I went to the cleaners this morning to pick up my shirts. Usually their shop is buzzing with activity: workers pressing shirts, suits and dresses; retrieving cleaned items for customers; hauling bags of laundry to the washing machines; and the store is hot and humid. Not today. There were racks of cleaned garments waiting to be picked up but nothing in the cleaning area. The washers and dryers weren’t running, the steam presses weren’t steaming.
This is a scene being played out across America. Around the world, in fact. Businesses large and small are being impacted, but small businesses are the hardest hit. This is because large businesses have access to lines of credit. Small businesses have what the owners can scrape up to keep going.
As I write this, Congress is putting finishing touches on a $2 trillion economic recovery package. This will help. Workers will get some temporary relief; large businesses will get aid. The theory is that helping the big businesses that employ thousands of workers will stabilize the economy and foster a quicker rebound. This has logic. But it will take months for the economy to pick up steam again. In the meantime, thousands will be laid off and some small businesses, like my cleaners, might not survive.
What can you do?
Take an inventory of your financial storehouse. Just like people have been taking inventory of how much food, clothing, paper goods and water they have on hand, look at what you have in the way of financial assets. What recurring debts do you have that must be paid, like the mortgage? What debts can you eliminate? Can you cut that cable TV package? Your gym is probably closed. Are you still paying the monthly fee?
Educate yourself on what financial assistance programs are out there. Find out if you qualify for direct payments, such as unemployment compensation, or some form of indirect relief, such as deferral programs.
Avoid, if at all possible, either taking on new debt, such as through a home equity loan, or dipping into your retirement account, especially if you are under retirement age. Last week I discussed why both of these are bad ideas.
Talk to professionals. If you have a financial planner, talk with them about what to do. Most are recommending to stay the course. If you absolutely must have money from your retirement account, talk with the financial planner about how much, when, and how often you take distributions. And don’t forget the tax consequences of withdrawals.
Do what you can to put your mind at ease. If you’re like a lot of people, you might have thought about doing a will or estate plan, but put it off. If making a will puts your mind a little more at ease, do it. In addition to bankruptcy, we offer wills, trusts and living wills. Call us. We’re happy to help. If you are suffering from general anxiety, talk to a mental health professional. Anxiety in these times is to be expected. There are lots of coping mechanisms.
What if you think you have to file bankruptcy?
The sad truth is, coronavirus will bankrupt far more people than it will kill. If you are one of those people, don’t be ashamed. The bankruptcy laws are there for your benefit. Take advantage of the opportunity to start afresh.
Before you consider bankruptcy, understand how it works. Become informed on the various types, Chapter 7 and Chapter 13. Learn what each will do for you. Call a bankruptcy attorney who offers free consultations to find out your options.
There are tough times ahead for all Americans. But we will get through this.