Proof of financial hardship can include documentation showing a significant, involuntary loss of income or unexpected expenses. Key evidence includes termination letters, recent pay stubs showing reduced hours, unemployment benefits records, bank statements, tax returns, medical bills, or a detailed hardship letter explaining the situation.
Signs of financial hardship often include sudden job loss, reduced hours, mounting medical bills, or struggles to meet basic living expenses.
Increased healthcare expenses (submit a bill or receipt for COVID-19-related treatment) Funeral expenses (submit a bill or receipt) Reduction in self-employment income (provide cancellations from clients, year-over-year financial statements or other documentation)
Depending on your situation, you might submit documents such as an unemployment notice, medical bills, military orders or a divorce decree. It's also helpful to provide verification of all sources of income (paystubs, W-2s and 1099s) as well as account statements to show your current financial status.
Giving evidence when you apply
You must give any evidence they ask for to support your application. For example, you'll have to explain: what you've done to find other sources of financial help. what other income or savings you might have to help pay your costs.
There are often two main reasons for financial hardship : 1. You could afford the loan when it was obtained but a change of circumstances has meant you can no longer afford the repayments; or 2. You could not afford to repay the loan when it was obtained.
What is Financial Hardship?
Your hardship letter should be honest, concise, and under one page. It should explain your current financial situation and what caused it. Don't include unnecessary or damaging details, such as blaming the lender or mentioning outside financial help might be available.
Here are the specifics on what to include:
A hardship is generally an unforeseen, significant financial or personal difficulty preventing someone from meeting basic needs or obligations, such as job loss, major medical bills, funeral expenses, or preventing eviction/foreclosure. The IRS defines it as inability to pay reasonable living expenses (food, housing, healthcare). Specific criteria vary by context (e.g., loans, retirement plans, government aid), but usually involve an immediate, heavy need beyond one's control, often requiring proof like bills or income statements.
Explain Your Financial Hardship Honestly
Provide a straightforward and truthful explanation of why you're facing financial difficulties. Whether it's due to a job loss, illness, or other reasons, be transparent about your situation to help the reader understand your need for assistance.
Financial hardship is when you are temporarily unable to make a repayment on a debt, such as a credit card, home loan or personal loan. The causes of financial hardship can include sickness, natural disaster, unemployment or over-commitment to credit arrangements.
You should provide credit card statements or loan agreements that show the minimum monthly payment, how many payments you have left to make and, in the case of a loan, when the loan began.
So, while rising rates and compounding interest can turn credit card debt into a serious burden, the IRS generally doesn't view it as the type of emergency that warrants early access to retirement funds. Borrowers may feel financial strain right now, but that alone doesn't meet the hardship threshold.
bank notice, for example, overdraft call or mortgaged property repossession. overdue medical bills. letter from a doctor verifying the inability to earn an income due to illness or caring for a sick family member. final notice from school regarding payment of mandatory fees.
If you've experienced a job loss, reduction in hours or unexpected medical emergency, gather paperwork that shows when and how your income changed. A termination letter, doctor's bills or disability paperwork can substantiate your claims and show that your hardship isn't temporary irresponsibility but a genuine crisis.
bank statements showing a reduction of income, essential spending and reduced savings. a report from a financial counselling service. debt repayment agreements. any other evidence you have to explain your circumstances.
People do this for many reasons, including: Unexpected medical expenses or treatments that are not covered by insurance. Costs related to the purchase or repair of a home, or eviction prevention. Tuition, educational fees and related expenses.
The 3-6-9 rule in finance is a guideline for building an emergency fund, suggesting you save 3 months of essential expenses for stable jobs, 6 months for most people (especially those with families/mortgages), and 9 months for those with irregular income (freelancers, sole earners) or high financial risk. It's a flexible strategy to provide financial security, helping you avoid debt or panic withdrawals during unexpected job loss or emergencies, with the exact target depending on your income stability and dependents.
Different ways to say you don't have enough money for professional relationships: