Hardship Program for Debt: Your Complete Guide to Financial Relief [2025]

Debt is a fact of life for many Americans. In fact, many people borrow for all sorts of different things. From paying for college to buying a home to covering emergency expenses, borrowing happens every day. 

Sometimes, however, debt can get out of control. This could happen because you borrow too much. Or, you could lose your job or face a loss of income. This could leave you suddenly struggling to make debt payments you could easily afford before.

Whatever the reason, if you're struggling with debt, you're far from alone. In fact, an Experian survey found that almost one out of every four adults currently had debt they described as being unmanageable. 

If you find yourself with debt you can't repay, you may need debt relief. If so, talking with your creditors about a debt hardship program is one option to get the help you need. 

That's because some creditors offer hardship relief programs to those facing temporary financial struggles. These programs may be offered by credit card companies, mortgage lenders, other loan providers, and even the IRS. 

Hardship relief programs vary by lender and the type of debt you’re dealing with. Many programs allow you to pause payments or lower payment amounts. In some cases, they also make it possible to avoid fees. This guide will explain more about credit card hardship programs and other types of hardship relief programs you could potentially take advantage of if you're struggling. 

What Is a Hardship Program for Debt?

A hardship program for debt is a program that some creditors offer to provide temporary help when you can't make your debt payments. Creditors agree to give you a break for a while to give you time to improve your situation.

Here's what you need to know about hardship programs, including how they work to address your debt problems over the long term.

Hardship programs defined

A hardship program for debt is exactly what it sounds like. You are experiencing some type of financial hardship, so your creditor works with you to create a special plan to make things easier. 

Many different kinds of creditors offer hardship programs, and the options available vary depending on the kind of debt you have and the nature of your hardship. If you qualify, your creditor may offer options like:

• Forbearance or deferred payment: This is a payment pause. You make no payments for a limited time. Usually, but not always, interest keeps growing while payments are paused. For example, if you have federal student loans, you may be able to pause payments for up to 36 months using economic hardship deferment.

• Loan modifications: Lenders change the details of your loan, either temporarily or for good. An example might be if your mortgage lender allows you to convert your 30-year mortgage to a 40-year mortgage to make monthly payments cheaper. 

• Interest rate reduction: Sometimes, lenders will reduce your interest rate temporarily or permanently. A lower interest rate makes monthly payments cheaper.

• Waived fees: Lenders may charge you fees if you don't pay a set minimum or if you pay late. A lender may be willing to waive your fees as part of a hardship program. 

• Reduced minimum payment: You may be able to pay a smaller amount for a period of time. 

Not all lenders or creditors offer all of these options. However, most companies you borrow from—including credit card issuers—do have some type of financial or debt hardship program or assistance plan that is designed to provide short-term relief. 

Card issuers and lenders often don't advertise these programs. This means you'll need to know to ask about them if you're facing a serious financial struggle. The sooner you reach out, the better if you need this kind of help.

Purpose and benefits of hardship programs

Why should lenders or creditors offer a hardship program for debt? It's simple. They don’t want you to fail to repay what you owe if your situation makes it impossible to meet the original payment terms. The lender has an incentive to find a different way for you to pay the debt so you don't default.

Let’s say you’re a lender. Your borrower makes consistent payments for a few years, but starts to fall behind. It’s clear the borrower is having trouble. As a lender, you could get aggressive about collecting the debt, but that costs money. It could also lead to the borrower filing for bankruptcy, or just giving up and paying nothing because they feel hopeless about the situation if they can't pay the full amount. 

Instead of spending a lot of money to try to collect, or risking collecting nothing if the borrower defaults or files for bankruptcy, you could try to find a way to work with the borrower. If you let the borrower pay less, you'd still have some money coming‌ in. If you let them pause payments, which they resume when they get a job again, you could end up collecting the full amount owed

The chance of getting paid most or all of the money in the end is the reason creditors often offer hardship programs. From a creditor’s point of view, loans are an investment. They don’t want to have to write off that investment because you can’t pay. They’d rather find a way for that investment to pay off, even if it’s a little different than originally planned.

Of course, naturally, creditors don’t like to make these changes if they don’t have to. Still, they might consider it if you can show you’re having genuine financial difficulties. In that case, they might decide that giving you a break is their best way of getting their investment to pay off.

Temporary vs. permanent relief options

A hardship program for debt is intended to be a temporary source of relief during a period of financial difficulty. Hardship programs also don't usually last forever. 

