Prioritizing Debts and COVID-19

For the best advice available on managing your debts, we highly recommend that you download a copy of the National Consumer Law Center’s award-winning book, Surviving Debt, which NCLC is making available for free during the COVID-19 crisis. A good deal of the practical advice offered here is contained therein.

Overview / COVID-19 Impact

This health crisis is stressful for everyone and consumers with more expenses than income to pay each debt are faced with a difficult decision on what bills to pay. It may be tempting to pay the bill from the most aggressive creditor, but this may not be in your best interest. It is important to understand how you can protect your family and bank account during this difficult time.


What You Can Do

If you are suffering from a reduced income, it is difficult to be economically stable. However, you should still try to minimize debts, stick to a budget, prioritize debts to be paid and avoid scams and predatory loans. High priority debts are debts that include necessities or that are secured by collateral (usually property, like your home or car). For example, if you do not pay for your mortgage or rent, your home could go to foreclosure or you could be evicted. Similarly, if you do not pay your car loan, your vehicle could be repossessed. Here are “high priority” debts:

  • Housing Costs
  • Car Payments/Transportation Expenses
  • Utilites
  • Food
  • Child Support
  • Taxes
  • Student Loans
  • Traffic Tickets/Court Fines

Low priority debts are unsecured, meaning you do not have to give anything back if you do not make your payments. For example, you do not have to give your credit card company back food that you bought with your credit card if you do not pay your bill. However, not paying low priority debts can have a negative impact on your credit, and the creditor could sue you in court. If you get court papers, you should contact a local legal aid lawyer promptly. Do not ignore court papers. Here are some “low priority” debts:

  • Credit Cards
  • Online Installment Loans
  • Payday Loans
  • Attorney Bills
  • Medical Debts


Rights and Protections

The recent Coronavirus Aid, Relief, and Economic Security (CARES) Act provides many consumer protections to help consumers during this difficult time. However, you must be proactive to get assistance. You will not benefit by ignoring the problem.

The Mortgage and Rent pages outline various relief options that are available for homeowners and tenants under the CARES Act. To obtain assistance with your mortgage, you must reach out to your mortgage servicer. And, you should not use funds to pay low priority debts during any forebearance. It is better to save these funds so you can make sure you can always pay your high priority debts.

Many auto lenders are also willing to work with consumers who need assistance (remember, you generally must request such assistance). You can get more information on the Auto Loans page of this website.

Many utility providers offer a budget plan if you are having problems making your payments. There are also federally funded programs for elderly or low income households. Common types of assistance are fuel, crisis, cooling, and weatherization. Virginians can go here for more information: Other states that have also temporarily halted all residential electric, gas, and water shut-offs until the COVID-19 crisis ends include: California, Connecticut, District of Columbia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Vermont, Virginia, West Virginia and Wisconsin.

You can visit the Student Loans page to learn about hardship forbearance, reasonable and affordable repayment plans and income-contingent repayment plans.

If someone contacts you to collect a credit card or other debt, you should determine who is contacting you. Are they your original creditor (who you took out the debt with), a debt collector (a third party attempting to collect the debt on behalf of the original creditor) or a debt buyer (a third party who purchased your debt from a the original creditor)? You may be able to avoid collection attempts if you are “collection proof.” This means your income and assets are protected from the reach of creditors. For example, if your income is from child support, social security, social security disability, or unemployment benefits, your creditor could not collect those funds to satisfy any judgment. If you tell a debt collector or debt buyer this, it may decide to forego further collection attempts. Visit the Debt Collection page to learn more about your rights when you are contacted by a debt collector.

If you have medical debt, you may be able to negotiate with the hospital or provider for reduced billing or charity care. You should contact your hospital or provider to see if this is an option.


Other Resources