, hundreds of thousands of small businesses across the nation are about to go under. The Paycheck Protection Program (PPP) is designed to help keep them afloat by providing forgivable loans owners can use to pay expenses including employee wages, rent, and utilities.

In concept the program is great. In practice, not so much.

That’s because the nationally chartered banks and SBA approved lenders charged with administering the program are permitted to pick and choose which applications to accept and in what order. As a result, they’ve been playing favorites. Business owners who have an existing relationship with a PPP lender go to the front of the line. Those who don’t, including minorities, are shoved to the back—if they’re able to apply at all. I’m sure you won’t be shocked to learn that Wells Fargo and other large financial institutions are telling smaller customers to hit the road and “try other banks.”  Publically owned Ruth’s Chris Steakhouse just announced that they alone sucked up $20 Million of the funds appropriated.

This type of discrimination is especially troubling in light of the fact that  Congress did not appropriate enough money to meet the needs of all the small businesses that are in trouble. When the money runs out, thousands of hard-working entrepreneurs and their employees will be doomed simply because they couldn’t access the help they were promised and desperately need.

We launched an investigation into this situation after being contacted by frustrated and infuriated small business owners. If you think something is wrong with the way a lender is handling or, more to the point, not handling your PPP application, please give us a call or email me at mdann@dannlaw.com

On the positive side, a number of clients have told us that smaller community banks are eager to process PPP paperwork. We’re not surprised. Over the years we’ve learned that community banks are extremely responsive to the needs of small borrowers. If you’ve been unable to make headway with a large lender, I encourage you to contact one of the community banks listed here.

Stimulus Checks can be hijacked by Judgment Creditors and banks

Stimulus checks funded by the CARES Act are already being deposited in the bank accounts of millions of Americans. That’s the good news.

Here’s the bad news: The Act doesn’t prohibit private debt collectors from garnishing stimulus money. That means if you’re behind on debt payments and have an outstanding court judgment, a private debt collector can grab your stimulus check. Attorney Javier Merino, head of DannLaw’s New Jersey office, along with consumer lawyers Josh Denbeaux and Ira Metrick just published an op-ed in the New Jersey Law Journal dealing with this issue.

If you fall in this category you should keep a close eye on your bank account and withdraw the money as soon as it is deposited. To stay one step ahead of judgment creditors you can track your stimulus payment here.

Here’s more bad news: if you owe money to the bank where your stimulus payment is being direct-deposited the bank can grab it. For example, if you have a bank account that’s been overdrawn, and your stimulus payment is deposited into that account, the CARES Act does not prevent the bank from taking part or all of the stimulus payment to pay back the debt. So far J.P. Morgan Chase and Wells Fargo have said they will not seize stimulus funds. Bank of America, Citibank, and U.S. Bank have yet to clarify their positions.

Waiver of Federal Student Loan interest is in doubt 

Federal Student Loans servicers have not been completely transparent about how they are going to implement the six-month zero interest, zero-fee forbearance included in the Act. In addition, some observers speculate that Navient, Greatlakes, and Nelnet don’t have the technology needed to properly track accounts. If you are taking advantage of the forbearance program please pay close attention to your loan statements and contact DannLaw or other attorneys if you notice a discrepancy in your account.

The CARES Act does not provide relief for federal loans originated before 2005 and private student loans 

The CARES Act does not provide forbearance for federal student loans originated before 2005 that were not consolidated or private student loans. If your loan falls into these categories you must continue to make your payments. If you are unable to do so, contact your servicer in writing and request a modification, forbearance or another type of accommodation.

Monitor your credit if you are taking advantage of the mortgage forbearance provisions of the CARES Act.

As we’ve noted in previous updates, the CARES Act provides for up to 12 months of payment suspension/forbearance for borrowers with federally-backed loans owned by Fannie Mae, Freddie Mac or insured by the FHA, VA and the Department of Agriculture. To determine if you have a qualifying loan send a request for information (RFI) to your mortgage servicer. We’ve drafted a simple RFI you can use. To obtain a copy email us at intake@dannlaw.com.

Please remember forbearance isn’t forgiveness.  That means you may be subject to higher mortgage payments, escrow payments, and other fees when you begin making your payments after the forbearance period. If you do take advantage of the Act’s forbearance program you should look closely at your monthly statement to make sure it is correct. You should also subscribe to a credit monitoring service and check regularly to make sure your servicer is not entering negative information on your credit report. If you notice discrepancies contact us at intake@dannlaw.com so we can help protect you and determine if you have legal claims that may entitle you to financial compensation.

Bankruptcy may be the solution to your financial problems 

My parents always encouraged me to hope for the best but prepare for the worst. Today, their advice is more valuable than ever before because the COVID-19 emergency is causing unprecedented damage to our economy and levels of unemployment not seen since the Great Depression. Study after study has shown that a majority of Americans would have a difficult time meeting their obligations for more than a month or two if they lost their source of income. The ongoing crisis has validated those studies.

The $1200 stimulus checks and small business loans may ease the pain in the short term, but when that money is gone many business owners and individuals will be forced to consider filing bankruptcy in the months ahead. And while many people are loathe to do so, bankruptcy protections may provide the best option for dealing with the devastation caused by the crisis—a crisis none of us created or could have anticipated.

The fact that the courts and collection activity are essentially shut down gives business owners and individuals a unique opportunity to closely examine their financial situation and begin planning for the future—including a future that includes bankruptcy. Doing so will put you in a good position to move forward once the crisis ends if you don’t have to file and will help ensure that bankruptcy provides the maximum protection for your family and your business if filing proves to be the best alternative.

If you would like to schedule a phone or video conference with one of our experienced bankruptcy attorneys to discuss your financial future and the options that are available to you, please email bflick@dannlaw.com  We are here to listen, to advise, and to help.

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A recent federal appeals court decision may spell “relief” for Americans buried under private student loan debt held by Navient. In a unanimous decision, a three-judge panel of the Court of Appeals for the Fifth Circuit held that Navient private student loans ARE dischargeable in bankruptcy.

This decision, to put it mildly, IS A BIG DEAL!

We won’t go into the complex legal issues discussed in the Court’s 28-page decision–although you can read it here if you are so inclined:5th cir private loans dischargeable

What matters is the bottom line: Navient debtors may now be able to climb out from under crushing private student loan debt by filing for bankruptcy.

While the ruling is great news, there are some important things you should know:

  • The decision only applies to private student loan debt issued or serviced by Navient. Non-Navient and government-backed loans cannot be erased via bankruptcy. To learn more about how to deal with government-guaranteed indebtedness visit www. https://dannlaw.com/student-loan-debt/
  • Bankruptcy may not be the best way to resolve your private student loan debt problems. The members of DannLaw’s legal team are well-versed in the laws governing both student loans and bankruptcy. We will be able to help you decide if bankruptcy is right for you and determine whether you should file Chapter 7 or 13. We may also be able to offer other options and strategies to deal with your debt.
  • Although the decision will serve as precedent within the Fifth Circuit’s jurisdiction which includes Louisiana, Mississippi, and parts of Texas, our experienced attorneys will be able to use the ruling to persuade judges across the country to discharge Navient private student loan debt via bankruptcy.

To learn more about this exciting decision and whether you should resolve your Navient private student loan debt dilemma by filing for bankruptcy,  call Atty. Brian Flick at 513-645-3488, Atty. Emily White at 614-500-4395 or use our contact form to arrange a free, no-obligation initial consultation. They will be happy to evaluate your situation and offer sound advice that will put you on the road to financial security.