If a lender paused your payments, for example, you'll need to resume them when the deferment or forbearance ends. If your lender lowered your rate or minimum payment for a limited time, the rate will usually go back up again automatically. 

The downside of that for borrowers is that a reduced monthly rate or payment only provides relief while it is in effect. As soon as payments come off pause or your rate increases, you'll be back to paying the full amount due. Your debt won't be forgiven or wiped away. Eventually, you'll have to pay it back. 

There are other more long-term options beyond short-term hardship debt relief solutions. For example, you could settle debt. This would involve negotiating down the balance due and making a lump sum payment for the amount you agree on with the remaining balance forgiven.

The right choice for you is going to depend on whether you can't pay your debt because of a temporary setback you'll be able to recover from relatively quickly—or at all. 

You May Like These

10 Holiday Shopping Debt Traps You Need to Avoid

Credit Card Debt Forgiveness

Debt Solutions

Types of Debt Covered by Hardship Programs 

Many types of debt may be covered by hardship relief programs. These include the following. 

Credit card debt hardship programs

If you have credit card debts you can't pay, the credit card company may offer:

• Credit card debt forbearance 

• A reduced interest rate

• A reduced minimum payment

Most credit card companies don't heavily advertise these programs because they are meant as a last resort. They also don't usually publish specific details on exactly how the programs work because those details can vary for different borrowers.

At the same time, some card issuers make clear they want to help. Here are a few examples.

Pro tip: Not all credit card companies are willing to provide hardship help, but many are. It’s worth asking if you're having a hard time paying what's due.

Capital One

Capital One has a page on its website called "Helping Our Customers Weather the Storm." While this page was originally focused on COVID-19 relief efforts, it remains up, and the message still stands.

The page reads, in part:

"We have a range of policies and programs to accommodate customer hardships. For customers who let us know they are being impacted, we are here to support and work with them….  Since our founding, we have been committed to serving the financial needs of all consumers across the credit spectrum. Our frontline associates are well-trained and well-prepared to serve customers in times of financial stress or hardship, and we’re grateful for the service they are providing as the number of hardship cases increases. "

American Express

American Express has a financial relief program that offers options including:

• A reduced monthly payment for the duration of the program

• Temporary relief from late fees and membership fees

You can sign into your account to enroll, select a plan that makes sense for you, and receive monthly updates on your progress toward completing your program. 

Discover

Discover offers a hardship program for credit card and loan customers who are struggling. "If you need support during a challenging financial time, you can work with Discover directly to find a solution for your credit card debt," the website states.

Mortgage hardship assistance

Mortgage lenders don't want to foreclose on a house. Doing so is expensive, and they risk property owners damaging houses they don't want to leave. A lender who has foreclosed may also have to evict you if you don't leave voluntarily, and they then need to pay to fix and maintain the house before finding a buyer. 

There are many different mortgage hardship assistance programs aimed at helping lenders avoid foreclosing on a house. Examples include:

• Mortgage forbearance: This is when payments are paused or made smaller.

• Repayment plans: These help you get caught up if you missed a few payments. You'll repay the unpaid amount over time by making higher mortgage payments temporarily.

• Loan modification: If you want to keep your house but can't afford to pay the current mortgage, loan modification can change the terms without refinancing to a new loan. This could include making your repayment time longer or reducing your interest rate or payment. 

Private mortgage lenders and government-backed lenders differ in the types of assistance provided. For example, Fannie Mae spells out steps mortgage servicers can take to reduce principal and interest payments by as much as 20%. 

These steps include calculating how far behind you are, establishing a modified interest rate, extending your loan repayment term, or not collecting payments on some portion of the loan amount.

Federal student loan hardship programs

When you have federal student loan debt, an income-driven repayment plan, forbearance, deferment, and student loan forgiveness are among the hardship routes you can explore. 

Deferment and forbearance both pause payments, but they work differently. 

• In a deferment, interest is subsidized on Direct Subsidized Loans. That means you don't accrue interest over time. For other types of loans, interest typically accrues.

• Interest typically accrues on all types of student loans in forbearance. 

You'll need to apply for either deferment or forbearance and demonstrate your eligibility. Deferment is available if you're undergoing cancer treatment, return to school, are providing active duty military service, are receiving unemployment benefits, are in an approved rehabilitation program, or are experiencing economic hardship. 

Forbearance is available based on financial difficulties, including a change in employment. Forbearance is granted for up to 12 months at a time, although you can reapply. 

