Information on Financial Hardship

Banks, mortgage companies, student loan lenders and other creditors are sometimes willing to give consumers facing financial hardship a break until they can get on their feet. Such breaks could include loan deferral or forbearance or a modification of the terms of your debt to make monthly payments more affordable. Before you can get any kind of break, however, you'll have to prove that you're facing a financial hardship.

First Step

As soon as you know that you will be falling behind on your payments, you should contact your lender and explain the situation. This may include job loss, a reduction in your number or work hours or unexpected medical bills or disability. Each lender has a different process for helping consumers faced with financial hardship, so you'll have to ask what is required of you, but the first step is always alerting the lender as soon as possible.

Why it Works

Lenders don't want to see you stop paying back the debt altogether, because they then will not be able to collect a penny more from you. They'd prefer to come to some sort of agreement that will allow you to pay back at least a portion of the debt. The point is, you have leverage. On the other hand, you as the consumer must make the first step, or the lender will move to foreclose, repossess or charge off your account.

Required Documents

Sometimes a lender can take a statement of financial hardship over the phone. However, more likely than not, you'll have to complete paperwork specific to the lender. Complete any documents your lender sends you. Be as specific as possible about the cause of the financial hardship and the severity. If the lender does not have a specific form for this, it may ask you to send a letter with a narrative explaining the financial hardship. Often, you're required to complete an itemized budget of your monthly expenditures and income as well.

Proof of Hardship

A lender may take your statement of hardship at face value and require no further documentation, but the more likely scenario is that you'll be asked to prove that what you stated in any hardship documents is true. Be prepared to provide copies of monthly bills, as well as anything documenting a loss of work hours or loss of employment.