Financial Hardship

Financial hardship summary:

• A financial hardship is when you have circumstances that make it difficult to keep up with debt payments. 

• Some financial hardships are temporary and only last a short time, while others can affect you for a longer period. 

• Certain types of financial hardship could make you eligible for a debt resolution program. 

Financial hardship definition and meaning

A financial hardship is any situation that makes it hard for you to keep up with debt payments and other bills. Types of financial hardships include:

• Job loss

• Illness or injury

• Divorce

• An unexpected drop in income

• A large unexpected expense

If you have a financial hardship, you might qualify for help through a debt resolution program. Debt resolution helps you get rid of debt for less than what you owe. 

Key concept: A financial hardship is a situation that makes it difficult for you to pay debts.

More on financial hardship

Financial hardships happen to lots of people, and maybe one has happened to you. It doesn't feel great, but it's important to focus on figuring out how to deal with the situation. 

One big question centers on debt. A hardship can make it harder to keep up with payments to credit cards or loans This could put your credit scores at risk and open you up to collection actions. Also, if you’re barely afloat and just making minimum payments, your debt could last for decades.

If you have debt, it helps to know what options you have to navigate your way through a temporary financial hardship. 

Financial hardship: an overview

A financial hardship is any situation that makes it harder for you to pay your debts and other expenses. Sometimes you have a heads up and can plan for hardship, but most of the time, you don't. 

For example, say that you know your employer has plans to cut staff in the next six months. If you think your position could end up on the chopping block, you could use that time to shore up your finances and look for a new job. 

While the hardship itself isn't ideal, having time to plan for it is. What usually happens, however, is that a financial emergency triggers a financial hardship. An unexpected event pops up and boom—suddenly there isn’t enough income to manage your debts or living expenses. 

Types of financial hardships

Financial hardships aren't all alike, and what one person experiences may be very different from another. The most common types of financial hardships include:

• Overwhelming debt after a job loss or a layoff

• Loss of income because your hours are cut or you get demoted to a lower-paying position

• Loss of spousal or child support 

• Illness or injury that leaves you unable to work

• Divorce or separation

• Loss of income and increases housing expenses due to a natural disaster 

• Death of an income-earner in your household

• A major home repair that insurance doesn't cover 

You could also experience hardship if you take on a caregiver role. For example, you might have to take time away from your job to care for elderly parents or a family member with special needs. Lots of people put family first in these situations, and that's understandable. But it's important to think about what it could mean for your finances. 

Financial hardship and debt forgiveness

A financial hardship situation might qualify you for debt forgiveness, which is when part of your debt is canceled. Debt forgiveness could be an option if you owe:

• Credit card debts

• Medical debts

• Unsecured personal loans or installment loans

• Private student loans

• Store credit cards

• Collections

• Repossession debt

• Payday loans

• Lines of credit

Debt resolution could offer a pathway to a better financial future. When you enroll debts in a debt resolution program, an expert works on your behalf to negotiate with your creditors. The goal is to convince them to accept less than what's owed. 

If your creditors agree, you pay some of what you owe, and the rest is canceled. You could get rid of debt faster than by making minimum payments, and say goodbye to financial stress. 

A Debt Consultant can evaluate your situation to let you know if you have a financial hardship that qualifies for debt forgiveness. If you do, they can help you create a custom plan to negotiate and resolve your debt.