In certain situations, your lender is required to approve your request for forbearance, including if you are serving in a qualifying AmeriCorps program, are participating in the Department of Defense student loan repayment program, are completing a medical or dental internship or residency, are pursuing teacher loan forgiveness, or are doing National Guard duty. 

Instead of choosing deferment or forbearance, the Department of Education recommends switching your payments to an income-based payment plan. Payments are based on an affordable percentage of income. You can sometimes pay $0 per month. After making a required number of payments, you can apply to have the remainder of your loan balance forgiven. 

If you are struggling to pay your federal student loans, you have many options to explore and should look into these potential hardship relief programs ASAP to avoid defaulting or missing payments.

If you have private student loans, there are fewer options, but most lenders will still work with you to pause payments or lower your payments for at least a limited time if you need it. 

Tax debt hardship relief

If you have outstanding tax debt, your IRS hardship program choices may include:

• Online payment plans: These include short-term and long-term plans that allow you to pay off your tax debt over time. The short-term payment plan period is 180 days or less, while the long-term payment period lasts longer than 180 days. You can only participate in the long-term plan if your tax debt combined with penalties and interest is under $50,000. 

• Offer in compromise: This option allows you to settle your tax debt for less than the full amount if you can't afford to cover the entire cost.You may be eligible if you've filed all tax returns and made all required estimated payments, aren't in bankruptcy, and have a valid extension for the current year if you didn't yet file. Your eligibility and the amount you'll pay is based on your income, expenses, asset equity, and ability to make payments. 

• Currently Not Collectible: If the IRS determines you're currently not able to pay your debt, it may report it as not collectible and temporarily delay the process of collection until your financial condition gets better. You'll still owe the money. The IRS will just pause in collecting it. The IRS will require proof of your financial details before putting you into this status. 

How Do Hardship Debt Relief Programs Work? 

Your eligibility for any hardship debt relief program will depend on what type of debt you have and the extent of your financial hardship. 

For example, signing up for an income-driven student loan repayment plan is an option for virtually anyone with federal student loans. On the other hand, credit card companies, mortgage lenders, and the IRS have stricter requirements for when they will allow you to modify your repayment plan.

Here are the general steps that you'll need to take to participate in a hardship debt relief program, as well as details on what to expect.

Identifying your financial hardship

You must disclose what your financial hardship is to your creditor. Common hardships include:

• Unemployment

• Major salary reduction

• Medical emergency, illness, or injury

• Divorce

• Natural disaster

• Death of a family wage earner

You can write a financial hardship statement for your lender that explains your circumstances and why you're unable to pay as expected. You should be ready to document your hardship with evidence such as:

• Employment termination letter

• Death certificate

• Divorce decree

• Medical bills

• Bank account statements

• Tax returns

• Investment account statements

The more proof you can provide of your difficult financial circumstances, the greater the chances that your lender will be willing to work with you. 

Types of relief offered in hardship programs

When you request hardship relief, it helps to understand what your potential options are and what kinds of relief the lender may offer.

• Loan forbearance or deferment: This is when payments are paused temporarily. In most cases, forbearance and deferment are just different names for paused payments. The distinction matters with federal student loans because interest is covered on certain loans in deferment. Other than on Direct Subsidized loans, interest almost always continues to grow when payments are paused, so your balance will get bigger during this time. 

• Loan modifications: This involves changing the terms of your loan, such as making your repayment schedule longer to lower monthly payments. Making your payment period longer results in higher interest costs over time but could provide more breathing room in your current budget. 

• Interest rate reductions: When your interest rate is lowered, your monthly payment goes down. You may also pay less interest over time unless you also extend your payoff period.

• Fee waivers: Lenders may agree to waive late fees or over-the-limit fees.

In most cases, these programs are temporary. 

Applying for a debt hardship program 

If you're hoping to become part of a debt hardship program, here are the steps you'll likely need to take to apply: 

• List your income and necessary expenses. Figure out how much your budget comes up short, and when this situation might change.

• Gather evidence to document your financial picture. This should include paperwork like paycheck stubs and copies of monthly bills.  

• Contact your creditor. Do this as soon as possible if you realize you can’t pay a bill in full. Working on a solution can head off penalties that would make your problem worse.

• Be calm and respectful. The idea is to work with your creditor on a solution. If you treat creditors like enemies, they’ll be less inclined to help.

• Make your case. Explain to your creditor why you’re having trouble paying your bills. Suggest what payments you might be able to make instead. 

• Listen carefully. Your creditor might respond with questions or requests for additional information. Take notes on what they want.

