Writing a Good Hardship Letter

When borrowers are struggling to resolve outstanding debts, it is often helpful for them to write a hardship letter. This letter serves to more thoroughly explain to the credit cards issuer, bank or lender (hereafter referred to as “creditor”) what is going on with the borrower and propose some way the creditor can help the borrower resume regular loan repayment.

This hardship letter can be a crucial part of your debt resolution or foreclosure prevention. The creditor’s decision to help you may be directly affected by the content in this letter, and it’s worth your time to carefully plan and craft your hardship letter.

Before you start, be aware of your objectives in creating the letter. Keep in mind this letter is for borrowers who have some money to pay, or who need a payment plan to catch-up. Be sure to be honest with your financial situation, and don’t make offers that cannot be kept.

Why Am I Writing A Hardship Letter?

The first thing to keep in mind is what you want from the creditor. What is it you are hoping to persuade them to do?

You might be asking your credit card issuer to suspend past due amounts, bring your account current, adjust your interest rate, or lower your minimum monthly payments. If your debt is in collections, you might be communicating with a debt collector about settlement options. You might be asking a mortgage lender to give you a loan modification, or to approve a short sale of your home. Whatever your ultimate goal is, keep it in mind as you compose the letter; everything you write should support this goal.

You can work with a personal financial coach who can help you explore your options and figure out what you should be asking of your creditor.

Other objectives should include explaining your the financial hardship. Be honest and succinct, and explain in plain language why your account(s) is or will become behind.

These reasons might be purely financial—you could explain in the letter that you suffered a setback from a temporary job loss, or other reduction in income that has affected your ability to make your regular payments.

Other life circumstances might disrupt your ability to make your monthly payments, and you could describe these in the letter as well. If you or a family member was called to active military service, or you went through a divorce or death of a family member, these are the kinds of circumstances where you would want to inform your creditor in a hardship letter. Ongoing medical issues could also be relevant. You can talk with your financial coach about what information to include.

Bear in mind as you compose the letter that you should not seek to cast blame or make excuses—this will not inspire your creditor with confidence that you can successfully handle your debts if they agree to help you. You’re describing your circumstances merely to explain what is going on, not to deflect responsibility for your situation.

Describing your hardship

Keep in mind that your entire letter should be concise—avoid letting the letter go into multiple pages. Your creditor is busy and if you hand them a novel to read, you are not respecting their time. So come up with a concise paragraph that explains the hardship you are experiencing.

Here’s an example:

“I’m writing to you because I was unable to work for several months due to an injury. During this time, our emergency savings were exhausted and we fell behind on our debts. Now that I am healed from my injury and ready to return to work, I believe I could resume regular payments if you would make adjustments to our loan.”

This paragraph works because it is brief—at only four lines, it doesn’t drag on but clearly explains the situation without too many unnecessary details. It also mentions that the borrower would be ready to resume payments if given a modification.

Of course, not every situation will be resolved—you might not have an injury that has fully healed. If your hardship was permanent, you’ll have to explain that your situation has changed, but still intend to resume making payments with the creditor’s help.

Here’s another example:

“Due to my recent divorce, my household has been reduced from two incomes to one. Because of this loss of income, I have fallen behind on my mortgage payments and sunk into credit card debt to stay afloat. I’m working with a nonprofit debt counselor to come up with a budget and a plan to repay my debts, which I think I can do with your help.”

Again, the focus is on explaining quickly what happened and why you’ve fallen behind on your payments, and that you think you can resume making payments if the creditor agrees to work with you.

If you have multiple hardships that are contributing to your situation, definitely list them all. But keep it to several short paragraphs; don’t launch into a long, unbroken narrative.

After you have described your hardship, it’s time to go into more detail about what you are doing to resolve the situation.

Your Response to the Hardship

When describing the steps you’ve taken to resolve the hardship, it’s important to be clear and honest, and ultimately to convey how your actions alone will not be enough for you to resolve the situation fully. You need the creditor’s help—this letter’s job is to convince them. So don’t minimize the gravity of your situation or hold back any information they might need.

Follow up on the previous paragraph with more details about your efforts to recover so far. For example:

“Since my divorce, I have worked hard to live under a restricted budget, but I have cut and reduced everything I can and still don’t have enough to meet all of my obligations. Now that my divorce is final, my income and expenses have stabilized. While I don’t have enough to make ends meet under my current budget, I believe a reduction in payments for the next six months from you will enable me to resume making regular payments going forward.”

