Few people get to go through life without worrying about money. At some point, nearly everyone has experienced some financial hardship, be it through job loss, medical bills, a natural disaster, or just bad luck.
When it happens, you have to decide who to pay first, who you can postpone, and how to feed your pets. You also want the hardship to have the least amount of impact on your credit rating. Most lenders and government bodies are willing to work with you if the worst happens, and the best strategy is to communicate clearly to them what has happened to you.
Using a letter of hardship is often the best way to communicate your situation to your bank, mortgage lender, or any other entity to whom you owe money. Although most creditors are willing to help their customers, they are picky about what constitutes a financial hardship. Let’s take a look at some scenarios in which a letter of hardship would apply:
Changes in Income or Expenditure
Have you had your pay cut or just had a baby? Maybe a roommate moved out without paying their share of the rent, or your car engine died? These unexpected changes can wreak havoc on your finances and cause real problems for you and anyone who depends on you.
If you’re like many Americans, you might not have enough savings to pull you through until your situation is corrected, so this may be a scenario in which to use a hardship letter.
Changes in Employment Status
One of the most demoralizing life events is the loss of employment. It can be a blow to your self-esteem as well as a shock to your bank account. If you’re lucky, you may receive a severance or referral to another company, but often it’s just you left wondering what’s going to happen to you.
You also may have had your work hours cut, or had your position downgraded. The result is the same: a seemingly permanent loss of desperately needed income.
Sometimes a death in the family can cause terrible chaos if the deceased left significant debts or other financial responsibilities to their survivors. They may not have left enough money for funeral expenses.
Relationship breakdowns such as divorce or separation can lead to significant hardship for one or both parties since their living arrangements are likely to change. Moving to a single income from a combined income is most certainly a financial hardship.
Injury or Illness
These can cause unmatched upheaval in anyone’s life. Small injuries won’t significantly affect a person’s ability to make money, but more extensive injuries such as loss of limbs, car accidents, or head injuries could easily constitute a financial hardship.
The same goes for illness. Even people with the best genes in the world can get sick and incur hefty medical bills in a hurry. If you must pay for your care out of pocket, you’re going to have a bad time.
Natural Disaster or Emergency
It’s hard to say which of these occurrences is the worst, but when the world itself causes you harm, it feels disastrous and can raze your entire life. Depending on where you live, you could fall victim to earthquakes, hurricanes, tornadoes, and blizzards. Flood damage from these storms destroys homes, businesses, and roads.
Creditors are generally very understanding under these circumstances, but it is still a good idea to assume they won’t be and put together a letter of hardship.
What’s In a Hardship Letter?
Hardship letters are meant to request a particular favor from your creditor. You are asking for a deferment or new, temporary terms outside of your original agreement.
Hardship letters contain specific information about your circumstances, how they changed, how your creditor can help you, and how you are helping yourself out of your situation.
Here are some qualities of a good hardship letter to follow if you need to write one:
Be concise – Keep it to a single page. Don’t take up two paragraphs talking about the specifics of your family and pets. Use two or three sentences to explain what has happened to you, and leave room on the page for the rest of the information.
Be specific – Tell your creditor exactly how you’d like them to help you. Do you want to defer payments? Do you want to pay half for six months and lower your interest rate? If you give them a realistic baseline, they have something to work with to begin helping you.
Be detailed – Use dates and specifics. If you lost your job, tell them exactly when you started and ended. If you were discharged from the military, say the same and the reason for discharge. Bad things happen to good people; don’t be afraid to be honest with them.
Be realistic about the future – Let your creditor know if you think your situation is going to change, and if so, when it will. You can’t predict the future, but you can have an idea of how long your situation might last.
If You Need Help
If you are in a position where you need to write a hardship letter, you can get help quickly. There are different letters for different situations.
Sometimes the type of creditor will dictate what type of help they can offer you. For instance, a mortgage lender doesn’t want to foreclose, but likely can’t change your interest rate. A credit card company can change your interest rate and payments. Many companies give special treatment to military and first responders.
Take a look at our templates and see if you find a letter that suits your needs. They’re there to help you. Good luck!