Coping with financial hardship: practical tips for tough times
By Gina Freeman
Reviewed by Keith Osmun
Jul 09, 2023
Read time: 7 min
People experiencing financial hardship can turn to many sources for help.
Friends and family, government agencies, charitable organizations, and financial services companies are all part of a big safety net.
Financial hardship is unpleasant, but the sooner you address it, the faster you’ll feel better.
Any situation that makes it difficult to pay your bills and afford the basics is a financial hardship. If you're experiencing financial hardship, you know it because it doesn't feel good. You don't need anyone to tell you that financial problems can lead to very high stress and a feeling of hopelessness.
Financial hardship is survivable and solvable. Once you start learning what your options are and you reach out for help, you're officially on the road to a better situation.
How to deal with a financial hardship
When financial hardship hits, you might understandably go into panic mode. But that won't help. Take a breath and plan. Here's a short list of actions you can take.
Identify your most pressing need – behind on rent? Can't make your car payment? Need medical care?
Could you afford your necessities if you didn't have to pay your debts?
Make a budget if you don't already have one.
If you have a budget, look for serious cuts (keep only your "needs" and ditch everything else). Remember—it's only temporary.
Get creative with solutions. If you can't afford your car, a loan might not be the answer. Maybe you need to sell your car and take the bus for a while. Or use it and do some gig work for a rideshare app or a delivery service.
If you can't budget your way out of your bind, do you qualify for government or community-based aid? Find agencies and organizations that can help and put their contact information in your plan. Make some calls the next business day.
Research your options for getting rid of debt.
If having debt is causing your hardship or contributing to it, you can get rid of it. Restructuring or settling your unsecured debt, or getting it discharged in bankruptcy, might make the rest of your life affordable.
When you create your hardship plan, list all possible sources of help. Include the type of help, the available amount, and the address, phone number, or online link to apply.
Where to find help with your hardship
Here are some directions you could go for help.
Family and friends
If your loved ones are in a better financial position than you, there's a right way to ask for their help.
Politely explain why you're struggling and ask specifically for what you need—a loan, food, a ride, help with childcare, etc.
Tell them what you've already tried or done to help yourself.
If you're requesting a loan, provide a repayment schedule including a start date. If you're asking for other help, agree on an end date—people are more willing to help if they know exactly what they're agreeing to.
Be flexible. If they can't come up with exactly what you asked for, you must be willing to take other kinds of aid.
Take "no" for an answer when that's the answer given. Be gracious. Your financial problems are yours to solve, and right now you're just exploring resources.
Be grateful if you get help, and be understanding if you don't.
Community and government assistance
Many programs offer help with everything from food and housing to childcare and energy costs. Note that programs in some areas may have waitlists. If your need is dire, apply for emergency aid first. Then start working with agencies for longer-term solutions.
The Temporary Assistance to Needy Families (TANF) program operates in every state and provides cash payments to low-income families with children for a limited time.
Childcare.gov is the gateway to resources for childcare assistance in your state. States get funding from the federal government to provide financial aid to help low-income families pay for childcare so they can work or attend school.
You can access your state's emergency rental assistance programs or check out HUD's state pages. You'll find state and local resources to prevent homelessness in the form of emergency housing vouchers, legal aid to fight eviction, and rent subsidies.
Emergency medical care
What if you need essential medical care and can't afford it? The U.S.+ Department of Health and Human Services (HHS) maintains a directory of health centers in all states. They can help you with access to care and Medicaid enrollment. Note that you need to go to your nearest hospital for a medical emergency. The Emergency Medical Treatment and Active Labor Act (EMTALA) requires hospitals in the U.S. to treat anyone who comes to the emergency room.
What if you are in legal trouble and can't afford a lawyer? The American Bar Association can connect you with three types of help: federally-funded legal aid services for low-income people, pro-bono programs that match volunteer lawyers with low-income clients to provide free services, and free answers to legal questions.
Credit counseling agencies
If you have unaffordable unsecured debt—like credit card balances—a reputable non-profit credit counseling service may be able to help you find your way out of the hole. When you contact a credit counseling service, they analyze your finances. They may help you create a budget. And they might enroll you in a debt management plan (DMP).
DMPs are for unsecured debt, not secured loans like mortgages or auto financing. When you're in a DMP, you have to close your credit card accounts and commit to paying them off in full. Your counselor contacts your creditors and tries to negotiate better terms for you—lower interest rates, waived fees, or smaller payments. They may even get past-due accounts "re-aged." That means you don't have to catch up on missed payments; your account is considered current.
