Q&A: Stimulus funds don’t count as income

Dear Liz: I hold power of attorney for my aunt, who is in a local nursing home. Medicaid pays the bulk of her cost to stay there. Her $1,200 stimulus check was just deposited into her bank account at the end of last month. The state Medicaid rules require that she not have more than $2,000 in assets. I try to keep her bank balance below that each month, which can be a challenge. Do you have any idea how the state Medicaid will handle this additional income to her bank account? Will I have to pay the nursing home additional money from it or reimburse Medicaid? Or will she be allowed to keep the whole amount? I want to be judicious with her finances and not screw up her eligibility for Medicaid (her greatest fear is being thrown out on the streets).

Answer: Your aunt is lucky to have you, and fortunately there’s no need to worry. The payments are not considered income for recipients of Supplemental Security Income (SSI), according to a blog post by Social Security commissioner Andrew Saul. State Medicaid programs are not allowed to impose eligibility requirements that are stricter than SSI standards, according to ElderLawAnswers, a referral site for attorneys who specialize in issues relating to seniors.

Q&A: Big debt is bad in the coronavirus downturn. But a consolidation loan might not be the answer

Dear Liz: I have about $40,000 in credit card debt and am considering a consolidation loan. I’m current with my cards. My income is about $130,000 per year. Can you recommend a lender? Any cautions?

Answer: As you probably know, this is a bad time to be burdened with a lot of debt. But taking out another loan may not be the answer.

Personal loans — the type of unsecured loan often used to consolidate other debt — work out best when you can lower the rate on your debt, get it paid off within three to five years and avoid accruing more debt while you do so.

Unfortunately, people who take out consolidation loans often don’t, or can’t, fix the problem that caused the debt in the first place. If the debt came from overspending, for example, they don’t trim their expenses to match their income and wind up borrowing more. If the debt is from medical bills, ill health may cause them to incur more medical-related debt.

Another issue is interest rates. Personal loans typically have fixed rates, which is good, along with fixed payments so you actually pay off the debt over time. That’s in sharp contrast to credit cards, which usually have variable rates and minimum payments that don’t pay down much of your principal.

Unless your credit is good and your income secure, though, you may wind up paying a higher rate than you are now — assuming you can get a personal loan at all. Lenders have tightened their standards considerably in recent weeks because of the current and expected economic fallout from the pandemic.

Many people are better off paying down their debt on their own, making extra payments to get their highest-rate card paid off first, and then moving to the next-highest-rate card, while paying minimums on the rest. (Another approach is to pay the smallest balance first, to give yourself a psychological win that can motivate you to keep going.)

If you can’t pay more than the minimums, then you’re likely in too much debt to dig your way out on your own. Consider making appointments with a credit counselor affiliated with the National Foundation for Credit Counseling and with a bankruptcy attorney (the National Assn. of Consumer Bankruptcy Attorneys offers referrals) so you can better understand your options.

Wednesday’s need-to-know money news

Today’s top story: Your 401(k) match may be in jeopardy. Here’s what you should do. Also in the news: What happens to your travel rewards if your airline goes bankrupt, how to upgrade your old car with new tech, and why your student loan Coronavirus forbearance is messing up your credit report.

Your 401(k) match may be in jeopardy. Here’s what you should do
Steps to take right now.

Airlines are on the brink of bankruptcy — what happens to your voucher, travel miles and airline credit card if they go belly up?
No guarantee of a refund,

Upgrade Your Old Car With New-Car Tech
You can get rid of those 8-track tapes.

Why Your Student Loan Coronavirus Forbearance Is Messing Up Your Credit Report
Scores are dropping as much as 50 points.

Tuesday’s need-to-know money news

Today’s top story: 5 questions to ask before canceling your travel credit card. Also in the news: Think it’s bad now? Wait until hurricane and fire seasons start, 8 types of credit card relief you can ask for, and tomorrow is the deadline to receive your Coronavirus payment by direct deposit.

5 Questions to Ask Before Canceling Your Travel Credit Card
You might hurt your credit score.

Think it’s bad now? Wait until hurricane and fire seasons start
Mother nature doesn’t care about your pandemic.

8 types of credit card relief you can ask for
From delayed payments to credit line increases.

Tomorrow Is the Deadline to Receive Your Coronavirus Payment by Direct Deposit
Get your information in.

Thursday’s need-to-know money news

Today’s top story: Start thinking bankruptcy now to maximize your options later. Also in the news: Why this is the perfect time to teach teens about credit, how to protect your stimulus relief check from debt collectors, and how to return a deceased relative’s stimulus check.

Start Thinking Bankruptcy Now, to Maximize Your Options Later
Timing is everything during the pandemic.

This is the perfect time to teach teens about credit
5 ways to prepare Gen Z for the real world of debt and finances.

