What To Do And Not Do When Unemployment Due To COVID Strikes
Las Vegas, Nevada – Consumer Bankruptcy May Be Part Of A Plan For Any Employee Impacted By Layoffs From The Coronavirus
The highly contagious Coronavirus has already inflicted a medical emergency across the world. Now the virus Covid-19 has caused all non-essential businesses in the State of Nevada to close, the Las Vegas Strip has temporarily closed its doors for the next several weeks. It is now looking like this closure may last many more weeks.
The suspension of non-essential business operations is leading to the furlough of thousands of Las Vegas employees and the loss of income for small business owners. The Las Vegas Strip employees impacted by such closures are casino dealers, housekeeping, restaurant servers, cooks, performers, bartenders, retail sales clerks, front desk, porters, valet and so forth. Moreover, all of the businesses that are ancillary to the Las Vegas Strip will be negatively affected. Such as Taxi, Uber and Lyft drivers, and tour groups.
Any work stoppage may cause severe financial hardship for any family. Especially so for the many workers living paycheck to paycheck. However, a weeks-long or months-long work stoppage will be a financial disaster to even the most prepared. Mortgage payments are still expected to be paid, groceries are needed, and the power bill will continue to come in.
Las Vegas employees live and spend their hard-earned money in the Las Vegas community. And when there is a cut back on their spending in the local economy, there is a ripple effect throughout the Las Vegas area. Discretionary spending is usually the first to go. This will lead to a weakening in the overall job market in the Las Vegas area.
With the Federal and local governments restriction on travel, the tourist-dependent Las Vegas Strip will suffer an even bigger hit than a temporary suspension of activity. At this time, it is unknown how long it may take to contain the Coronavirus. The recent strip closures are for two weeks, but it is possible it could be for many weeks longer. Even after any containment, it is unknown how long it may take for the tourist industry on the Las Vegas Strip to return to normal.
Anyone impacted by the downturn in the Las Vegas economy should have a plan with options to be as prepared as possible. Success favors the prepared!
Anyone laid off should immediately apply for unemployment benefits. Nevada unemployment benefits are available for up to 26 weeks. During the 2007 – 2010 great recession, the federal government stepped in and unemployment benefits were extended to 52 weeks. The weekly amount of unemployment benefits is based on 4% of the highest-earning quarter of the base period. The weekly maximum is $427.00.
Undoubtedly, the federal government will be rolling out some form of relief as well. Initial relief may be a one-time payment of $1,000.00 – $2,000.00. This will probably be limited to people who are under a yet to be established income requirement.
I am sure whatever the governmental aid will ultimately be, it will not replace the incomes that the now out of work employees were earning before these massive layoffs. Collecting a maximum of less than $1,900.00 per month will leave many in a challenging financial position.
Hard decisions will soon confront many of us. At what point does one decide to stop making credit card and other loan payments? The answer is dependent on an array of factors: Amount of debt, length of time out of work, amount of cash reserves, amount of money paid when gainfully employed, any late payments or stopped making payments prior to the work stoppage.
Continuing payment on payday loans while on unemployment will probably not even be possible. Payday loans usually require two payments per month, and each payment is equal to 25% or more of the total amount of the loan. The super high-interest rate keeps the loan balance from going down. Again, someone who is unemployed, probably cannot maintain any payday loan payments.
Two things you should not do before consulting with me is liquidating a 401(K) account to pay debts or take a Home Equity loan to pay a debt:
1. Liquidating or borrowing against a 401(K) or other retirement accounts to pay debts may be a bad move
First, a retirement account is a form of saving to support yourself when you retire. The federal government encourages this form of savings by offering tax benefits and protections. As we are now witnessing, self-preparedness is paramount.
Second, a careful analysis should be conducted to determine whether personal bankruptcy is a potential option. If ultimately files for bankruptcy, most loans and credit card debts are eliminated. For a personal claiming Nevada exemptions, in a bankruptcy, a 401(K) account may be protected up to $500,000.00. Thus, liquidating a 401(K) to pay-off some of the debt, or to pay-off and then recharge up debt, and later still file for bankruptcy would result in the needless loss of your valuable retirement account.
2. Taking a Home Equity loan to pay debts may not be a good move for you
First, debts such as credit cards and payday loans are unsecured. There is no property or collateral securing the debt. So if you fail to pay back the loan there is no collateral for the lender to take. The lender may take legal action against you for failing to pay the loan, but there is no property directly tied to the loan.
In contrast, a secured debt there is some collateral that secures the debt. The collateral is usually a home or vehicle. A home equity loan is a secured loan. In a home equity loan (secured debt) if you fail to pay back the loan the lender may foreclose on your home. The problem with taking home equity to pay an unsecured debt is that you are essentially turning the unsecured debts into secured debt. In a bankruptcy claiming Nevada exemptions, you can protect your homestead up to $550,000.00 in equity.
The Coronavirus has presented Las Vegas with a scary medical challenge. The fallout from this medical emergency is the immediate stoppage of work. If you are faced with unmanageable debt, credit card, payday loans, behind on home mortgage payments, please do not hesitate to contact the Law Office of Rodney K. Okano at (702) 566-3600.
I am available to discuss potential options over the telephone without the need to leave your home: