Writing A Hardship Letter Collection Agency

People do not really get into a situation where they have unmanageable debt intentionally. However, these things do happen, which can lead to their debt being taken over by a collection agency. If you find that you are still unable to pay your debt, you may need to write a hardship letter. The reason why this should be done in writing rather than over the phone, is because this will give you proof of your intent to resolve the situation. It also means that the collection agency cannot, at a later stage, change their mind.

There are several things that you can offer in a hardship letter collection agency. For instance, you may want to offer a one time payment, after which the remainder of the debt is written off. Alternatively, you could ask to have payments deferred. You may even ask for the bill to be forgiven completely.

Be Honest and Transparent in Your Hardship Letter

Whatever the reason is, you must be honest and transparent about it. After all, you are asking them to accept less money, or even no money at all. To achieve this, you have to explain what your hardship is, and what that means in terms of your finances. Examples of acceptable hardship include unexpected medical bills, sudden serious illness, involuntary reduction in income, loss of job, a failed business, job relocation, a death in the family, military duty, incarceration, divorce, or property damage.

Key Things to Include in the Letter

When you write your letter, you must remember that you are asking for a favor. The letter is designed to convince the creditor that you are deserving of that favor. To achieve this, you must indicate:

  1. The reason why you haven’t been able to pay your debt, and what you are doing to resolve this
  2. The status of your current finances, and what kind of assets you have (with value)
  3. Your offer for a settlement.

You may even try to have the debt fully forgiven. It is very rare for this to be allowed, unless it is clear that the creditor will not be able to collect the payment anyway. For instance, if you are in receipt of Social Security benefits, unemployment payments, or workers’ compensation, onto which income garnishments cannot be placed, they may be more likely to accept your proposal. Overall, it is better to make an offer for settlement, through a reduction in payment or a pause in payments.

Things to Remember

Make sure that your letter fits on a single page. It should include all pertinent financial information that makes it clear what your situation is. Always be polite and give a clear offer with full facts and details. Request a response to your letter in writing, so that you always have a paper trail of any agreement that is made.

Remember to always keep copies of any correspondence you have sent. Send your letters through signed for mail as well, so that you are guaranteed that it has been received. And do also follow up if you have not heard back after a week.

Hardship Letter Collection Agency Example

{Your Name}
{Your Address}
{Your Phone #}


To Whom It May Concern:

I have an outstanding debt to {Company} that I have been unable to meet. I would like to request a partial forgiveness of the account and a payment plan over the next {period of time}.

The reason I have been unable to settle this debt is {reason}. I have attached my financial records and payment stubs to verify my hardship. If possible, I was hoping that I could pay {percentage} percent in installments of {monetary amount} over the next {period of time}.

Please contact me at your earliest convenience so that we can work out an arrangement. Thank you for your time.


{Sender Name}

For more sample hardship letters, click here.

Writing A Debt Hardship Letter

There are a lot of reasons why you may not be able to meet your financial obligations. If this happens to you, you shouldn’t hide that fact but rather try to address it by being honest with your creditors. They will actually appreciate this and will usually be happy to work with you, as taking out legal action against you would be far more expensive. However, you should not do any of this over the telephone, as you should have documented proof of your efforts.

Explore the Various Ways to Deal with Your Debt

If you are experiencing difficulties in repaying your debt, there are different ways to deal with this. You could, for instance, offer a one-time lump sum to pay off the debt. Alternatively, you could ask that you be allowed not to make any payments for a specific period of time. You can even ask for the debt to be completely forgiven.

When you write a debt hardship letter, you essentially ask the creditor to consider the debt to be repaid, based on specific conditions. To be considered for this, you must prove that you are in significant financial hardship. For instance, you may have had an unwanted reduction in hours, a death in the family, or an illness.

You should never think that you are somehow deserving of a settlement, however. That is a decision that your creditor will make. Rather, you are writing in an effort to convince the creditor to accept your offer. You must write in such a way that you don’t exaggerate your hardship, as this could mean the creditor will request a bankruptcy, but don’t underplay it either, as this would lead to the creditor not agreeing to providing you with a settlement.

Key Tips in Writing a Debt Hardship Letter

First of all, make sure that you include the reason why you are unable make the payment and how you are already trying to remedy your situation. You should explain your current situation and what are your assets. Lastly, you must explain your offer. To do that properly:

  1. Keep your letter as short as possible. If possible, it should be just one page in length.
  2. Provide all relevant information on financial income.
  3. Be polite and courteous.
  4. Provide any personal information of importance, including medical conditions.

If you hope for settlement, you have to give a clear offer. In old debts, any offer is usually accepted, but don’t assume that this will happen. Always request a written confirmation of receipt and that of any decisions that have been made.

If you are in a position where you cannot repay your debt, you can ask for it to be forgiven as well. In most cases, this will only be accepted if there is no way for the creditor to collect in other ways. For instance, if someone is in receipt of Social Security benefits, it is not possible to enact an income garnishment.

Make sure that you end your letter with a full and honest apology for the situation that you have found yourself in. However, do not become emotive. The creditor is looking for facts, not for feelings.

Debt Hardship Letter Example

Writing An Insurance Cancellation Hardship Letter

There are a lot of reasons as to why you may want to cancel your insurance policy. Often, it is because of getting a better rate, or you simply do not need the insurance anymore. However, sometimes, it is because of financial hardship.

Handle the Situation Carefully to Avoid Miscommunication

It is very important that you handle this situation properly. If you don’t, then it is likely that there will be some miscommunication and you may find yourself having to pay various charges. It is important, therefore, that you also write your letter at the right time. Check your insurance policy so that you know which cancellation rules are in place. Make sure that you meet those requirements and find out what you should do next.

In most cases, you won’t be able to ask for a hardship cancellation over the telephone. Rather, you will have to contact the company in writing, meeting whichever cancellation policies they have in place. Often, they have a form that you have to complete, which you may also be able to find on their website. Either way, they do generally look for similar things.

Common Requirements by Insurance Companies

One of those things is a clear reason why you want to cancel your policy. In cases of hardship, you need to make sure that you indicate exactly what has happened that has left you in such a situation. You also have to make it clear, in this case, that the situation is not due to their service, but rather that there have been events that were beyond your control.

What to Include in Your Hardship Letter

You also have to make sure that the insurance company can easily find you. Hence, you must include your name and address, as well as your policy number. You also have to make sure that you include details of the payments that you have already made. You want them to make a special exception for you, allowing you to end your contract before the date is due, and this means that you have to give them reasons to do so. For instance, you should tell them if you have always made your payments on time, or if you still have, and aim to keep, other types of insurance with the same company.

Difficulties That You May Encounter

In most cases, insurance policies can simply be canceled. However, there are situations in which that is not possible, particularly if you have taken out a contract with a fixed end date. One key difficulty that you may encounter here, is if you want your insurance company to provide you with a refund for any money that you have already paid towards your insurance policy for future months. You will have to give very clear reasons as to why you believe your insurance should not just be canceled, but also that you should get a refund. There are certain situations in which this would be accepted, for instance, if you have experienced a sudden loss of work, if there has been a death in the family, or if you have received substantial medical bills after an illness.

Insurance Cancellation Hardship Letter Example

{Phone #}


Dear {representative}:

I am in the fight of my life against {disease}. It is a fight in which the odds are statistically against me. It is a fight that demands my singular focus. Bizarrely, I must simultaneously wage a battle for preservation of my medical insurance benefits.

Throughout my debilitating treatment, the clock has been ticking. During radiation, the letters came: my job will be held for {time period} but I will lose my health benefits in {time period}. In a post-chemo fog, I opened another letter stating that {time period} is fast-approaching and I must either return to work or file for COBRA benefits. I cannot return to work at this time. Not only can I barely walk across my living room on bad days, {disease} legally bars me from driving until six months have passed since {my last seizure}. COBRA payments far exceed what I am receiving in short-term disability benefits; in fact, the {amount} payment quoted is {double our mortgage}.

I remain optimistic about my survival. And I have great faith in my fellow humans: several kind-hearted coworkers have graciously donated sick leave hours to me. Still, I fall short of the {threshold} required by {time period}.

I cannot overstate my sense of outrage and fear at the injustice and irony of losing my health coverage due to a health crisis.

Please fix this.


{Sender Name}

Writing A Hardship Letter To Social Security

A hardship letter to Social Security is also known as a “dire need” letter. Only certain situations are classed as dire need, so it is very important that you consider those. Disability claimants, in particular, are commonly affected by financial hardship. They may not be able to obtain their needed medication, go to hospital for treatment, or meet the expenses for their critical care. On top of that, they struggle to pay their standard monthly expenses, such as mortgage, rent, and utilities.

Dire Need According to the Social Security Administration

It would seem that those types of situations would always be classed as “dire need”. Unfortunately, the Social Security Administration (SSA) does not agree. The reality is that the SSA does not truly care when a disability claimant, or other Social Security benefit claimant, ends up with crumbling finances that make it impossible for them to live a decent life. They will evaluate the concerns when a hardship letter is received and process the claim, but you should never assume that the claim will be accepted.

The Process at the SSA for Evaluating a Claim

If you have sent a hardship letter, you will have already gone through the original claim in which you requested certain benefits. Several standard reconsideration steps can be followed should you not agree with the decision made based on your initial application. Eventually, you will have to request a hearing in front of an administrative law judge (ALJ), at which point the Office of Disability Adjudication Review (ODAR) will determine whether your situation is truly dire or not. In the past, this was done by the Office of Hearings and Appeals. Unfortunately, this is a lengthy process and, by this time, the original claim might have been initially made as much as a year ago, if not more.