Remember, the goal of the letter is to get help of some kind from your creditor. The letter has to establish that you need that help if you are going to succeed.

Stating What You Want

Now that you’ve stated your hardship and discussed what you have done so far, you need to state more explicitly what you want from your creditor.

“I believe a reduced interest rate would allow me to afford to make my payments going forward. I’d like to discuss this with you as soon as possible so we can work together to find a solution.”

Enclosures

You’ll want to include supporting documentation to back up everything you have said so far. If you discussed a medical issue, include copies of medical bills and/or records to support what you’ve said. If you had a divorce, add a copy of the divorce order. A quick sentence or two here in the letter discussing what you are including is sufficient.

Wrap up the letter with a sincere “thank you” for their consideration and an invitation to contact you to discuss the situation further.

7 Tips to Writing a Good Hardship Letter

Keep these tips in mind as you think about your hardship letter:

  1. Keep it original. Don’t find a form letter on the internet and fill in the blanks. Write a complete original letter that is unique to your situation. Sincerity matters a great deal in this process, and if the creditor sees an obvious form letter, they will not take you as seriously.
  2. Be honest. If you say anything in the letter that rings false or is obviously untrue, be prepared to get rejected. Include current and accurate documentation to support any claims you make in the letter.
  3. Keep it concise. Do not go into unnecessary details, and try to keep your letter to one page.
  4. Don’t cast blame or shirk responsibility. All you need to do is describe your circumstances, your response to the situation, and why you need the creditor’s help to succeed. No matter how unfair your situation might be, an effort to deflect blame or scapegoat in your hardship letter will be a red flag for the lender.
  5. Don’t use jargon or fancy words. Aim to write your letter at a sixth-grade level. Don’t go overboard trying to impress the reader. Keep the language straightforward and simple.
  6. Keep your objectives in mind. You are writing the letter to convince the creditor to help you. You have to make it clear that you won’t be able to succeed without their help, but that with their help, you are sure you can make it work.
  7. Give the creditor an action plan. You need to tell the creditor what you want them to do. “Contact me at your earliest convenience” is fine, if you’re talking about changing the terms of the account or loan. Whatever action you ask them to take, you need to make it clear to them that this action is necessary for you to save the loan.
  8. A financial coach or nonprofit housing counselor can review your letter before you send it to the creditor to make sure you haven’t made any serious errors and that you have communicated effectively. If you’re dealing with a mortgage loan, be sure speak to a HUD-approved housing counseling agency, and for other kinds of debts, like credit cards or personal loans, get credit counseling from a nonprofit financial coach.

The writing process and content of a hardship letter are personal things, but you should feel free to get help from a professional when working to save your home or take control of your personal finances. A personal financial coach can help you explore all of your options and ask for the right kind of help in a hardship letter. If your loan is a mortgage, talk to a housing counselor first, because a hardship letter may not be necessary for a loan modification or other relief.

Don’t go it alone! We’re ready to offer expert advice and assistance, no matter what your current debt situation is.

Sample letter:

Your Name
Your Address

Your Credit Card Issuer and/or Lending Institution

Loan/Account Number: #

Dear [Get the name of the person in your creditor’s loss mitigation department and address it to that person directly],

[Paragraph 1-explain your situation, including any bona fide financial hardships that have resulted in your current delinquency.]

[Paragraph 2- discuss what you have done so far to correct your situation, and why you are unable to manage the situation on your own.]

[State what you want the creditor to do in order to help you succeed, and say why you think success will be guaranteed if you gain the creditor’s assistance.]

[Mention enclosures or attachments that you are including to corroborate everything you’ve said above. Sincerely thank the creditor for their consideration, and invite them to contact you by your preferred method.]

Your Name
Your Contact Info

Speak to our certified Debt Coaches to review all of your options and discuss best strategies for getting out of debt.Speak to our certified Debt Coaches to review all of your options and discuss best strategies for getting out of debt.
Melinda Opperman

About The Author

Melinda Opperman is an exceptional educator who lives and breathes the creation and implementation of innovate ways to motivate and educate community members and students about financial literacy. Melinda joined credit.org in 2003 and has over 19 years experience in the industry.