How to Claim Financial Hardship
Claiming financial hardship when you can't make your credit card and loan payments is a difficult decision to make. Qualifying for relief from your creditors and lender is not a quick and simple process, but, in order to try to save your house from foreclosure or keep you out of bankruptcy, your first step is to ask your creditors for help. You can contact a credit counselor to intercede on your behalf, but sometimes it's hard to differentiate between the legitimate companies and the many scams that exist in the industry. Therefore, it may be in your best interest to contact your lender yourself and start the process to claim a financial hardship.
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Instructions
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Call each creditor and ask for a loan modification or financial hardship packet. You may be asked a few preliminary questions to determine is you qualify to apply.
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Make your debt payments on time, if you are able. Claiming financial hardship does not absolve you from repaying what you owe.
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Complete each financial hardship packet and return them by certified mail to your creditors and lender. You may need information and documents such as your account number, tax returns, income and loss statement, monthly expenses, reason for your hardship and how much you can pay each month.
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Write your financial hardship letters carefully, tailoring each one to the creditor who will be receiving it. Be specific about why you cannot pay your debt and explain if the setback is permanent or temporary. Since you will be assigned a representative at each of the creditors, make your letter personal so that the representative will understand your situation. Discuss details such as a job loss, medical expenses and your challenge of supporting your children, if applicable.
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Do not include inflammatory remarks in your hardship letter, such as attacking the creditor or lender and blaming the company for your situation. Also, don't mention a divorce, the fact that you spent more than you earn or threaten to file bankruptcy.
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Wait one to two weeks after you have submitted your financial hardship packet to call each of your creditors to ensure that they have received it and that a determination of qualification is in process. You may have to contact your creditors several times over many months before you know if your claim of financial hardship is approved.
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Accept or decline an offer of assistance, if you qualify. To avoid foreclosure on your property, your mortgage lender may offer a permanent or temporary loan modification, to delay your payments in a forbearance, allow you to short sell your house or give your home back to the lender with a deed in lieu of foreclosure. Other creditors may reorganize the debt to lower your minimum payments, forgive a portion of your balance if you are able to pay it back in one lump-sum or allow you to temporarily skip a few payments and pay them back slowly.
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Tips & Warnings
Be patient with the process of claiming a financial hardship. Creditors and lenders may take several months or longer to reply to your request.
References
- Office of the Comptroller of the Currency: OCC Consumer Tips for Avoiding Mortgage Modification Scams and Foreclosure Rescue Scams
- Mortgage101: Declaring Financial Hardship on Your Loan to Prevent Bankruptcy
- Get PreQualified.com: Write a Mortgage Loan Modification Financial Hardship Letter
- USAttorneyLegalServices.com: Tips on How to Write a Letter of Hardship
- U.S. Department of Veterans Affairs: Avoiding Foreclosure
