For many years you have enjoyed the best job in the world. You have all your bills paid up and money stashed in the bank. There are no creditors calling your home or work. Life is pretty predictable at this point. Then one day all that changes. Your boss calls you in his office to say the company is cutting back and your job is eliminated. You beg for mercy or a different placement, but there is none to be had.
Then the struggle begins.
While you are out of work, your savings becomes spent. There is nothing left and the creditors just don’t care. They keep ringing your phone off the hook and sending those nasty settlement letters in the mail. You are at your wit’s end and don’t know what to do. You think about giving up. What’s the point in trying anymore? When you reach this moment, a hardship letter could be a smart solution.
What is a Hardship Letter?
According to the experts at Legal Zoom, a hardship letter is just what it says. It is a letter written by you, the borrower, to your creditor explaining your situation. At any point when you need assistance or an alternative payment option, most creditors will require you to write a hardship letter.
Your letter should provide the creditor with a detailed explanation of what assistance you need. The cause of your hardship and what your current situation is, in relation to finances, are also to be included. Creditors need the full picture. Don’t hold anything back. If they fully understand your situation, you are more likely to receive the assistance you are asking for.
When to Start Writing
According to the Business Insider, the average American is carrying over $5,000 in credit card debt. This number is rising each day. With a number like that, any life change could lead to a hardship letter. Below is a list of situations that may lead you to write a letter. Keep in mind this list is not exhaustive.
- Loss of Income – Anytime you lose your source of income, which may come from losing your job or relocating, the danger of hardships is likely to come your way. Deciding to pay your bills or buy groceries for your family are everyday questions to answer. The time between jobs can be stressful, but with a hardship letter, your creditor may take some of the stress away.
- Suffered an Injury – If you been injured at work, in an automobile accident, or doing repairs at home, your income may change. While you’re out of work, you may receive compensation less than your usual salary. This lessens the number of monthly payments you can make. Write that letter and explain your situation. There may be an alternative payment method available.
- Home Has Not Sold – Relocating means buying or renting a new home. During this time, you will need to sell your previous home. Who wants to pay two mortgages? You may need to ask your creditor to refinance or defer a few payments.
- Death of a Family Member- This event definitely leads to unexpected expenses going out of your pocket. When you pay over $5,000 in funeral expenses, you are bound to hit tough times. Finances may not be at the front of your mind and bills get behind.
- Military Service- Serving your country may send you away from home. In order to pay your creditors, special arrangements may need to be made.
- Divorce/Separation- Legal expenses can add up quickly making it hard to keep up the payments.
During any of these times, you may want to write that letter sooner rather than later. Don’t wait until you are significantly behind. It may actually make getting help harder to achieve.
Tips for Writing a Hardship Letter
Writing a hardship can be a daunting task. It is as if you are admitting defeat. We all hit those tough times and must ask for help. That’s okay!
Creditors are not going to put hardship letters at the top of their agendas. The bottom line is that they want their money back. In order to make sure your letter gets in the right hands; it needs to be stellar.
Let’s examine some tips for writing a hardship letter that no creditor can resist.
- Concise is the word- There is no need to add fluff in this letter. You want to keep it simple and to the point. This will keep your audience tuned in. Don’t make them put your letter down because it was three pages long.
- Make your request specific- Tell the creditor exactly what you are asking for whether it be a lower interest rate, refinance your mortgage or forbearance.
- Explanation of your hardship is essential- In this portion of the letter, clearly lay what your hardship is, how you got there, and why it has affected your ability to make on-time payments. If their multiple circumstances leading to the current hardship, be sure to list them. Again, no fluff, just the facts.
- Be sure to restate your request at the end of your letter- This is the place to remind the reader of what you’re asking for and show humility. Remember that you are asking for a measure of grace in a hard situation but ultimately the creditor has control.
Making the choice to ask for help in the form of a hardship letter is not a sign of weakness or failure. It is a sign of strength. You have the bravery to ask your creditor for help. Knowing what a hardship letter is when to write one, and tips to make it stand out will give you peace of mind and hopefully a helping hand to your finances.
Will you give in to the thought that you will never be free of debt because life threw stones at you or will you give the amazing hardship letter a chance?