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Types of hardship plans - 3 Benefits and 2 drawbacks

Hardship plans or programs are often offered by the banks when consumers are unable to keep up with their payments. Banks offer hardship plans to those consumers who are facing serious financial hardships.


Check out the following sections to know more about hardship programs.

Hardship plan - What it is all about

Hardship plans or programs have developed to assist the ailing debtors. These programs help the debtors to pay off their debts at reduced interest rates. The monthly payment amount of the creditors is lowered after the debtors qualify for the hardship plan or program. The debtors can pay a fixed amount every month for a certain period of time and make the debt repayment process faster.


2 Types of hardship plans

Depending on the bank, your financial ability to commit to a payment, how far behind in payments you are, a hardship plan may look something like this:


  • Temporary hardship plans - These plans are typically set for 6 or 12 months. Your monthly payment can sometimes be reduced to 2% of your current balance. Your interest rate is reduced to anywhere from zero to 9%. Fees and penalties are often waived. When the plan expires your billing will reset to the pre-plan arrangement. This may be the temporary payment relief you need.
  • Long term hardship programs - These became more common when the economy fell off a cliff. They are still made available by many of the larger credit card issuers today. Your balance will be frozen and the account closed. Your payment will be amortized over 5 years (60 months) similar to the temporary plans of 2 to 2.5% of the current balance set as your monthly payment.

Hardship plans - Things you need to be aware of

When you're already behind in payments and you either call the creditor yourself, or pick up one of the many calls that will be placed to you in an effort to establish a payment plan, you'll be asked qualifying questions. The questions center on your monthly income and what you pay out each month for bills. You may be asked what you pay for rent or on your mortgage, what you pay for cell phone, utilities, internet etc. How you respond will impact what plan you qualify for, or whether you are offered a reduced payment plan at all. If your monthly cash flow shows no money available after essentials are met, you obviously cannot reasonably commit to any plan, no matter how good the terms. If the income and expense exercise shows too much excess and available money, the payment plan offered may not be as favorable.


Creditors offering a 5 year hardship repayment plan may require you to recommit to the plan every 12 months.


3 Benefits of hardship plans

Additional benefit to a hardship plan may include:

  1. Depending on how many months you have missed payments; your creditor may agree to "re-age" the account after 3 or more timely payments on the plan. This means they may consider removing the 30, 60 or 90 day late pays from your credit report.
  2. There are limits to re-aging. As a general rule, once your account is charge off, you will find you have reached a point where re-aging is not an option.
  3. Whether you work with a credit counseling company and enroll in a debt management plan, or work out hardship payment plans with creditors on your own, you will want to establish the plan prior to having missed 5 payments. This time frame is encouraged in order to avoid accounts charging off wherever possible.

Hardship plans - 2 Drawbacks you need to know

The 2 main drawbacks are given below:

  • Available to delinquent creditors: Hardship plans are typically only offered to those who are behind with their credit card payments. If you are current and call inquiring about a hardship plan you are basically saying you are at risk of defaulting on payments. This can result in their lowering your available credit limit or even closing the account. If you still have options to meet your scheduled monthly payments, I would not recommend calling your creditors to discuss your hardship. This strategy should be reserved for the creditors you are unable to pay on time.
  • Some creditors don't offer the plan: Some smaller credit issuers, like store and gas cards may not offer consumer hardship plans, but do allow them through a credit counseling agency. If you don't want to opt for DIY credit counseling or bank sponsored hardship plans, then enroll into a credit counseling program to solve your debt problems.
Has anyone ever been offered a hardship plan from ...
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Has anyone ever been offered a hardship plan from their credit card company? If so, how long did it take for an offer to be made? IE: how many months of non-payment? I am thinking specifically about American Express so if you've experienced offers from them, I would appreciate it if you'd share the info.




Forget any help if you owe about $20.000 or more. They want the entire payment at 0 interest and how does that help if you cannot make that payment?

They turned me over to lawyers Zwicker and Associates and the one attorney I have read about . This is not a reputable honest firm I see after reading on Google. Amex forces people into bankruptcy.

Sub: #1 posted on Fri, 01/22/2010 - 01:01

Unregistered


I called Amx, to ask about hardship due to job loss and was transfered to that department spoke with a lady about my situation and she said they would lower my monthly payment and I would have 6 month of 0% interest and then 6 months of 9.99% interest and after the year it would go back to where it was before I started this program, and while on it for the year I could not use the card, which is fine with me. and I could take myself off the hardship program at anytime during that year. Also, you have to make the first payment via phone and you have to make your first payment on the program via phone and after that however you want, but you cannot be late one time or you will be removed from the program. She was very nice about it, and I don't have that high of a balance under $5K and I have never been late one time. so if you want to do this, just call and make sure you call on the day you want your payment due, being on unemployment I am making it on the final day its due. Hope this help anyone.

