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What is Financial Hardship?

financial hardship

If you are struggling to pay your bills every month, you might be dealing with a financial hardship. What is financial hardship? The exact definition depends on a number of factors, including the type of debt you are dealing with and your circumstances. Financial hardship typically refers to a situation in which a person cannot keep up with debt payments and bills or if the amount you need to pay each month is more than the amount you earn, due to a circumstance beyond your control.

What Causes a Financial Hardship?

A financial hardship often results from a change in your financial circumstances. Common reasons for a hardship include:

  • Loss of a job
  • Significant cut in hours or pay 
  • Divorce or death of a spouse
  • Medical illness or injury

COVID-19 Financial Harship

Millions of consumers have been impacted by the COVID-19 crisis. Loss of income, illness, social distancing and business shut downs have caused a signficant financial disruption that has left families reeling.

We’ve created a financial resource page for those who are looking for specific assistance related to the COVID-19 crisis. You can also request help online by completing our form to request a call with a Certified Credit Counselor who can assist you, or by calling our COVID-19 Hotline.

Contact our COVID-19 Hotline: 1-888-419-2374

Warning Signs of Financial Trouble

Do you know the signs that indicate that your finances are getting out of control? It’s best to address any issues that crop up in your personal finances before they get to the point where you are significantly impacted.

Some common signs that you are headed for financial distress include:

  • High balances (or balances beyond your credit limit)  on credit cards 
  • Using credit to pay for everyday expenses when you aren’t able to pay off balances monthly
  • High debt to income ratio
  • Utilizing high-interest loans or cash advances to make ends meet
  • Juggling monthly bills
  • Making only minimum payments on balances
  • Fear of knowing what you owe (ignorance is not bliss!)
  • Late or over the limit fees piling up
  • Reduced credit score resulting from high balances and/or late payments
  • Inability to qualify for needed credit

Impact of Financial Stress

Financial distress can have devastating effects on individuals and families. When faced with difficult financial situations, it’s not uncommon for the loss of jobs, homes, cars, retirement accounts, personal belongings and savings to result. The stress and fear of  financial hardship and the resulting loss can have an emotional impact as well as physical impact.

Common responses to financial stress may include:

  • Increased anxiety or depression
  • Marital difficulty
  • Substance abuse
  • Insomnia or difficulty sleeping
  • Over- or under-eating
  • Physical symptoms such as digestive difficulty, upset stomach, nausea or headaches

How Can I Qualify For Student Loan Financial Hardship?

If you have federal student loans, you might qualify for a special repayment plan when experiencing a financial hardship. For example, you may qualify for pay-as-you-earn, or an income-based repayment plan if you have a partial financial hardship. A partial financial hardship for people interested in the income based repayment plan occurs if the amount they would owe annually on the standard repayment plan is more than 15 percent of the difference between their adjusted gross income and 150 percent of the poverty line in their state, based on the size of their household. For people on the pay-as-you-earn plan, the amount is more than 10 percent.

What Can I Do About Financial Hardship?

If you are facing a financial hardship, you aren’t alone. In fact, surveys indicate that only 40% of Americans have sufficient savings to sustain a financial emergency

Whatever the cause of your hardship, you have options. Solutions range from changing the repayment plan on your student loans to working with a credit counselor to set up a debt management program.

How Can I Qualify For Credit Card Hardship Programs?

Many credit cards also offer credit card hardship programs that will help you manage your debt. Speaking with a credit counselor is the first step in evaluating what programs you may qualify for. A certified counselor will review your financial situation and make recommendations customized to your needs

These programs typically offer lower interest rates, lower minimum payments, or reduced penalties and fees. You can usually choose between a short-term agreement (6-12 months) or a permanent one that lasts until your card balance is paid.

In addition to debt management, credit card hardship programs or new payment plans, you may be able to get back on your financial feet by evaluating your budget and adjusting your monthly spending. A credit counselor can help you taking a look at your budget and making recommendations. 

It’s important to note that a financial hardship is usually something you can’t control and isn’t your fault. Since life can throw you a curve ball from time to time and even the best laid financial plans can get derailed, many lenders and creditors will be willing to work with you, at least to some degree, until your financial hardship is over.

If you are experiencing financial difficulty and are looking for a solution, non-profit credit counseling can help you make sense of all your options. ​contact us today for a free financial assessment with one of our certified credit counselors or schedule an appointment that fits into your schedule!


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Filed Under: Money management

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10 Responses to What is Financial Hardship?

  1. Mary Gibson says:

    I am a 68yrs.old single mother with a disable daughter we need help

  2. Kimberly says:

    Hi I’m a 58 yr old woman who is on disability $791 a month and CANT WORK. My fiancé was hit by a car while walking and can’t use his arm. So he is not working. My bills are more then I make. I have no money for food. Etc. how can I qualify?

    • Tracy East says:

      Kimberly – that sounds like a tough financial situation to be in. If you’re looking for specific hardship programs that will help with monthly expenses or food, check your local and state resources first. There are many programs that can assist on the local level including food banks/pantry programs, utility programs, clothing resources and more. Many may be available right in your community.

  3. Jay says:

    In June of 2019 my wife had to have a liver transplant that forced me to charge out motels, fuel & food. I had to get a signature loan just to try and stay up. All my credit cards are maxed out and at this time we have over 90K in debit. I also took a 30% pay cut that has placed more stress on myself and wife then anyone can take. I have lost 60% of my savings and need the other just for back up if we have to have another surgery. I dont see anything changing over the next year or two.

    • Tracy East says:

      Jay – Thank you for sharing. Financial hardship is real and difficult to walk through. We are cheering you on that you are able to see a turnaround soon.

  4. Patricia Reyna says:

    I’m a 57 yr old woman with ab16 yr old daughter that’s in the 10th grade and an 18 yr old son that was working but sighted up with the Marines but was sent home because he was having anxiety attacks! He started to look for ASAP but it’s been 4 months and nothing! And since he wasn’t in the Marines for more than a month he doesn’t qualify for unemployment! And since the Coronavirus started he sure can’t get a job! I’m on disability and only get 783 a month! I have used my credit cards for gas, food and things that we need! I’m over my limit. Plus my son got me a car, 2016 Toyota Hilander. So 5 credit cards that can’t make the payments on plus a car payment and light, rent cable, internet, and phone payment! I don’t know what to do! I only get $783 on disability and $283 on child support. My total income is $1066 and my bills are $1800 a month! Can I qualify for any kind of help?

    • Tracy East says:

      Hi Patricia – there are many resources for assistance you can check. Have you contacted your local 211 agency to see what type of assistance you can qualify for locally? Our credit counselors would be happy to discuss your financial situation and see what options your creditors may have in place that could help. Give us a call for a free budget assessment.

  5. Heartsease Braxton says:

    I’M UNABLE TO PAY TO GET MY VEHICLE OUT OF THE SHOP. I’M RECOVERING FROM A BROKE KNEE AND I DON’T HAVE MEANS OF TRANSPORTATION TO GET WHERE I NEED TO BE.

    • Tracy East says:

      We are sorry to hear about your financial hardship. Have you contacted local resources for assistance in your area? 211.org is a great place to start to find resources that can help you in a financial crisis.

  6. Harold Donaldson says:

    I just under went a second emergency surgery within an eight month period due to a rupture in my intestines and colon section. I’m currently out of work and seeking help in my healing process

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