Last month, the New York unemployment rate went up to 14.5%, taking it to its highest level since the Great Depression.

According to the New York State Department of Labor (DOL), it was the biggest monthly drop in employment numbers on record. Nationally, the April unemployment rate was 14.7% (compared to 4.1% in March), mostly due to the loss of over 1.7 million private-sector jobs.

With so many New Yorkers out of work or living paycheck to paycheck, personal debt levels are on the rise. If this is your situation, you’re probably wondering if your creditors or debt collection agencies will take legal action against you to get their money.

The current economic overview

New York State Budget Director Robert Mujica confirmed that calls to the DOL went from a maximum of 50,000 per day to an average of three million, with highs of eight million calls a day not being unusual.

Mr. Mujica also stated that before the pandemic took hold, his office had a team of 500 employees to assist with claims. He now employees 7,000 staff and admitted that the state hired five outside contractors to deal with the increasing claim volume.

In terms of job loss, the largest hit sector in New York has been leisure and hospitality. A decline in tourism and closure of all businesses deemed nonessential have put thousands of restaurant workers, hotel employees, and certain retail employees out of a job. COVID-19 has also taken a devastating toll on small businesses.

Governor Cuomo recently announced that more state assistance will be available. New York is working with private banks to launch a small business relief program that will make over 100 million dollars worth of loans available to small businesses. Priority will be given for businesses owned by women and minorities that have less than three million in revenues and 20 or fewer employees.

Can your creditors come after you at this time?

For the time being, no. But it’s only a temporary respite.

If you owe money to the state (for example, medical bills or unpaid student loans), Governor Cuomo has put all collection efforts on pause until later in the year. During this hold, your debt will not accrue interest or have collection fees applied.

If you owe a lot of money on your credit cards or have unpaid utility bills, your creditors or a collection agency can call you about them, but for the time being, the New York Court is limited to essential functions only. This means that no one can file a collection case against you until the COVID-19 crisis passes.

Regarding the collection calls, if third-party collection agencies are calling you at an excessive rate or threatening you over the phone, they have violated the Fair Debt Collection Practices Act (FDCPA), which prohibits harassing and manipulative debt collection practices, and you should consult a consumer protection attorney about pursuing compensation.

To summarize: your creditors cannot file a new case against you as long as the COVID-19 crisis is in place, but this relief is only temporary. If you are unable to work out a repayment arrangement with them, your debts could continue to grow, and you may eventually face the possibility of:

  • Wage and/or bank account garnishment
  • Foreclosure
  • Eviction

It’s a hard situation to be in, especially if your employer doesn’t reopen, and you don’t find gainful employment immediately. Support measures like the CARES Act and stimulus checks have helped, but these are only temporary relief measures and not intended to be long-term solutions.

How bankruptcy can help

petition for bankruptcy

A bankruptcy petition can discharge many debts, such as credit card bills and personal loans.

If overdue bills continue to harm you financially after the crisis passes, consumer bankruptcy can help you address unsecured debts such as:

  • Credit cards and lines of credit
  • Medical bills
  • Unpaid utilities

Filing for Chapter 7 can discharge these debts in a matter of months, leaving you in a better financial position to pay down secured debts like your mortgage, car loan, child support arrears, and any other obligations that you voluntarily affirm. After you file, the automatic stay prevents creditors and debt collectors from all further collection efforts, such as calls, letters, and lawsuits, giving you breathing room and peace of mind.

If you are concerned about the effect of COVID-19 on your financial situation, then most New York bankruptcy attorneys are offering virtual consultations, so don’t hesitate to reach out and get the advice you need. If Chapter 7 is the best way to help you regain solvency, then your attorney will help you file a case when the courts reopen.

This is a difficult time for all New Yorkers. But like most challenges, it will pass. In the interim, it’s important to stay safe, stay positive, and make the right financial decisions for yourself and your family.

About Jayson Lutzky

Jayson Lutzky

Jayson Lutzky has been practicing law in New York State for over 37 years. He primarily handles divorce, family law, personal bankruptcy, personal injury and medical malpractice cases. Jayson is fluent in both English and Spanish. He is a member of the Bronx County Bar Association, is admitted to the Federal Court for the Southern and Eastern Districts of New York and has received numerous awards. In 2000, Jayson won the President’s Pro Bono Service Attorney Award from the New York State Bar Association and also received recognition from the Network for Women’s Service Commitment to Justice Award. Recently, Jayson won recognition from Martindale-Hubbell and AVVO. Jayson is also an arbitrator in the Small Claims Part in the Civil Court of New York in the evenings and has served on the Board of Trustees of the Greenburgh Hebrew Center as well serving as its President. Jayson attended Union College in Schenectady, New York where he received his Bachelor’s degree and graduated with honors in 1979. Jayson attended the Benjamin N. Cardozo School of Law at Yeshiva University, New York and graduated in 1982 with a law degree.

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