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How Do You Demonstrate Financial Hardship?

Sarah Edwards | October 25, 2023

Sarah Edwards
Legal Expert
Sarah Edwards, BS

Sarah Harris is a professional researcher and writer specializing in legal content. An Emerson College alumna, she holds a Bachelor of Science in Communication from the prestigious Boston institution.

Edited by Hannah Locklear

Hannah Locklear
Editor at SoloSuit
Hannah Locklear, BA

Hannah Locklear is SoloSuit’s Marketing and Impact Manager. With an educational background in Linguistics, Spanish, and International Development from Brigham Young University, Hannah has also worked as a legal support specialist for several years.

Summary: When you write a hardship letter, make sure to demonstrate that you’re experiencing genuine financial hardship. You can do so by describing your situation and providing supporting documentation. SoloSuit can also help you negotiate a settlement if you’re facing unpaid debt.

Life happens. When it does, you may need to send a financial hardship letter to your creditors to request an adjustment to your monthly bill or payment schedule. Otherwise, late or missed payments could result in additional fees, penalties, and a reduction in your credit score. But how do you demonstrate financial hardship?

When you submit a hardship letter, you’ll have to provide evidence that you’re going through hardship. Here are some ways you can demonstrate hardship to your creditors.

Alternatively, you can negotiate a settlement plan by using SoloSettle from SoloSuit.

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What qualifies as a financial hardship?

According to the Consumer Financial Protection Bureau, Americans are facing declining financial stability and health. For instance, 31% of renters missed at least one rent payment in 2022 alone. This is primarily due to a reduction in work hours or even pay, but anytime you cannot pay your bills, it is considered to be a financial hardship.

Common examples of financial hardship can include:

  • Job changes or layoffs.
  • Death in the family.
  • Divorce.
  • Illness or injury.
  • Natural disasters.
  • The COVID pandemic.

When you write a hardship letter, you may need to specify what exactly is causing your financial hardship, but companies are used to hearing these kinds of explanations.

Demonstrate your financial hardship

Before your creditor agrees to adjust your payment amount or deadline, they may expect you to demonstrate your financial hardship. For the sake of efficiency, it’s best to demonstrate this hardship when you submit your letter. Here are some ways to demonstrate your hardship.

Not sure the debt is yours? Use SoloSuit to validate your debt before proceeding.

Describe your hardship and how it’s affected your finances

First, you can simply describe your hardship by telling your story. Stick to the facts of what happened and be as specific as possible. For example, you might explain: “On October 5, 2023, I was laid off from my employer.”

Make sure to explain how your hardship has impacted your finances. Job loss is easy, but if you’ve experienced a major illness, you may need to explain how your health prevented you from bringing in income.

Provide supporting documentation

This is perhaps the most important step since it is the most concrete. The more supporting documentation you can provide, the more likely your creditor will grant your request to adjust your payment amount/schedule.

Common documents might include:

  • Bank statements that show income and expenses.
  • Copies of your most recent tax returns.
  • Copies of pay stubs.
  • Copies of other bills (credit cards, utilities, medical bills, etc.).
  • Letters of unemployment or notices of reduction in pay/hours.
  • Eviction notice.
  • Medical bills.
  • Insurance premium payments.
  • Notice of repossession of assets.

To fully demonstrate hardship, you may need to submit more than one type of document. Remember to keep the originals and only send copies.

Explain how your hardship will be resolved

Your creditors may be more willing to extend grace if they are confident that you can resume payments in the immediate future. Be specific about when you expect to be financially able to return to your original payment plan. Your creditor may be willing to create an entirely new plan based on your current situation, or they may simply pause your payment schedule until you’re back on your feet.

Let’s look at an example of how to demonstrate financial hardship.

Example: Casey had been paying her student loans faithfully, but in 2021, her boss informed her that her company was facing budget cuts. Casey wasn’t fired, but her work hours were reduced considerably. As a result, Casey’s monthly budget had to be reworked until she could find a new job or at least a side hustle. Casey sent a hardship letter to her student loan provider, requesting a pause in her loan repayments until she found additional income. She submitted her most recent pay stubs, showing her income before and after her company’s decision. With this proof, her student loan administrator extended a brief grace period until Casey could make new financial accommodations.

Are you being sued for debt? Watch this video to learn how to settle a debt collection lawsuit.

Settle your debt quickly

A hardship letter can keep you out of debt. But if you ever fall behind in your payments, you may need to settle your debt to resolve the situation. Use SoloSettle from SoloSuit to start the negotiation process, then settle your debt for a lower amount.

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