Friday, July 23, 2010

Christmas in July

There's something really offensive about encouraging people to make unnecessary purchases in the midst of the Great Recession. In California 12.4% of our fellows don't have jobs. Many more face wage and/or hour reductions, furloughs, and other attacks on their income. While retailers are in the business of parting people from their money, they seem to be unaware that their sales in the early years of the New Millennium were dependent on credit--and the credit has dried up. People are just not in need of Christmas presents in July, and may not be in need of them in December. In fact, those who have money may think it's a bit unseemly to be buying when so many of our friends and neighbors are having a hard time.

Friday, July 2, 2010

State Workers and the Governor

The Governor is trying to force state workers in California to sign egregious contracts by threatening to pay minimum wage. As the spousal unit of a state worker, I'm none too happy about this, but rather than vent uselessly, I will instead provide some practical advice for those who may suffer from this.

1. There's a difference between rent and mortgage payments. Homeowners can skip their mortgage payments for a couple of months with little danger that they will lose their homes, although it may have a nasty effect on their credit ratings. Lenders don't typically file a Notice of Default until a homeowner has missed three mortgage payments, so the mortgage probably isn't critical for a month. (I know this only because I've written about tenants and foreclosure for a couple of years now.)

It's a whole different matter when you rent, as the landlord can begin eviction proceedings within a few days after a missed payment. It's possible that your landlord (particularly if s/he is local) will be understanding and accept partial payment or wait until there's a state budget and you're reimbursed for the withheld wages). If your landlord does agree to this, get the agreement in writing, as you want any understanding to be clear and unambiguous.

If your landlord won't agree to this and you don't have sufficient savings to cover the rent, or can't borrow from friends, relatives or your credit card, you have to make a nasty judgment call. You can either give notice now and move in with relatives or friends for the duration, or wait, hoping that a budget will be signed before the end of the month.

What you cannot do is fail to pay rent and then have your landlord take you to court. Your landlord would likely be successful in an unlawful detainer action, and those are reported to the landlord screening services. A successful eviction action would make it very difficult for you to rent for a very long time. If you receive a three-days' notice to pay rent or quit, you MUST move before the three days expires. Period.

Update: I've already been asked what happens if you rent with roommates. It's the same thing that happens in any roommate situation in most leases and rental agreements. The co-tenants are all responsible for all of the rent. That means that if one tenant doesn't pay rent, the other tenants are responsible for the entire amount of the rent. (This is why many young people move back to their parents' homes, rather than renting with roommates. The risk is just too great.) If the other tenants can't cover the rent, the landlord can, after the three-days' notice to pay rent or quit has expired, evict all of the tenants living in the unit. If you find yourself in this situation and can't raise the money for rent next month on your own, you should let your roommates know as soon as possible.

2. Your car payment is somewhere between your mortgage and rent, in that the lender may not come to repossess your car immediately, but isn't going to wait more than a couple of months before taking back the car.

3. You can make the minimum payment on your credit card(s). You may not like the interest charges, but the important thing is not to go into default.

4. You may have no choice but to skip your gas, electricity, cable and cell payments for the duration. With your public utilities, particularly SMUD, you should let them know that you can't make a payment. They will likely be more understanding than Comcast and Verizon and, in fact, are probably planning right now for just this situation. In addition, public utilities are required to give substantial notice before suspending service, which will give the Legislature more time to pass a budget.

5. You have short grace period on your car insurance. Insurers must give you 20 days after the due date to pay your car insurance before canceling your insurance. However, losing insurance means that you can't drive your car and will probably have to pay a reinstatement fee to restore your coverage.

6. It's difficult to determine what childcare providers will do. Sacramento providers may, on the one hand, be more understanding. But they may also care for several children whose parents aren't being paid and may not have the cushion to wait for payment. State workers may have to take their children to work with them.

7. If you have a 457 deferred compensation plan, you MAY be able to borrow from it. (It depends on the terms of the plan, and the costs may be high.)

8. Keep track of every penny that you have to pay because of this. If the Governor's actions are found to be retaliatory, you may be eligible for compensation for your costs. If you have to give up your rental, keep track of the costs of moving and storage. And track the costs of finding a new place, including any deposits, fees, time taken off work, and so on. Note any late fees, interest charges, penalties and such that you have to pay for delayed payments. Check your credit rating and note any changes resulting from the crisis.