Sarah Edwards | October 25, 2023
Edited by Hannah Locklear
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.
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:
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.
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.
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.
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:
To fully demonstrate hardship, you may need to submit more than one type of document. Remember to keep the originals and only send copies.
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.
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