Financial Hardship

Financial hardship summary:

• Financial hardship is a financial setback due to unforeseen life events like job layoffs or a major injury.

• Anyone can experience financial hardship through no fault of their own.

• You have rights and resources that might help you get through your financial hardship.

Financial Hardship Definition and Meaning

Financial hardship occurs when you struggle to keep up with debt and bill payments because of unexpected circumstances or life events. It’s a situation that often calls for some form of debt relief.

Some common situations that can lead to financial hardship:

• Job loss/layoff/redundancy

• Divorce or separation

• Serious illness

• Major accident or injury

• Death of a parent or spouse

• Natural disasters

• Mental health problems

What Kinds of Financial Hardship Resources Exist?

A variety of local and federal government resources can help people experiencing financial hardship. These can include:

• Food assistance programs (SNAP or WIC)

• Unemployment benefits

• Welfare or Temporary Assistance for Needy Families (TANF)

• Emergency housing assistance

• Rental assistance

• Utility bill assistance

• Home repair assistance

You can also check with local nonprofits and groups that specialize in helping people get through financial hardship. Search online, using specific language to describe the type of help you need and what area you’re in. For example, assistance for homeless single parents in [your city].

What to Do if You Can't Pay Your Bills Due to Financial Hardship

Contact your creditors as soon as you realize you'll have problems paying your bills or debts. The sooner you get in touch, the more options you'll likely have to work out an amicable solution.

Hardship program options you may be offered could include:

• Payment forbearance or deferral. Loan or credit card forbearance can let you skip, postpone, or reduce the amount of your payments for a set period of time. 

• Reduced interest rates. Some lenders or credit card issuers may agree to reduce your interest rate, which can lower your monthly debt payments.

• Late or overdraft fee waivers. Many creditors are willing to waive late or overdraft fees, especially if you’ve kept your account in good standing in the past.

• Payment plans or extensions. Creditors might help you set up a repayment plan based on your ability to repay your debt.

• Debt forgiveness. In some cases, financial hardship could qualify you for full or partial debt forgiveness, which means your debt goes away. 

If you haven't yet fallen behind on your payments, you can also ask that your creditor not report late payments to the credit bureaus. This could help protect your credit standing. Always make sure that you get any agreements in writing, even if your negotiations were done over the phone. This will ensure everyone is on the same page and give you a physical copy of the plan in case you need to double-check any details.