If you're having trouble paying your bills, it's a good idea to alert your creditors and try to get them to work with you to avoid a serious situation, such as bankruptcy. Writing a debt hardship letter is typically the first step in this process.
Your Situation
A debt hardship letter should describe your financial situation and explain the reasons you are unable to pay your bills. This could include the loss of a job, the costs of medical care or the adjustment of loan terms, as happens with adjustable-rate mortgages.
The letter also should detail the steps you've taken to rectify the situation, including any attempts to borrow additional funds or the sale of a large asset, such as a car. This will show the creditor you've made a serious attempt to correct the situation on your own.
Your Proposal
A debt hardship letter always should include a possible solution to the problem. This might be offering to pay a percentage of your debt in a lump sum in exchange for writing the rest of it off or requesting loan modification, which changes the terms of your loan or credit card agreement, such as interest rate or length of the loan, to create a monthly payment you can afford.
If you're having trouble paying your mortgage, you might suggest a short sale, which is when the lender agrees to allow you to sell your house for less than you owe on it and take the proceeds as payment in full.
General Guidelines
The tone of your debt hardship letter should be professional and polite, and you should be completely honest in your accounting of your situation. Don't sound desperate, though, because you want to get the best deal possible and the longer it takes your creditors to collect, the more difficult and expensive the process might be for them.
If you're offering to pay a percentage of your debt, a good place to start is 20 percent, but don't suggest something you can't afford.
Additional Materials
Include documentation to back up the information in your debt hardship letter. This usually is in the form of copies of recent pay stubs, bank statements and income tax returns.
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