You make one monthly payment to the plan, and your counselor distributes it among your creditors. It simplifies your bill paying and could save you money. However, DMPs have just a 21% completion rate because often, the payment is unaffordable. DMPs also restrict your access to credit, which can backfire if you experience a financial emergency.
Credit counseling can be very helpful in some situations, but it doesn't reduce what you owe. Experts recommend only enrolling in a DMP if it clears your debts in five years or less and you can comfortably afford the payment.
Consider contacting a professional debt consultant about debt resolution. Resolving debt means your creditors agree to accept less than you owe as payment in full. They do this when they believe you can't afford to repay the entire amount and that settling for a lower amount is in their best interest.
You can resolve debts by offering a lump sum to the creditor. If they agree, you pay it and the creditor forgives the remaining unpaid balance.
Of course, few people in financial trouble have a lump sum to offer creditors. There are two ways over this obstacle. You could ask your creditor to agree to a series of payments. Or you could save money until you have enough to make offers.
When you work with a professional debt resolution company, they will set up a Dedicated Account for you. You make an affordable monthly deposit into this account. The amount is often lower than your minimum payments. Once there's enough in the account, a team of expert negotiators starts working on agreements with your creditors. Once an agreement is reached, it's presented to you for approval. After you approve, the money is sent to your creditor, and the debt resolution company's fee is paid from the same account.
You may have to choose to stop paying your creditors so that you can free up money for your monthly deposit. Missing payments can have a negative impact on your credit.
The debt resolution process is private and doesn't create a public record.
Bankruptcy can be helpful if your debts are overwhelming. Especially if you're worried about a lender foreclosing on your home or repossessing your car. The most common forms of bankruptcy for individuals are Chapter 7 and Chapter 13. Chapter 7 lets you walk away from your debts in exchange for giving up any property that isn't protected (the bankruptcy court decides what property is protected). Chapter 13 is a repayment plan that lasts three to five years. Once you complete the requirements and after your repayment period ends, any remaining balances are forgiven.
Bankruptcy has a few advantages—it can (temporarily) stop foreclosure or repossession. It can give you total debt forgiveness (Chapter 7) or give you more time to pay (Chapter 13). Forgiven amounts are tax-free, and your creditors can't refuse to participate.
Bankruptcy's potential downsides are that it's public, it happens in the court system, and you must go along with the court's plan. You may have to surrender property or income. Not everyone qualifies for Chapter 7, and Chapter 13 bankruptcies have a low (33%) completion rate. That's because payments can be very high and difficult to sustain year after year.
In addition to the list here, don't forget that you are your best advocate. Don't wait for help to come to you. Chase down every lead. Search the internet for [type of hardship] in [your area]. For instance, if you live in Oregon and break a tooth, search for "emergency dental care for low-income in Oregon." Up comes a list of free and low-cost services, who they are for, how much (if anything) they cost, and where to call or go.
Yes, it's scary, but the bad times won't last forever, and there's help if you know where to look. According to at least one study, the biggest problem for many people is that they don't know what's available, and many assume they don't qualify when they do. If you're financially stressed, you'll probably qualify for at least one program or more.
Start planning now. Even taking the smallest first steps can make you feel better.
Gina Freeman has been covering personal finance topics for over 20 years. She loves helping consumers understand tough topics and make confident decisions. Her professional history includes mortgage lending, credit scoring, taxes, and bankruptcy. Gina has a BS in financial management from the University of Nevada.
Keith is an editor and fact-checker for Achieve. He makes sure the content is accessible by ensuring that each piece has impeccable grammar, an approachable tone, and accurate details.
Frequently asked questions
What should I do if I can't pay my bills?
If you can’t pay your bills, contact your creditors immediately. Explain the problem and ask for help. Tell them what happened (job loss, interest rate increase, medical issue, etc.) and what you need from them (more time to pay, a smaller payment, permission to miss one or more payments).
How do you prove you can’t pay your bills?
Provide anything that documents your issue—a layoff notice, a paystub showing reduced hours, medical paperwork, and bank statements. Just make sure the method you use to transmit that information is secure.
How can I get money right now?
It’s easiest to set up a source of emergency cash before you start missing payments. An emergency credit card can be a lifesaver. But if that ship has sailed, one option is a personal loan. You can apply even if you have credit problems. A hardship loan may be what you need to get back on track.
The Temporary Assistance to Needy Families (TANF) program provides emergency cash to qualifying families.
Don’t pursue ultra-fast sources of cash like payday loans, check advances, or title loans. They are so incredibly expensive, you could quickly (probably within two to four weeks) find that your financial situation is even worse. The vast majority (85%) of payday and check advance borrowers have to renew their loan because they can’t afford to pay it off. Try friends and family instead.