5 financial hardships that might qualify for partial debt forgiveness

By Rebecca Lake

Reviewed by James Heflin

Jun 27, 2024

Read time: 4 min

Optimistic young woman looking for debt forgiveness

Key takeaways:

  • Financial hardship can stem from various situations and can make it difficult or impossible to repay debt. 

  • Partial debt forgiveness is an option for those facing financial hardship.  

  • Help is available. Consider reaching out to your creditors directly or to a debt expert to discuss your situation.

If you're experiencing financial hardship, you’re understandably upset. But try to breathe and focus on choosing your next step carefully. You can get through this—you just need to know your options. 

You may be able to get rid of your debt for less than what you owe if you can prove that you're experiencing a hardship that qualifies for debt resolution.

Financial hardships that qualify for partial debt forgiveness

What is a financial hardship? Generally, it means a situation in which you're having trouble paying your bills, including basic living expenses and debt payments. Creditors may partially forgive some of your debt if you're going through a tough situation that prevents you from paying what you owe.

Here are some hardship situations that may allow you to have some debt forgiven. 

1. Changes to your job or income

Loss of income could, of course, affect your ability to pay credit cards and other bills. A pay cut can be the result of:

  • Layoffs

  • Termination

  • Reduced hours

  • Declining sales (if you own a business)

Alimony and child support aren't considered income for tax purposes, but if your household relies on them to cover expenses and those payments cease for any reason, that could lead to financial hardship. 

You need to have proof of the changes to income to qualify for debt forgiveness. It may also be helpful to have a copy of your monthly budget so creditors can see what expenses you have. 

2. Death in the family

A death in the family can be emotionally devastating and have unintended financial consequences. 

If the person who passed away was the primary income earner, having that income go away could make it difficult to keep up with expenses, including debt repayment. Emergency savings or life insurance can help ease the burden, but not everyone has them. 

The loss of a loved one could also affect your ability to earn a living if you have to take an extended leave of absence from work to grieve, or to care for other family members. If your employer doesn't offer paid leave, you may be without a paycheck temporarily. 

3. Illness or injury

Getting sick or injured can sideline you from working and leave you with mounting medical bills, both of which can result in financial hardship. 

If you're hurt on the job, you may be entitled to workers’ compensation, but that may only go so far toward covering your expenses. Short- or long-term disability insurance can help replace lost income, but only if you have coverage in place before an illness or injury happens. 

You may be able to work out a payment plan with your doctor to cover medical bills. But if you can't pay anything toward credit cards, you may qualify to have some of the debt forgiven. 

4. Divorce or separation

Going through a divorce or separation can take a toll financially. Some of the issues you may be trying to sort out include:

  • Who will keep the family home, if you own one

  • How other assets will be split

  • Who will take responsibility for marital debt

  • What, if anything, either of you will pay for alimony or child support

You may have new expenses if you're setting up a separate household. Or you might be without income if you were a stay-at-home parent while your spouse or partner worked. 

If you're leaving a marriage or relationship with debt, getting some of it forgiven can make the transition less financially difficult. 

5. Caring for an aging parent

Taking care of aging parents can strain your finances. If they have little to nothing saved, you might be expected to assume responsibility for their expenses. The issue can be compounded if you have to cut back your hours at work or leave your job altogether to be a caregiver. 

If your parents themselves have substantial debts they're struggling to pay, you may need to talk to them about also seeking debt forgiveness. If they're living on a fixed income and much of it goes to health care or living expenses, that could be sufficient to prove financial hardship. 

Financial hardships can be overcome

Going through a tough time financially is never pleasant, but there are things you can do to overcome it. Negotiating with creditors to have some of your debt forgiven can give you breathing room as you get back on your feet. 

What's next

  • Reach out to your credit card companies to see if temporary relief is available. Help might include fee waivers or reduced interest rates.

Consider talking to a debt expert to learn whether partial debt forgiveness is appropriate for your situation.

Rebecca is a senior contributing writer and debt expert. She's a Certified Educator in Personal Finance and a banking expert for Forbes Advisor. In addition to writing for online publications, Rebecca owns a personal finance website dedicated to teaching women how to take control of their money.

James is a financial editor for Achieve. He has been an editor for The Ascent (The Motley Fool) and was the arts editor at The Valley Advocate newspaper in Western Massachusetts for many years. He holds an MFA from the University of Massachusetts Amherst and an MA from Hollins University. His book Krakatoa Picnic came out in 2017.

Frequently asked questions

Partial debt forgiveness involves negotiating with creditors to repay less than what's owed. The remaining debt amount is canceled or forgiven. Debt forgiveness is also referred to as debt resolution

People who are going through financial hardship may qualify for credit card debt forgiveness. You need to prove that you can't make regular payments toward your debt because of a situation that's beyond your control. Creditors may not consider you a candidate for credit card debt forgiveness when you're able to keep current on your payments. 

There are no government debt forgiveness programs for credit cards. Eligible borrowers may be able to get their federal student loans forgiven, however. If you have credit card debt, working with a debt resolution company is an option for those who want to pursue forgiveness. A debt resolution company could negotiate with your creditors on your behalf and to try to lower the balances that you owe.

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