What is a Financial Hardship? – Definition
A financial hardship is when someone is willing to pay their debts as they originally agreed to but is unable to do so due to a significant unexpected event or unforeseen circumstances that have seriously impacted their ability to pay. Events that can cause financial hardship include the loss of a spouse, divorce, losing your job, a serious injury or illness, a major emergency, a natural disaster, or even getting in over your head in debt.
Financial Hardship Assistance, Programs, Info & Help
Loan, Mortgage, & Credit Card Financial Hardship Programs
Loans – Contact Your Bank for Different Payment Arrangements
If you have a loan with a financial institution and you anticipate that you will not be able to make one or more payments or you can no longer afford your current payments and need to reduce them, contact your bank and see what arrangements you can work out. Financial institutions do not have formal hardship programs. Instead, they look at each situation on a case-by-case basis.
If you have been paying more on your loan than you were required to, then your bank may be able to allow you to miss the number of future payments your extra payments in the past have effectively already made. It’s possible that approaching the situation like this won’t violate your original agreement since the loan will still be repaid within the amortization period originally agreed to.
The important thing here is to be as pro-active as possible and discuss the matter with your bank or credit union as soon as you foresee a problem.
Mortgages – If your behind on your payments or unable to pay moving forward
The possibility of losing your home because you can’t make the mortgage payments can be terrifying. If you are having trouble making your payments, contact your loan servicer to discuss your options as early as you can. The longer you wait to call, the fewer options you will have.
Many loan servicers are expanding the options available to borrowers – it’s worth calling your servicer even if your request has been turned down before. Servicers are getting lots of calls: Be patient, and be persistent if you don’t reach your servicer on the first try. Your mortgage payments can possibly be reduced or suspended for a period if servicer agrees. At the end of that time, you may resume making your regular payments as well as a lump sum payment or additional partial payments for a number of months to bring the loan current.
Credit Cards - The Most Common Interest Relief Program is Called a Debt Management Program
If you are stressed about making an credit card payment, don't keep it to yourself. If you work with your bank, there may be a way to get some help during the coronavirus pandemic. The best thing you can do is pick up your phone and call your bank and ask them for help. Ask for someone who works with their "customer hardship" or "customer assistance" program. It may take a little while and banks may be reluctant, so be persistent. You should also confirm that any assistance available from you bank will not negatively impact your credit. Make sure to find out all the details before proceeding with any arrangement.
CARES Act and Qualified Retirement Plans
The CARES Act offers some help to those with retirement accounts. Normally, if you took money out of an employer-sponsored retirement plan or IRA or other before 59 ½, you’d be hit with taxes and a 10% tax penalty on that amount. But the CARES Act waives the early distribution penalty on up to $100,000 of such distributions in 2020 for what the law calls “affected individuals.” And you’ll be allowed to pay over three years the taxes that are due on the distribution. As part of the new law, Congress is permitting savers to skip so-called required minimum withdrawals or RMDs from their retirement accounts in 2020. These mandatory withdrawals must be taken each year after account holders turn 70½.
While early birds who took this year’s RMDs during the first week of January are out of luck, those who waited until February or March may be able to reverse the transaction if they meet certain conditions
Call your plan provider for an explanation of available options.