Writing Effective Hardship Letters

Hardship letters are used whenever conventional methods of debt management don’t work well. A hardship letter is a way to document in writing what the issue is, what solution you propose and the potential outcomes. This article will outline the six steps in creating an effective letter.

Step 1: Start with why you are writing the letter. “I am writing because we are behind on our car payments and want to resolve the situation.” In this section, make sure you apologize for the delinquency and state that you will do better in the future.

Step 2: Give a detailed account of your situation. If you’ve been ill, been laid off, lost your home or experienced the death of a family member, or a downturn in business, tell all about it. Include details such as “Our business income has dropped 45% since the onset of the recession and my wife lost her job. With unemployment at 12% it’s been very difficult.” These are concrete details that the reader can understand and relate to. Be careful at drawing the line between making excuses and giving a good reason for your delinquency.

Step 3: Write out specifically what you are asking them to do. Do you want to make a payment plan for your credit card or a vendor? Spell out exactly what you want to do and what’s in it for them. For example: “I propose to resolve this situation by making $300 monthly payments on the 5th of each month with the first payment to be made upon acceptance of this arrangement.” Also, propose an increase in payments if your finances allow at some point.

Step 4: State what’s in it for them if they agree. Example: “If we can work out an agreeable payment plan, then we can continue to stay in business and meet our debt obligations.”

Step 5: State what bad thing will happen if they say no. Example: “If we cannot come to an agreement then we will have to allow the vehicle to be repossessed and I may lose my job without reliable transportation. This in turn means I cannot make any payments on the debt.” Or “If we cannot agree, we may be forced to file for bankruptcy, which would not benefit either of us.”

Step 6: Give the creditor a way to contact you and indicate that you have their first payment ready if they can agree to the plan. Be sincere and gracious in closing; such as “I appreciate your time and consideration, I hope that we can continue a long and mutually beneficial relationship in the future.”

By following these steps, you may be able to successfully negotiate a win-win situation. I know you are asking, why should I write instead of call? Writing a letter creates a paper trail. It also helps convey your intentions and documents your attempts at solving the problem. You know the drill when you call a major company. After you’ve managed to navigate their menus, you end up having to explain your situation to a different person each time you call. Then inevitably it seems each different person you talk to gives you a different answer. A phone call to follow-up on receipt of the letter is a good idea.

If your offer is accepted, the key to success is keeping your commitment. If your offer is not accepted, try again. Read my previous article “Debt Negotiation for Struggling Business Owners “. Most creditors will work with you and don’t want you to default. I have successfully negotiated  payment plans and debt reduction for my clients and written many effective hardship letters on their behalf.  For more information on how I can help you, please contact me at info@tirenajones.com or fill in the contact information below.


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