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Learn how to enter into a credit card hardship program.

Financial setbacks can turn up without warning. When they happen, they can make it hard for you to pay your bills. Your monthly credit card bill is one of the most important bills that you need to pay. If you fall behind on your credit card bills, it can affect your credit score.

When you realize that you won't be able to pay your credit card bill a given month, you should call your credit card issuer, and ask to get on their credit card hardship program. When you deal with difficult circumstances that aren't your fault, a hardship program can offer some relief. Not every credit card issuer may have one; if yours does, you should consider taking advantage of it. All you need to do is to call them and ask.

All credit card companies and other lenders offer some form of hardship program to qualified customers. They usually offer these as a last resort. Companies would rather not see a consumer file for bankruptcy as the lender will receive zero from them in that case. Offering certain individuals a credit card hardship program is in their best interest as the issuer will more than likely receive some money and not have to write off the entire balance.

Unfortunately all credit card companies have their own types of programs, and they have various criteria, as you can learn from this site. One lender's credit and income guidelines for a program will vary from another credit card company. However, there are some general guidelines to follow in the process on entering into a program and we can show you how to be successful when establishing a hardship and the steps to follow.

Steps for how to establish a hardship program

1) You need to determine your credit rating. You should obtain a recent copy of your credit scores or report. Before opening up the line of communication to your lender or credit card company, and before negotiating any credit card debts or hardship programs, you need to know how the lender views you and your personal financial situation. You can determine this be gaining an understanding of your own creditworthiness

You should also strongly consider getting your FICO score, as this is a very important number when a credit card company is reviewing your request for a credit card hardship program. The FICO number is the most telling snapshot of your overall credit and assumed worthiness. A FICO score below is 600 poor, and a FICO score above 720 means your credit is in excellent shape.




2) Your credit card company or lender will want proof that you are truly struggling and have good intentions to get back on track. So collect all statements and documents that are relating to your economic or financial hardship. For example, gather all medical or doctor letters, keep copies of any unemployment stubs or filings, disability award letters, bankruptcy papers, or divorce filings. You will need these documents to either prove and/or to argue your case when you open negotiations. These documents will also help you get the best terms for your credit card hardship program.

3) The next step in the process is to calculate your personal debt-to-income ratio (DIR). Many credit card companies, banks, and lenders will use this ratio to determine how much debt you can repay, and how likely it is that you do so. In order to determine this debt to income percentage, simply divide the sum of your monthly bills and other expenses by your total gross income. While once again the terms of each program will differ, in general a DIR above 50 percent shows a clear financial hardship for the consumer. Lenders will tend to not offer credit card hardship programs if you show an ability to repay your loans or debts.

4) You can call your lender. Or, often better, write a letter to your lender that will request a hardship, and it also serves as the first step in the negotiations process. Be sure to include your name, credit card or account number, Social Security number, e-mail address, phone number and mailing address. You rarely want to handle any serious negotiations or agree to the terms of the deal over the phone. Ideally you will want to handle all negotiations and communication via mail or e-mail. The reason why is that this written communication creates a paper trail for the consumer that may be required to hold a lender accountable to the agreed upon hardship program. Click here to read more on hardship letters and find examples of a letter.

5) You need to be specific in your letter or phone call. Ask for and tell them you want to enter into a hardship restructure program in your letter. Stress that the restructure will help you keep up with and pay down your debt over as short of timeframe as possible. Be sure to request a specific interest rate, a set monthly payment and terms of the credit card hardship program. You may want to suggest making a one-time lump sum payment on your bills to show your willingness to repay the credit card debt. Send this letter, with copies of all financial statements and documents as per above, that will corroborate your economic hardship and that will provide you with the best chance for success.

6) After you send the letter or call the credit card company or lender, follow up with another if you do not get a reply. Or call, and ask for a written reply. Once you receive the lenders offer (be sure it is in writing) counter the offer. Your counter needs to be serious. Make sure it is a reasonable counter offer. Also be sure that you have a solid reason for the counter offer. For example, if the bank or lender's suggested monthly payment still doesn't get your DIR percentage below 50 percent, you have a great case to argue that the credit card hardship programs wouldn't solve the financial hardship that you are experiencing. As always, send any counteroffers via e-mail or US mail.





If you get to this point and are still not having any luck, then you may want to explore using a third party to help you enter into a plan. Some attorneys and other professionals can help you negotiate and provide other advice on a contingency basis that will not cost you any money up front. Learn more on debt arbitration programs.

7) Last, but not least, get the final credit card hardship plan from your bank or lender in writing. Closely review all of the terms of the deal, and make sure the plan is financially beneficial to you and your personal situation. Make sure you can pay the monthly payments, and abide by its terms. Also, it is strongly suggested that you only sign the document after you review it with a trusted adviser, like an accountant, attorney, or a friend or family member who is well versed in financial terms and hardship programs.


By Jon McNamara

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