Reasons for a Financial Hardship
A financial hardship results from an involuntary reduction in income or an unavoidable increase in expenses. Some hardship reasons lenders are likely to consider:
- Mandatory reduced hours or hourly wage.
- Underemployment after loss of previous job.
- Death of a borrower.
- Decline in business earnings if self-employed.
- Permanent or short-term disability.
- Serious illness of a household member.
- Divorce.
- Unemployment.
- Major medical expenses.
- Disaster.
- Urgent property repairs.
- Increase in child care expenses.
- Mortgage loan and payment changes.
How to Write a Hardship Letter
Keep your Hardship Letter brief and to the point: four paragraphs are ideal, and no more than two pages.
When writing your Hardship Letter, be sure to include:
1. The names, addresses, and phone numbers of anyone named on the loan or bill.
2. The account or loan numbers and any other relevant details about the bill or loan, such as the number of months delinquent, property value, or equity.
3. The reasons for failing to keep current with your monthly payments. Be respectful and matter-of-fact. Don't get into any blame games or side issues.
4. An overview of your financial situation. This should include:
- Actions that you have taken to reduce expenses and increase income.
- Financial counseling or other steps that you have taken to resolve the situation.
- The amount of money that you have saved to pay toward the delinquency.
5. A brief outline of your desire to prevent default, bankruptcy, or foreclosure. Your hardship letter is a negotiation first and an explanation second. If you seek a loan modification or payment plan, list the reasons why you believe you will succeed in coming current on their payments. If you seek another solution, such as a deed in lieu of foreclosure or short sale, propose that solution here.
6. Relevant documents, including:
- Information about the monthly gross (pre-tax) income of your household.
- Your most recent income tax return.
- Information about your savings and other assets.
- Your monthly mortgage statement.
- Information about any second mortgage or home equity line of credit on your home.
- Account balances and minimum monthly payments due on your credit cards.
- Account balances and monthly payments on your other debts and personal loans.
7. Finally, be appreciative. Thank the lender in advance for considering your situation.
This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.
