Topics on this page:

• What is Financial Hardship?
• What to Do If You Cannot Pay Your Bills
• What is a Hardship Letter?
• Things to Consider
• Sample Letters

What is Financial Hardship?

Financial hardship is a situation where a person cannot keep up with debt payments and bills because of unforeseen or unexpected circumstances.  Examples of unforeseen or unexpected circumstances include:

• Changes in employment status (such as furlough, losing a job, or having hours reduced)
• Significant life events (such as a relationship breakdown or death in the family)
• Injury or illness
• Emergency event or natural disaster

What to Do If You Cannot Pay Your Bills

Contact your lenders, loan servicers, and other creditors

Being behind on your payments can have a lasting impact on your credit. If you go too long without making payments, creditors may have a collection agency try to collect your debt. If the debt involves your home, you may be forced into foreclosure. If the debt involves your car, you may have your vehicle repossessed.
If you cannot make a payment now, need more time, or want to discuss payment options, contact your lenders to explain your situation and what options may be available to you. Credit card companies and other creditors may be able to offer a number of options to help you. Some options they may be able to offer include:

• Temporary reduction or deferral of payments
  • Note: Some creditors may impose conditions on payment reductions or deferrals, such as more interest.
• Reduction in interest rates
• Loan extensions
• Waiver of certain fees, such as ATM, overdrafts, and late fees
• Other flexibilities for repayment

Some lenders may also be willing to not report late payments to credit reporting agencies.

When contacting your lenders, be prepared to explain:

• Your financial and employment situation
• How much you can afford to pay
• When you’re likely to be able to restart regular payments
• Your income, expenses and assets

If you are able to work out a plan with your creditor on the phone (or in person), be sure to get confirmation of any agreements in writing.

Consider working with credit counselors to understand your options

Reputable credit counseling organizations are generally non-profit organizations that can advise you on your money and debts and help you with a budget. Some may also help you negotiate with creditors. These trained professionals provide advice for little or no cost, and they will work with you to:

• Discuss your situation
• Evaluate options
• Help you negotiate with your lenders and servicers

What is a Hardship Letter?

A hardship letter explains to a lender the circumstances that have made you unable to keep up with your debt payments. The letter provides specific details such as the date the hardship began, the cause and how long you expect it to continue. Many creditors will require a hardship letter if you request help. 

In your hardship letter, you should include a detailed description of the type of assistance you are requesting. For example, your letter might ask for one or more of the following:

• Pausing your payments
• Reducing your payments
• Securing a lower interest rate
• Extending your loan term
• Forgiving late fees

Things to consider:

• Speak with your landlord, mortgage company, or creditor first before you write a letter.  Just sending a letter may not be very effective as it will take a fair amount of time to get to the individual who needs to see it, if at all.  Speaking with your creditors will enable you to work out the details of any payment plan that you can later confirm with your letter.
• Be sure to send the letter directly to the person to whom you have spoken to confirm your request for a reduced payment plan.
• Make sure that you have all the necessary information in your letter including account number, address of the property, and a telephone number where you can be reached.
• Be sure to keep a copy of the letter.  In some situations, you may want to send the letter by certified mail.  You may also want to fax the letter to the company.

Sample Letters

During the most recent government shutdown, the Federal Office of Personnel Management provided the following templates for use by federal employees to write a hardship letter to a creditor. The templates include letters to creditors and a mortgage company.

Sample Letter to Creditor

Dear (Name of Company or individual with whom you have spoken)

This is to confirm our conversation of (date) in which we discussed a temporary reduction in my monthly payment.

As we discussed, I am a Federal employee who has recently been furloughed due to a lack of funding of my agency.  Because of this, my income has been severely cut and I am unable to pay the entire cost of my monthly payments, along with my other expenses.

As we had agreed in our conversation, I will be able to make regular payments in the amount of $_______.  I realize that I will be responsible to pay the remainder of the payments and, when I return to work, I will contact you immediately to work out a plan to take care of the reduced payments.  I will also keep in touch with you to keep you informed about my income status.
I appreciate your willingness to work with me and your understanding during this difficult time.

Sincerely,
(Name)

Account Number
Address
Telephone Number

Sample Letter to Mortgage Company

Dear (Name of Company or individual with whom you have spoken)

This is to confirm our conversation of (date) in which we discussed a temporary reduction in my mortgage payment.

As we discussed, I am a Federal employee who has recently been furloughed due to a lack of funding of my agency.  Because of this, my income has been severely cut and I am unable to pay the entire cost of my mortgage, along with my other expenses.

As we had agreed in our conversation, I will be able to make regular payments in the amount of $_______.  I realize that I will be responsible to pay the remainder of the payments and, when I return to work, I will contact you immediately to work out a plan to take care of the reduced payments.  I will also keep in touch with you to keep you informed about my income status.
I appreciate your willingness to work with me and your understanding during this difficult time.

Sincerely,
(Name)

Account Number
Address
Telephone Number