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What Is a Financial Hardship, and How Can You Get Help?

Life is all about surprises, and some of them may leave you in financial hardship. Fortunately, there are programs to help you through tough times.

August 19, 2022

This article is provided for informational purposes only and should not be construed as legal or investment advice. Consult with a professional financial or investment advisor before making investment decisions.

No one can predict the future or when economic hard times are coming. Unforeseeable life circumstances can leave anyone unable to fulfill their financial obligations. If you’re experiencing an emergency financial situation, you don’t have to bear the burden on your home. Help may be available.

This guide will provide information on what events qualify as financial hardship and how you can get financial assistance in each situation.

What events can create financial hardships?

If you are in financial hardship and cannot pay regular living expenses, you’re probably dealing with an unforeseen emergency. Accidents, illness or sudden property loss can lead to extreme financial hardship and make it impossible to keep up with your normal lifestyle. 

Here are five events that can cause financial hardship.

Job loss

Unexpected job losses due to strikes, layoffs or other reasons can be emotionally and financially devastating. There’s a limit to how far severance compensation can go, and unemployment benefits may not cover all of your recurring monthly expenses. 

Without a financial buffer to help you transition between jobs, you may struggle to keep up with your expenses.

Death of a family member or spouse

Losing a partner is difficult at any age. Grief is a full-time job that often trumps daily responsibilities and finances. When a spouse or family member dies, an immediate drop in income may make it hard to pay bills and meet other financial obligations. You might even end up responsible for the deceased’s outstanding debt.

Imminent foreclosure or eviction from home

Homeownership is still the American dream, but not being able to pay your mortgage on time (or at all in some cases) can cause financial hardship. 

Once you've missed your fourth payment and are 120 days past due, the lender can initiate the foreclosure procedure. This can all take a toll on your emotional well-being, too. 

However, there is some good news in this situation — many lenders will work with you through forbearance or by refinancing your home loan with a better interest rate so you can continue your loan repayment.

Unexpected medical expenses

One of life's biggest shocks comes from a devastating sickness or accident. On top of recovering physically, you have to figure out how to cover your medical bills, so you don’t take on debt. 

If you lose work for some time, even receiving temporary disability benefits might leave you unable to afford your household's basic needs. This can be especially true if your monthly commitments include loans or debt payments.

Funeral expenses

Families who have lost a loved one must make many decisions about the funeral as soon as possible. Many people in the U.S. have trouble paying for funeral costs every year. Funeral expenses in the United States are estimated at more than $9,000, as the National Funeral Directors Association reported. Burials can be expensive, making it hard to pay your bills.

If you’re facing financial difficulty, you may need legal assistance to deal with the challenges of eviction, unemployment or debt collection harassment. Here are a few resources for legal assistance during financial hardship.

Taxpayer bill of rights

As a U.S. taxpayer, you should know your rights when dealing with the IRS, including the right to challenge the IRS’s position and retain representation. These are just a few of the taxpayer bill of rights provisions.

You can visit the Taxpayer Advocate Service (TAS) if you need additional tax assistance. If you have tax issues you can't handle on your own; tax advocates are there to help you with everything from understanding the mail you receive from the IRS to navigating interactions with the IRS regarding audits, tax refunds, child credits and more.

Legal services are notoriously expensive, but you don’t have to handle financial hardship alone, thanks to legal aid assistance. 

Legal aid programs are designed to assist people who cannot afford legal representation. The American Bar Association (ABA) provides these services by matching low-income clients with volunteer lawyers who agree to take their cases for free. 

Home mortgage and rental assistance 

People who have lost income may struggle to pay mortgages or rent. There may be federal, state or local mortgage and rental assistance programs that can provide relief.

Consumer Financial Protection Bureau

The Consumer Financial Protection Bureau (CFPB) assists in preventing evictions and foreclosure defense. The CFPB helps find housing and other services, including:

  • Applying for emergency rental assistance

  • Applying for subsidized housing

  • Writing a hardship letter to explain your financial circumstances to your lender or landlord 

  • Finding safe temporary housing

  • Financial advice

The Mortgage Debt Relief Act

The Mortgage Forgiveness Debt Relief Act of 2007 lets many taxpayers leave out income from the debt that is forgiven on their main home. This relief is for people whose mortgage debt has been reduced through restructuring or whose mortgage debt has been forgiven because of a foreclosure.

