Hardship Policy Template
A hardship policy gives you a fair, consistent way to handle customers who genuinely can't pay right now.
What's included
- How to recognise genuine hardship versus a stall
- What a fair hardship arrangement should include
- How to document an arrangement so it sticks
- When to pause collections and when to resume
- How hardship interacts with referral and write-off
7 min read
Why have a hardship policy
Some customers want to pay but genuinely cannot, at least for now. A hardship policy gives you a consistent, even-handed way to respond — one that recovers more over time than either bullying a struggling customer or quietly writing the debt off. It also protects you: handling hardship fairly and on the record is far easier to defend than ad-hoc decisions. This template covers commercial accounts; adapt it to your business and review it before you rely on it.
The hardship policy
- 1. Eligibility
- Available to customers who acknowledge the debt and demonstrate a genuine, temporary inability to pay in full.
- 2. Request
- The customer explains their circumstances and proposes what they can pay and when. Reasonable supporting information may be requested.
- 3. Assessment
- The credit controller assesses the proposal against the customer's history and the size of the debt, and recommends an arrangement.
- 4. Arrangement
- A written plan sets the instalment amount, frequency, total, and the date the debt clears. Any pause on interest or fees is stated.
- 5. Collections hold
- Routine reminders pause while the arrangement is honoured; the account is monitored, not ignored.
- 6. Default
- A missed instalment without contact reactivates the standard collections cadence.
- 7. Records
- The request, assessment and arrangement are logged with dates.
How to use it
When a customer raises hardship, slow down and listen before you decide — the goal is a realistic plan you will both stick to, not the largest number you can extract today. Put the agreed instalments, dates and total in writing the same day and have the customer confirm, so there is no later confusion about what was promised. Keep monitoring the account; a hardship hold is a pause on reminders, not on attention. If the arrangement defaults without contact, resume your normal cadence and, where appropriate, refer the debt. Pair this with your vulnerable customer policy so genuinely vulnerable customers are flagged and handled with extra care.
Keep it fair and consistent
The value of a hardship policy is that it treats similar situations the same way. Use the assessment step to keep decisions grounded in the customer's history and the size of the debt rather than how persuasive they sound on the day. Record every arrangement so you can see, over time, which plans are honoured and which quietly lapse — that pattern tells you whether your terms are realistic. Review the policy alongside the rest of your credit control documents at least once a year.
Tips
- A hardship policy recovers more than bullying or writing off.
- Agree a realistic plan, then confirm it in writing the same day.
- A hardship hold pauses reminders, not monitoring.
- Resume the standard cadence if the plan defaults without contact.
FAQ
Does a hardship arrangement mean reducing the debt?
Not usually — it most often spreads the same balance over time. Any reduction should be a separate, deliberate decision.
Should I pause interest and fees during hardship?
Often yes, as a goodwill gesture that helps the plan succeed — state clearly in the written arrangement what is paused.
What if the customer keeps asking for new arrangements?
Repeated failed plans are a signal to escalate or refer rather than to keep renegotiating indefinitely.
Templates are a head start — not legal advice
Customise to your business and have important documents reviewed. Need to recover a debt? We can help.