How to protect your stimulus relief check from debt collectors
Turn that check into cash quickly.

How to Return a Deceased Relative’s Stimulus Check
Unfortunately, you can’t keep it.

Tuesday’s need-to-know money news

Today’s top story: For self-employed, filing for unemployment benefits is getting easier. Also in the news: How to pay rent when you can’t afford it, what to keep in mind with credit card payments during the pandemic, and how to find out what you owe the IRS.

For Self-Employed, Filing for Unemployment Benefits Is Getting Easier
What you need to know before filing a claim.

How to Pay Rent When You Can’t Afford It
Exploring your options.

COVID-19: What to Keep in Mind With Credit Card Bill Payments
Reach out to your card issuer.

Use This IRS Tool to Check What You Owe Them
Making sure you’re up-to-date.

Start thinking bankruptcy now, not later

If you’ve lost your job or struggle to pay your debt, you may need to file for bankruptcy. If that’s the case, you should ignore some common financial advice and start thinking defensively.

The coronavirus pandemic that upended the economy is also expected to send unprecedented numbers of people and businesses to bankruptcy court. Millions are out of work, and economic disruptions could continue until a vaccine is widely available, something that may be more than a year away.

“I am gearing up for having a tsunami of new cases,” says Jenny Doling, a bankruptcy attorney in Palm Desert, California, who serves on the American Bankruptcy Institute’s Chapter 13 Advisory Committee. “I think there will be a whole lot more people filing than what anyone’s ever seen before.”

In my latest for the Associated Press, what you need to know now if bankruptcy is in your future.

Monday’s need-to-know money news

Today’s top story: How states are helping student loan borrowers during the Coronavirus. Also in the news: Making a financial recovery kit to rally faster after disaster, a new episode of the SmartMoney podcast on buying a first home in an expensive area, and why your credit limit just dropped.

How States Are Helping Student Loan Borrowers During the Coronavirus
Find out what your state is doing.

Make a Financial Recovery Kit to Rally Faster After Disaster
Using all this free time wisely.

SmartMoney Podcast: ‘How Can I Buy My First Home in an Expensive City?’
Important factors to take into consideration.

Why Your Credit Limit Just Dropped
Reducing risk.

Q&A: Getting your stimulus check

Dear Liz: Do you have suggestions on what we should do about not receiving our stimulus check? We have our Supplemental Security Income checks direct deposited, making our bank information correct and known to the IRS. I have checked the IRS “Get My Payment” site daily and continue receiving the message, “payment status not available.” I’ve contacted the IRS, our governor, both state senators, our congresswoman, the mayor and several in the media without a response. Whom can I contact to receive an answer and information?

Answer: The U.S. Treasury Department says people who receive SSI should receive their relief payments in early May. The huge volume of payments means the money is being doled out in stages, but the IRS portal that’s supposed to help you track your payment has experienced a number of glitches.

One possible workaround is to enter your address on the IRS website in capitalized letters. Older computer systems and buggy programs sometimes respond to capital letters when they can’t process lowercase ones. The IRS insists the tool is not case sensitive, but it does suggest not using punctuation when entering your address.

The $1,200 payments are being sent automatically, but if you’re on SSI and have children 16 or younger, you only have until May 5 to request an additional $500-per-child payment through the IRS portal.

Q&A: How to make ends meet if the coronavirus shutdown has reduced your income

Dear Liz: My husband’s salary was cut by more than 50%. While we are thrilled he is still employed, this deep cut will make it very challenging to pay all bills for our family of four. We don’t qualify for the $1,200 relief checks based on our 2019 taxes, which have already been filed. He is ineligible for unemployment because he’s salaried and his hours haven’t been cut. Are there other options for financial support or am I misinterpreting the government options?

Answer: You may have a few options for making ends meet during this trying time.

The first is mortgage forbearance. If you have a federally backed mortgage and have been affected by the pandemic, the Coronavirus Aid, Relief and Economic Security (CARES) Act gives you the right to forbearance for nearly a year if you request it. You can ask for 180 days initially as well as an additional 180-day extension.

Most mortgages are federally backed, including those lent or guaranteed by Fannie Mae, Freddie Mac, the Veterans Administration, the Federal Housing Administration and U.S. Department of Agriculture. If you have one of these mortgages, you won’t have to pay back the skipped payments all at once. You could spread out the payments or tack them on to the end of your loan.

To find out if you have a federally backed mortgage, and to request forbearance, contact your mortgage servicer — the company that accepts your payments. Be prepared to wait because lenders are overwhelmed with requests right now.

Even if you don’t have a federally backed loan, your mortgage lender is likely to have some forbearance options — as does your credit card issuer, your car loan company and any other lender you owe. Make sure you understand how each program works and how you would repay the skipped payments. In most cases, your balances will continue to accrue interest, but the programs could give you some breathing room while you wait for better times.