“I’m tired of paying my creditors each month, those bloodsuckers!”
Someone gave me this as their “reason” for pursuing a debt settlement program. Sorry, Charlie, that is not a legitimate hardship. Try telling that to your creditors and see what kind of reaction you’ll get: probably not something favorable.
Another one that won’t fly is “I want to retire, but I can’t with all these debts.” Honestly, if you’ve got a job and are paying your debts, you’re better off than 14 million unemployed Americans. http://www.bls.gov/news.release/pdf/empsit.pdf
So – what is a “hardship” and why do you need to know?
A “hardship” is the reasonable excuse for needing debt relief. It could be one simple reason, or it could be multiple reasons, depending on your situation.
A legitimate hardship means you don't have enough money to pay your debts.
Legitimate hardships
Work
I lost my job. If you are unemployed and have fallen behind in your payments and don’t have the savings to pay your bills, you have a financial hardship that can easily be understood by creditors.
My hours were cut back. Even if you are working, if you’re not earning enough to pay the bills then you have a hardship. It’s legit.
Business is failing. Do you own your own business but the sales aren’t coming in fast enough to keep up with the bills? That’s going to make it impossible to pay the bills.
Family
I just went through a divorce. Often when families split up there’s not enough money to go around for two households.
My spouse died. Without that income and not enough life insurance, the bills can pile up with no way to pay them off.
Medical
Hospital bills. Maybe you have insurance but it only covered 80% of the $100,000 hospital stay. That remaining $20,000 becomes too great a burden, and the debts become overwhelming.
Extended illness. If you’re disabled by an accident or illness it may become impossible to regain your former earning capability. You might have also lost wages during that time.
Family care. What if you are caring for a family member and no longer able to support both households? Or have to cut back your hours voluntarily to care for a family member. These are hardships that can restrict you from repaying your debts as agreed.
Income vs. Expenses
You are struggling to make ends meet, with no end in sight. What if you’ve been paying your debts for years, but the cost of living is catching up with you, and you’re finally cutting all your expenses to the minimums yet barely scraping by. You’re making only minimum payments, you’ve cut out all optional expenses, and still don’t have enough each month without borrowing to pay your bills. You need debt relief!
Have you thought of other legitimate hardships? Let me know in the comments.