This rule applies to debts written off between 2007 and 2017. This exclusion applies to forgiven debts of up to $2 million ($1 million if married and filing separately). 

The exclusion doesn't apply if the discharge is because the taxpayer did work for the lender or for any other reason that isn't directly related to a drop in the home's value or the taxpayer's financial situation.



The COVID-19 pandemic has wreaked financial havoc on millions of Americans, and many people have experienced a loss of income and fallen behind in their mortgage payments.

A borrower experiencing financial difficulties due to the pandemic may have access to help under a new federal law known as the Coronavirus Aid, Relief and Economic Security (CARES) Act. 

Your mortgage must be supported by one of these federal agencies or organizations to qualify for the CARES Act's protections:

  • Conventional loans acquired or packaged by Freddie Mac and Fannie Mae 

  • Home equity conversion mortgages (HECM) available through the Federal Housing Administration (FHA)

  • The Department of Veterans Affairs (VA) of the United States

  • The Department of Agriculture (USDA), including USDA Direct and USDA Guaranteed

Although CARES Act’s forbearance relief does not apply to privately held loans, you should still speak with your mortgage servicer to learn more about available aid options.

Student loan assistance 

If you have a federally funded student loan (subsidized or unsubsidized), the U.S. Department of Education provides resources to help with a payment plan. Some income-driven repayment plans, loan consolidations and other plans can help you make manageable payments during financial hardship, meaning you won’t fall further behind while you navigate this difficult time. 

You can also find out if you’re eligible for student loan forgiveness. Certain jobs and circumstances might qualify for forgiveness, cancelation or discharge of your loans. There are student loan forgiveness programs for teachers, for example, and other public service occupations with U.S. federal, state, local or tribal governments or not-for-profit organizations.

Federal tax assistance

Financial hardships can affect many areas of life, including your ability to pay your federal taxes. If you’re worried about what to do come tax season, these resources may provide help.

If financial hardship has you past due on your federal taxes, the IRS can work with you to establish a federal tax repayment plan. Your payment alternatives will be determined by your unique tax position. A full payment, a short-term payment plan for late payments (paying in less than 180 days) or a monthly installment agreement are possible options.

If you've been affected by a natural disaster, the IRS may provide IRS tax relief provisions to assist you. When the federal government designates a major disaster area, unique tax law measures may help taxpayers, and companies recover from the financial burden of a disaster. Additional time to file and pay taxes may be granted by the IRS depending on the facts of a given case. Filing an updated return can claim disaster-related losses on a previous year's tax return.

Retirement accounts and financial hardships

If you’re experiencing financial hardship, you may consider withdrawing or taking a loan from your retirement savings account. Generally, you can receive an early distribution from an IRA for expenses related to secondary education or buying your first home without the additional tax applied for early distribution.

However, if you’re facing economic hardship and looking for a way to deal with your creditors, you may have the option to make a hardship program withdrawal from your 401(k). 

This allows you to remove assets from your account to satisfy an "immediate and heavy financial need," such as covering medical or burial expenses or preventing home foreclosure. With a hardship withdrawal, you are not required to pay back funds.

You could also consider a non-hardship loan from your retirement plan, which will leave your retirement savings in place.

Take back control of your finances

No one plans to experience financial hardship. Unexpected financial problems can be stressful, scary and emotionally draining. But if you have a qualifying financial hardship, there’s help available. 

The federal government and other resources can provide:

  • Home mortgage assistance

  • Rental assistance

  • Student loan assistance

  • Federal tax assistance

  • Personal loan and credit card assistance

If you need help with debt management, download the Tally†credit card debt payoff app. The app rolls all your credit card debts into one monthly payment and offers a lower-interest line of credit so you can efficiently repay higher-interest credit card debts.

To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 - $300.