Communicating a Hardship Effectively

Effective communication is the single most important aspect of describing hardship issues in your hardship letter. Many modification requests fail because the homeowners can not tell their story in a simple way. It is easy to forget there is a real human being analyzing the hardship letter within the lender’s or servicer’s loss mitigation department who is responsible for determining the existence of a real hardship. With that said you must keep your hardship letter simple and get to the point quickly.

Loss mitigation departments are overwhelmed with foreclosures, short sales, and modification requests. They do not want to read a ten page letter regarding the loan officer who put them in the loan, why they bought the house, the memories they have had there and why they want to keep their home. When writing the hardship letter, keep the letter simple and to the point. In addition, handwrite the hardship letter. The fact is that people personally relate to handwriting more than a typewritten letter and this includes the lender’s or servicer’s loss mitigators. What follows on the next pages are perfect examples of sample hardship letters, a financial worksheet, an income and expense worksheet, a sample loan modification request and a sample stacking order for you to use. Notice as well that on the loan modification request and on the sample stacking order for a loan modification you will need to include documentation of your home’s value. You can obtain reliable documentation of your home’s value from a local Realtor, Title Company or from an appraiser.

How to Determine if You are a Candidate for a Loan Modification

Lenders and servicers will, in general, look for one thing when you submit a modification request. They look for a documentable hardship of course, but at the end of the day if they decide to grant your request for a loan modification all they really want to know is if you can afford the new payment(s). This is the big secret behind getting a loan modification approved. There is, however, an art to making loan modifications work. You must disqualify yourself from your old payments and at the same time qualify yourself on a new payment structure. It sounds complicated and it is at first but you will quickly learn important strategies for effectively processing loan modifications. To understand what the lender or servicer considers qualified, you have to know how lenders calculate your income. The income you can use to qualify for a modification is different from traditional income calculations used to qualify for traditional loans. Moreover, the difference in the qualification guidelines is typically in your favor.

For a modification, you can qualify based on your documentable total household income. As such, you can count income from almost any source: Grandma’s SSI, income from child day care services, from a second job paid under the table, etc. so long as it can be proved. Proof must be in the form of bank statements, 1099’s or in some other documentable form as outlined in the submission paperwork you will provide the lender. In addition, if only one of two spouses was on the original loan, the other spouse’s income can count so long as it is documentable.

Once you calculate all documentable monthly income from all household sources you then have what you can present to the lender as the new qualifying income. To calculate a qualifying monthly mortgage payment, use the benchmark fully amortizing 5.00% rate on whatever the new balance might be, counting arrearages if they are added back into the loan. WARNING: this is only for a general qualifying exercise only; do not expect this rate or payment! If the payment at 5.00% is just too high, then you may not be an appropriate candidate for a modification. However, you can still request help with other services such as a deed in lieu of foreclosure, a short sale or postponing as long as possible a notice of trustee’s sale in an effort to help you transition to more affordable housing.

Loan Mod Process

Sample Hardship Letter : Using the forensic mortgage loan document audit as basis for pressuring lenders, you will move lenders to take immediate action to stop an impending foreclosure and keep your home safe and place yourself in a better financial situation. This audit reveals various federal and state violations or errors in the original loan documents. Our internal auditing statistics show that four out of every five loans we have audited have significant violations.

In the beginning of the process you will need to send your lender a Qualified Written Request (QWR). The QWR is a formal demand that the lender must comply with under federal law to produce copies of your loan documents within a specified timeframe. Once you have collected all of the required documentation from your lender you can proceed to perform a forensic loan audit. Sample Hardship Letter

Once the audit has been completed and if violations are found a formal request for a loan modification is sent to the lender along with an abundance of highly organized financial information that makes the best case possible as to why you (a) deserve a loan modification and (b) can afford the new payments. This is a long process that requires patience and negotiation skill.

Are Hardship Letters Just for Loan Modifications?

