Financial circumstances can change quickly for better or worse — a fact many of us know from firsthand experience.

Sometimes this works in our favor, like when we get a raise at work, receive an unexpected windfall or pay off a debt. But other times we find ourselves facing financial challenges that were not present when we initially took on a loan or opened a line of credit. These circumstances that make it difficult, or impossible, to fulfill our financial obligations are simply known as “hardships.”

Let’s take a closer look at what counts as a financial hardship and what you can do about it if you experience one yourself.

Common Financial Hardships Borrowers Face

Hardships take a variety of forms. Some of the most common reasons people are unable to make payments on their debts include:

  • Injury
  • Illness
  • Divorce
  • Unemployment
  • Income reduction
  • Natural disaster
  • Military deployment
  • Death in the family
  • Incarceration

Case in point: Many Americans saw a change in their income due to the effects of the COVID-19 pandemic. Many workers faced furloughs and layoffs due to business closures. Business owners also dealt with fluctuating income streams as a result of closures and changes in consumer behavior. As Investopedia cites, more than four in 10 Americans believe the coronavirus will have a “high impact” on their financial stability six months down the road.

Communicating with Lenders About Hardship

Of course you intend to make regular payments on loans and credit cards when you first agree to them. But life has a way of throwing us curveballs, and sometimes unanticipated circumstances crop up that make it tough to keep up with the bills.

The worst thing to do in this situation is nothing, as you’ll see your credit score start to suffer as your lenders report skipped payments to reporting bureaus. It’s worth trying to communicate with creditors to see if you can come up with a workable plan together.

Many credit card companies offer hardship programs, which is basically a payment plan. The issuing bank may agree to eliminate fees or reduce interest rates for a specific amount of time while you get back on your feet. As NerdWallet writes, the exact terms a lender may offer depends on the hardship at hand, their protocols and the deal you negotiate together. The process begins with calling your card issuer and explaining the situation.

Homeowners facing financial woes looking to avoid foreclosure — instead hoping to sell their home for less than what they owe or get their mortgage otherwise modified — generally need to plead their case in a letter. This letter should include the nature of the hardship and measures you’ve taken to try to rectify it, as well as proper documentation to back up your assertions.

Read More: The 5 Best Financial Budget Apps for Startups

Americans facing significant debt exacerbated by hardships, and who have already fallen behind on payments, may find themselves eligible for debt relief programs. Eligibility for these programs generally depends on the existence of a hardship that necessitates more than just a temporary reduction in interest or waiving of fees; it calls for trying to negotiate down the actual amount owed to make repayment more feasible.

The key is always taking a proactive approach to anticipating the impact of the hardship, communicating with lenders and taking action to minimize the negative effects. One key aspect is sitting down to go over your budget with consideration for the newly arisen hardship. In other words, you need to know exactly how much you can afford to pay from the outset — whether you’re trying to get into a hardship program or enrolling in debt relief.

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