• Follow up. Your creditor might give you next steps to take. These might include filling out an application for a hardship program or providing additional facts and documentation. Make sure you respond to requests promptly.

• Document any agreement. If your creditor agrees to a modified payment schedule, get it in writing.

Who Qualifies for Hardship Programs?

Debt hardship programs are a type of emergency debt relief for people who are temporarily facing financial problems. 

The best candidates for a debt hardship program are those with a genuine need for financial help to pay off their debts and who are experiencing short-term issues because of the problems mentioned above, including death, divorce, illness, job loss, or natural disaster. 

Lenders will consider the circumstances of your hardship, as well as your account history when deciding if you can qualify. Depending on what program you're participating in, that includes:

• Income

• Type of employment

• Type of loan

• Disability

Government student loan programs have an additional set of criteria. 

Credit history considerations

Your credit history may play a role in whether you qualify for a hardship program. If you have generally been a good customer with a positive payment track record, and you have good credit, then you may be more likely to qualify for a hardship program for debt. 

How to Apply for a Hardship Program: Step-by-Step Guide 

The process of applying for hardship relief programs varies based on the program and your lender. Here are the key steps you'll need to take.

Before you apply: financial assessment

Before applying for your program, you should first conduct a financial assessment to determine:

• If you truly need help from the hardship program. Can you make adjustments to your budget or increase income to stay on track with your current payment schedule?

• Can you afford to make payments? Unless you're putting payments into forbearance or deferment, most hardship programs require you to pay something each month toward your debt. How much can you afford to put toward your program after all of your other bills are covered? 

If you aren't sure how to do a financial assessment like this, you may want to talk with an accredited credit counselor to help. 

Contacting your creditors

The next thing you'll need to do is to contact your creditors to see if they offer a program and to find out how the hardship program works. 

You can call the credit card company or lender using the phone number on the back of your card or on your account statements. You may also be able to start an online chat. The customer service representatives can help you ‌reach the right place when you call. 

When you request a hardship program, be very clear about what your hardship is and the fact you're asking for help. This could be something as simple as explaining, "I'm going through a divorce and I don't have the money to pay my loan right now. I need to discuss options for debt hardship relief."

As you talk to your creditors, remember that you can negotiate terms. You can always ask them to drop more fees, lower your payment a little more, or pause payments for a little longer. The worst that happens is they say no. 

You should also ask as many questions as you can about different hardship options, and the impact of each on your credit score, your ability to borrow more in the future, and your monthly payments. You’ll also want to be clear about the effect of the program on your debt balance (will you end up owing more than you do today).

Be sure to understand exactly what any hardship program you are agreeing to looks like, including how it will affect current costs and costs over time—and get the agreement in writing.

If you are initially denied, you shouldn't get discouraged. Many people don't get approved at first and you may need to call back again to try with a different customer service agent. You could send a letter to the lender or card company to get the request in front of the right people. 

Following through with the program

You need to go beyond just learning what is a hardship relief program—you must know the details of your specific program and what you have to do to complete it. If you don't fulfill the terms, your creditor may not be willing to work with you as much in the future.

When you enter into your program, find out exactly what is expected of you. If you're making monthly payments, consider automating the process so the money is withdrawn automatically from your account. This will help make sure you don't miss a payment. Be sure to include this in your budget so you're ready for the money to come out.

It's also important to get ready for what happens after the program ends. If your payment will resume or go higher, be prepared for this to occur by saving money in advance. 

If you're having trouble during the program or worry about what will happen when it ends, you should also reach out to your creditor to express your concerns and see if there is anything else the creditor can do to help.

Impact of Hardship Programs on Your Financial Future

Hardship programs can affect different aspects of your finances—here’s how.

Credit score impact

If you have maxed out your credit card or are missing payments already, or are in danger of doing so, those issues are already affecting your credit. Pursuing a hardship debt relief program may cause your score to take another hit, but the effect might not be as bad as you think. If, on the other hand, you are starting with great credit, your score could drop sharply.

Participating in hardship programs for credit cards or other debts doesn't, by itself, hurt your credit. However, some of the things that happen because of your participation can affect your score. For example:

• If your card company or lender posts a note on your credit record indicating you're participating in a credit card debt relief program, this can hurt your score and raise red flags with lenders. Ask your card company if they plan to do this.

• If your account is closed or your credit limit is lowered, this could have a negative impact on your credit score. Credit utilization, length of credit history, and types of different kinds of credit are three key factors in your score and all could be affected by your accounts being closed or new limits imposed on your access to credit.