Sub: #2 posted on Tue, 10/20/2009 - 19:57

Unregistered


There are many ways to solve your debt problems. You can use the search box at the top of your screen and see what others have to say about the companies you are using or may be using. Before you choose any company, please do your homework and check them out thoroughly. Some have had luck with certain companies, others have gone the Do it Yourself method. Keep us posted and good luck..karen

Sub: #3 posted on Sun, 09/27/2009 - 22:00

Bossy4455 Bossy4455
Moderators
(Posts: 5854 | Credits: 743.03)

Amex is horrible. I have an account with them and my grandmother dose as well my grandmother is unable to commit to regular 500.00 pymts any longer and can do 200 until it is paid off. I called on her behalf yesterday and ended up with a very rude rep. What makes this situation worse for this rep is I work in collections for a very large company I thought that our rules with my job and hardship programs were a pain to get signed up for and not worth the hassle until i spoke with AMEX yesterday. I know all the collection laws and guidelines and I don't feel that they practice them as they should. They told me that the company only has one program 6 months at 0% apr and then 6 months at 9.99 % apr and then back to normal rates and pymts at the end of the year and will be unable to get on any other program for 12 months after the completion of the program. When asked what they do for people that are in a permeniate situation such as my grandmother they would not answer the question and would just tell me about this one program they had. After asking to speak to a manager his attitude was just as bad. When asked the same question and getting the same answer while being talked over, I asked a question of " What would you do for a customer that made 10000 a month and is now going to have to be placed on disabilty and will only be making tops 3000 a month and can no longer afford the current min payment and this situation would not ever change." The MANAGER very rude said this is all i got do you want it or not and would not answer my question treated me so badly. I advised him that this is the only company i know that doesn't provide a long term program has bad customer experience and that I am also a card member along with almost everyone else in my family and I will be closing my card and my family will be as well and doing business with another company that values their consumer. This managers only response is im sorry you feel this way this is what i can offer you on ur grandmothers actt. You will get no where with these people and I thought i had a fighting chance seeing how i do this job for a living. So for those of you other there having a hard time the best thing i can suggest if you have an amex card is attempting to settle it out or working with a non for profit CCS i know there are alot of companies out there and many are not what they say they are so if you want one that is legit look up Money Mangement International (MMI) GreenPath or Novadebt they are good companies and will work for you.

Sub: #4 posted on Sun, 09/27/2009 - 08:03

Unregistered


I was paying $400 in interest every month for years . It was a business account. I had $40,000 open and I owed about $30,000 when my husband got cancer. He was out of work and even though we had insurance medical bills piled up. I used Amex to explain my business a dumb move. I had stopped using the card and was paying it off.

I asked for a hardship program. I figured I had paid twice the principal in interest and never was late . Then this month I had trouble with my payment. They still wanted $580.00 the regular payment with 0 interest. I know that sounds good and for the past five months I was able to do it. This month I cannot. I asked if I could pay $100 a week and they said no I was going to be taken out of the hardship program. They were not nice.

So now I have no choice but to relinquish the hardship program . We are so close to getting a Making Homes Affordable loan which will cut our HP in half but I must not miss a HP. I told them that. I was working with my bank since April and now everything falls apart.
In weeks I may get my loan from my bank.

If I pay them their money I won't be able to make my HP. I have been on such a tight budget. I am very depressed at how they are treating me.

By the way I am in CA and I said my phone number is business and it is and so they cannot call me. If you put it in writing that you will not take calls at home or work they must obey.
A person can lose their job because of these calls and there are class action lawsuits concerning these harassing calls.

Right now I have money owed by my business accounts and I must wait for it. Amex will not .

I also had my credit limit dropped by Amex and then my other creditors followed suit. They started the whole downward slide They make it look as though you charged all available credit when they lower your AC that way.

I don't know one person who is happy with Amex. I suspect some who say wonderful things are with the company or else very wealthy.

Sub: #5 posted on Thu, 09/24/2009 - 01:51

Unregistered


When you placed you amex on a hardship program, were you still able to use your card or did they shut it off?

Sub: #6 posted on Thu, 08/20/2009 - 22:53

Unregistered


The reason that creditors offer hardship programs is that they hope you will be able to turn things around, start paying your bills again, and therefore, they keep earning money off of you!

Sub: #7 posted on Tue, 08/05/2008 - 01:14

alias1958 alias1958

(Posts: 1230 | Credits: 79.88)

After the six months, the card reverted to the previous terms. The remaining balance would still be there, the interest rate would return to the previous rate, and the minimum monthly payments would return to the previous amount. Hardship programs, for the most part, are just temporary solutions for temporary situations. If your situtation is not temporary or you can't do anything to change it within the six months to one year that most companies offer, then you have to look for a more long-term solution.

Sub: #8 posted on Tue, 08/05/2008 - 01:13

alias1958 alias1958

(Posts: 1230 | Credits: 79.88)

It was a six month program, with 9.99% interest rate, and $50 per month payments. My balance was only about $2000, so the payments would probably be higher if your balance is higher
Do you mean you only had to pay $50 for 6months and thats it ? What about the rest of the balance?

Sub: #9 posted on Tue, 08/05/2008 - 00:49

virtualdeal virtualdeal

(Posts: 99 | Credits: 14.12)

Original creditors don't have to obey a cease and desist, unless you live in one of the few states that have laws to the effect. I live in California, which is one of those states, but I don't know about yours. I think though (but I'm not certain, so maybe someone else can verify) that you still have the right to tell the OC not to contact you at work. In my expereience, even if you tell them you can't pay and tell them why, they will still keep calling you pretty regularly.

Sub: #10 posted on Mon, 08/04/2008 - 06:31

alias1958 alias1958

(Posts: 1230 | Credits: 79.88)

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