Write to the Nearest ODAR office of the SSA

One of the best things you can do is send your hardship letter to the SSA directly to your nearest ODAR office. In so doing, you may be able to expedite the process substantially, sometimes by as much as several months. To achieve this, however, you must ensure that your letter includes enough details and compelling evidence to show that your financial situation is truly unmanageable. You should also include photocopies of things, such as your income, your expenses, and late payment notices from your mortgage provider, landlord, or utility providers, and so on. You must also be able to prove that you have already made all possible attempts to lower your expenses.

Unfortunately, even if you write directly to the ODAR office and they agree to give you a hearing sooner than usual, you will still have to wait several months in total. On the other hand, those few months may just prevent you from losing everything that you earned before you became disabled in the first place. You should also make sure that you write hardship letters to your creditors, so that they are aware of your situation and the fact that you are awaiting an appeal with the ODAR office. They are more likely to be more lenient than the SSA after all.

{Your Name}
{Your Address}
{Your Phone Number}

{Financial Institution Name}
{Phone Number}
ATTN: {contact person}

To Whom It May Concern:
I am writing this letter to request that my Social Security disability claim be processed as a dire need case. I understand that the process is long and difficult for many people, but I believe that I may qualify for critical need.

My situation constitutes dire need because {only possible situations: 1. This is a military casualty case, 2. This is a compassionate allowance case, 3. I am homicidal or suicidal, 4. I have a terminal illness, 5. I cannot afford food, medicine, or shelter}. I am attaching {doctor’s prognosis, psychiatrist’s analysis, military discharge papers, etc.} as proof that my circumstances are critical.

I fervently hope that this case can go through quickly, as my condition is rapidly becoming more burdensome. I am currently unable to {detailed description of your current limitations}. I believe that with my disability claim I could {description of what you would do with the money}.

I appreciate your time and consideration. I look forward to hearing from you soon concerning this matter.


{Sender Name}

Writing A Hardship Letter Abandonment

If you own property, particularly commercial real estate, you may find yourself in significant financial hardship as a result of abandonment. Abandonment happens when tenants leave, usually unexpectedly, and you are unable to immediately find replacements. The result is that you may have to sell your property. Because commercial real estate is so expensive to hold, it is quite common for property owners to request a short sale.

A short sale is a process in which you sell the property for less money than the outstanding balance on your mortgage. In a short sale, the lender has to agree not just to do this, but also to dismiss the difference between the money collected and the money owed. Lenders may be willing to do this if it is demonstrated that holding the property and eventually moving into foreclosure would be more expensive.

Basic Content of the Hardship Letter Abandonment

A hardship letter is a formal document that must focus on facts. You have to keep it short and to the point, trying to fit all the information on a single page. Attach any documents you have to prove each of your points, such as a property valuation, details of your tenants, when the tenants left, an income statement, the short sale offer, and so on.

You must start your letter by explaining which building you own, and the type of building. State that you hope to come to a short sale agreement. Explain what your current mortgage payments are and that, in order to make those payments, you require at least a certain number of tenants to be in the property. However, your property has now been abandoned, which means you are no longer able meet that requirement. Make sure you indicate why your property was abandoned and when.

Explain Why the Situation Is Unsustainable for You

Indicate your current rent figures as well as how much money has been invested in renovating and repairing the property. Explain what other steps and measures you have taken in order to reduce your outgoings and save money. State that, despite all of that, your tenants have still chosen to abandon the property. This could be due to certain issues, such as a housing crisis or property damage, for instance. Basically, what you must demonstrate, is that the result is a substantial loss of income on your part.

Your letter must make it clear that the current situation is unsustainable for you. This means that you will not be able to keep up with the mortgage payments, and that you may soon have to file for bankruptcy. Explain that, if at all possible, you would prefer to circumvent or avoid that, and that you feel a short sale could be an appropriate solution. You should only make a request for this, however, if you have already received a short sale offer. Hence, make it clear who has made the offer, when, and the offered amount.

Remember that there is no guarantee that your request will be accepted. However, if you can demonstrate that it is in your lender’s interest to do so, you may have a chance.

Hardship Letter Abandonment Example

{Your Name}
{Your Address}
{Your Phone #}


To Whom It May Concern:

I am writing this letter to request the short sale of my {building type}. In order to meet my mortgage payments, I require the rent from {number} tenants. However, due to the {location/condition of the property/etc.}, the property has been abandoned.

I currently charge {amount} for rent per person, and I have invested {amount} into property repairs. I have also {additional steps to save money}. However, due to {property damage/housing crisis/etc.}, my tenants have abandoned the property and I no longer have a steady stream of income.

Soon, I will no longer be able to meet the loan requirements and will have to file for bankruptcy. I am hoping to circumvent that chance with a short sale of the property as soon as possible.

Attached are the necessary documents outlining the property value, damage, repairs, and upkeep costs. I am grateful for your assistance in this matter.

Thank you,

{Sender Name}