Borrower Financial Hardship Letter

Summary

This template financial hardship letter is for use by a borrower to send to its lender to (1) inform the lender of the borrower's financial hardship and (2) request a modification of the borrower's outstanding debt. This template includes practical guidance, drafting notes, and alternate and optional clauses. This template may be used by individual or small business borrowers and/or their respective counsel. A lender will sometimes require the borrower to send a financial hardship letter before working on a loan modification. For example, an individual borrower may need to send a financial hardship letter to the mortgage lender as a precondition to a loan modification. In the letter, the borrower may request, among other things, (1) an interest rate modification, (2) a temporary loan payment reduction, (3) an extension of the loan maturity date, or (4) a payment deferral or forbearance. Alternatively, the borrower may request a loan modification but not specify the type of modification (as the parties may discuss the appropriate modification after the letter is sent). This template should be adapted to specify the borrower's specific circumstances and the terms the borrower may be able to offer to the lender. Before beginning to prepare the actual letter, the borrower (or borrower's counsel) must review all the relevant loan documents to determine, among other things, (1) the terms that should be used in the letter, (2) who should receive the letter, and (3) the manner of delivery (i.e., by mail, fax, courier or otherwise). The borrower (or borrower's counsel) should also review the latest loan statement to determine the outstanding loan balance, current interest rate, and the number of missed payments, if any. For information on residential loan modifications, see Residential Foreclosure Alternatives. For information and resources on loan workouts, see Out-of-Court Restructuring and Liquidation Alternatives Resource Kit. For information and resources on individual bankruptcies, see Consumer Bankruptcy Resource Kit.