The exact impact on your credit will vary based on the program and how it is reported. For example, if you choose an income-driven repayment plan for student loans, that shouldn't hurt your credit as long as you pay on time.

There's also good news for your credit. When you enter into the program, you may be able to negotiate with your creditors to stop posting negative details, such as late or past-due payments. Your program may also buy you some breathing room to start paying on time. All of this could put you in a better position to improve your credit over the long run. 

You can monitor how your credit score changes using free online tools during the time you're participating in your program. Monitoring could help you understand the real-world impact of your on-time payments and financial moves.

Long-term financial planning

Ideally, once you have successfully completed a hardship debt relief program, you will want to avoid having to participate in another one in the future. That means you should take steps to shore up your finances so you don't have to.

You can do this by:

• Building an emergency fund with three to six months of living expenses: Prioritize saving for emergencies by cutting back on other spending until you have money set aside. Automate contributions to your emergency fund to avoid missing one and to build up your account balance sooner.

• Avoiding debt except for the essentials: If you don't have debt, you won't have to worry about repaying it if something goes wrong. Try to avoid borrowing unless you absolutely have to. 

• Living on a budget to spend within your means: Living on a budget could help you save for emergencies and avoid borrowing. Set up a budget and assign each dollar a job so you make a clear choice on where your money is going. Once you have your budget, track your spending to make sure you don't spend more than you have set aside for a specific expense.

• Setting financial goals for your future: Set some clear financial goals going forward, including saving for short-term and medium-term expenses like vacations or car repairs so you don't have to borrow. 

Future borrowing implications

If your credit score was affected by your hardship program, you might have a harder time borrowing right away. You should be eligible for secured credit cards, which require a cash deposit. Other lenders may be worried about loaning money to you since you had payment problems in the past.

Try to keep your credit card balance as close to zero as possible, pay your bills on time all the time. Your positive payment history will soon become more important. Your negative information will eventually drop off your credit history. 

If you want to borrow for a car or a home loan, you may have the chance to explain to the lender why you needed a hardship program. If you had a good reason for needing help and can now show you've been responsible with your debt, the lender may be more willing to work with you.

When Hardship Programs Aren't Enough: Other Debt Relief Options

A debt hardship relief program can help with debt management but it can't solve your problems if you have too much debt to reasonably pay back.

In these situations, you may need to look into other debt relief programs beyond what a temporary hardship plan can offer.  

Debt settlement with Freedom Debt Relief

If you have a lot of debt that you feel like you can't repay, debt settlement could be the solution you're looking for.

Debt settlement allows you to get long-term debt relief by getting rid of debt for less than the total amount you owe.

When you settle debt, you may choose to stop making payments to your creditor so you can start saving money for settlement offers. You negotiate a deal with your creditors to pay back some amount of money you owe. The creditor then forgives the remaining balance. 

Creditors may agree to debt settlement if they are worried they won't get paid at all. You can try to negotiate debt settlement on your own, or work with a professional. Learn how Freedom Debt Relief works to see if this option is the right choice for you. 

Bankruptcy

Bankruptcy is legal protection from your creditors. There are two different kinds of bankruptcy you could file:

• Chapter 7 allows you to walk away from most unsecured debts within a few months. You might have to give up some of the things you own. You’re allowed to keep certain things, like a modest car and your household goods. If you can afford a monthly payment, you won’t qualify for Chapter 7 bankruptcy protection.

• Chapter 13 lets you make payments toward your debt on a three to five year repayment plan. At the end of the plan, the remaining debt is forgiven. 

Creditors can’t opt out of bankruptcy.

Bankruptcy stays on your credit record for seven years if you file Chapter 13, and for 10 years if you file Chapter 7. It makes future lenders nervous so it is harder to borrow after a bankruptcy. You may want to consider bankruptcy after you have looked into other options like hardship debt relief or scheduled a free consultation with Freedom Debt Relief to find out your options for debt settlement. 

Freedom Debt Relief: Support Beyond Hardship Programs 

Freedom Debt Relief can provide more comprehensive solutions than a temporary hardship program. There are many people in debt in the past who were able to successfully negotiate to settle their debt and move forward. 

This includes people like Lea who turned to Freedom Debt Relief in May of 2023. Lea was able to pay off 10 debts in 25 months, putting $173,142 of debt behind her for good. 

If a hardship program with a temporary pause or reduction in payments won't cut it for you, contact Freedom Debt Relief today to schedule a free consultation and find a solution that truly allows you to be proactive in dealing with your debt for good.