The vast majority of hardship letter sites on the internet are devoted to loan modifications and helping consumers draft hardship letters for them. However, hardship letters are required and can be used for: short sales, credit card debt negotiation, requesting lower interest rates on credit cards and installment loans and a host of other consumer loans.

The reason hardship letters are so effective in recent history is that lenders are having a difficult time keeping their paying clients paying their bills on time. The debt settlement industry is going through an enormous boom at present because of the state of economic affairs in America and all over the world. The moral of the story is that a well crafted hardship letter accomplishes a number of goals:

1.     It puts your lender on notice that they may be losing a great deal of money if they don’t pay attention to you.

2.     It makes your lender understand that you’re not some “run of the mill idiot” that doesn’t care about their finances.

3.     It tells a personal story in a short time frame that loss mitigation agents may connect to personally

4.     If you’re hardship is related to active military deployment or other legally protected statuses, your lender may have to legally come to your assistance.

5.     It establishes a record of correspondence with your lender. This is important if you ever decide to file a lawsuit against your lender.

There are a number of other reasons that hardship letters can help you and they are not all related to loan modifications. If you need a sample hardship letter and you can’t find one on this site then please leave us a comment and we will begin the work of drafting a sample hardship letter that will work for your specific contextures – Just for Loan Modifications?

IRS Penalty Abatement Sample Letter

It’s no secret that the IRS doesn’t shy away from assessing penalties for every single offense that can be possibly thought up by the human imagination. While the IRS can be ruthless in assessing these penalties, many times, the IRS will not be sticklers about enforcing them. Dare I say they may even be somewhat reasonable about it, given plausible justification of the violation. The only way to know how committed the IRS is to charging you the assessed penalty is to ask them.

This may be easier said than done. You may sit down to pen a beautifully crafted letter and get as far as “Dear IRS” before your writer’s block makes a bold and unashamed appearance. Now what? Should you be forthcoming with details? What types of things are the IRS looking for? Is there a particular department you should be writing to or do you have a case worker you should contact? Do you need a doctor’s note or your hospital records? Do you need pictures of your damaged home from the hurricane or insurance records? Will the IRS be able to use any of your information to assess you further or worse yet, audit you?

Before you sit down to spend your valuable time on a letter to the IRS, take a moment to examine the pertinent details you intend to present to them to determine the feasibility of your request.

Did you file your return or pay your taxes on time and this is an error?

You should request a penalty abatement. Skip ahead to Sample Letter.


Were there circumstance outside of your control (i.e. car accident, serious illness, no access to your records, bad tax advice from a professional or the IRS) that prohibited you from filing returns or paying your taxes?

You should request a penalty abatement. Skip ahead to Sample Letter.

Were you too busy to hire someone to do your taxes or do them yourself? Did you expect to owe money to the IRS that you wouldn’t be able to pay so you put off the filing of your returns? Did you simply forget to file your returns?

These are not considered reasonable causes and your chances of obtaining a penalty abatement are slim.

You may have further questions about what the IRS would consider reasonable cause. Do not hesitate to contact a tax professional you trust to discuss these details. An Enrolled Agent is the highest credential the IRS bestows upon tax professionals. Find one that has no complaints and an A+ rating at the Better Business Bureau to further discuss your circumstances.

Below is a sample letter and breakdown of the components of a competent letter to the IRS about abating your penalties.

Sample Letter


January 1, 2012




Internal Revenue Service

Penalty Abatement Coordinator


City, State, Zip


Re: Penalty Abatement

Ima Taxpayer


City, State, Zip


Tax Year: 20??

Notice #


To Whom It May Concern:


I have been assessed a penalty in the amount of $2,345.67 (please refer to enclosed notice # for details).


The penalty was assessed for (insert offense here i.e. unfiled taxes, unpaid taxes, etc). I was unable to (insert proper action here i.e. file my returns, pay my taxes on time, etc.) due to (insert reason here i.e. disability, serious illness, etc.).


Describe the nature of your hardship here. For example, if you were disabled, include details such as the nature of your disability, the severity of your disability, and the dates of your disability.


Explain how your hardship prevented you from the proper action that the IRS is penalizing you for. Explain how other obligations were impaired (i.e. inability to pay other bills, inability to care for your children, etc.)


Please find enclosed documents to further explain my (insert hardship here).  The documents to enclose would be doctor’s notes, police reports, death certificate, pictures – anything to help the IRS agent fully understand your inability to file your returns or pay your taxes.


In light of the above information, I ask that you consider an abatement of my penalties for reasonable cause. If you have any further questions, I encourage you to contact me directly at (insert phone number here) or (insert email address here).


Thank you for your time and consideration. I look forward to your response.




Sign your name in ink pen here


Type your name here




Other Things To Consider

Do you need to file your returns or pay your back taxes before submitting a request for penalty abatement to the IRS? A hardship isn’t black and white. Would your situation constitute a hardship? How can you tell if the IRS made a mistake on your assessments and therefore you’re due a penalty abatement? It would serve you well to speak with a reputable Enrolled Agent before sitting down at a desk to formulate your written plea to the IRS for a penalty abatement.

Medical Hardship Letter

Medical hardship letter: this is not Europe, we pay for our medial care in this country. The problem with that is people get left behind, the hardship of paying medial bills can be too much for many when bad things happen. Unfortunately it happens more than we want to admit, that’s where tools like medial hardship letter come in handy.

Medical hardship letter

Creditor Name:
Account #:

Re: Medical Bill Financial Hardship

I have come to a point where I am no longer able to make our current monthly payments.

These circumstances mainly came about due to severe illness as I have been diagnosed with a serious illness which according to the doctors, would take long time to heal with necessity of hospitalization for several weeks when different types of investigations and tests have to be taken up on different days under different circumstances before concluding actual ailment that is nagging me. Already, major expenses are being incurred to mitigate the sufferings through injections and oral medications. Prior to that, I worked for a large organization for many years and made a luxurious living including substantially enough to set aside for a nice retirement.

After a few late payments, the interest rates on all the cards had climbed to at or near 30%. I am now hugely in debt and sinking fast. In 20xx, I returned to the workplace full-time but expected earnings did not materialize and I have been falling behind my schedule. I am now considering debt management or debt consolidation however at this time, I am making similar arrangements and negotiations with my other creditors to avoid having to file for personal bankruptcy. I want to pay my debts but I just cannot see how to do that and keep my home and pay all my creditors. I hope you can see my predicament and offer a reasonable repayment plan.

Yours sincerely,

(Your Signature)
(Your Name)
(Your Address)
(Your Account #)

Car Loan Hardship Letter

This is a post is for Denise Cox who commented on the how to write your own hardship letter page of this site. In the turmoil of the mortgage crisis its not just homes being foreclosed on but also peoples vehicles. Many of whom require it for their very livelihood, so this auto hardship letter is for you Denise… good luck.

Intro (lead your letter with your basic information for an easy read for who is processing your paperwork including; your name, address, lender name, and account number)

To Whom It May Concern:

I am writing this letter to explain my unfortunate set of circumstances that have caused us to become delinquent on our mortgage. We have done everything in our power to make ends meet but unfortunately we have fallen behind and would like you to consider working with us to make sure you are paid in full.

The main reason that caused us to be late is …. (insert reason here and don’t be too lengthy and long winded) … We had fallen further and further behind. Now, it’s to the point where we cannot afford to pay what is owed to …(lender goes here). It is our full intention to pay what we owe. However at this time we have exhausted all of our income and resources so we are turning to you for help.

(The approximate date of hardship and we believe that our situation is Temporary or will be Permanent.)

Our situation has got better because… (explain how things have gotten better or going to, you’ll have to sell them on it)

We truly hope that you will consider working with us and we are anxious to get this settled so we all can move on.

Sincerely and Respectfully,

Borrower’s Signature
Co-Borrower’s Signature