Financial Hardship

Financial Hardship Arrangements
If youre suffering from temporary financial hardship you can request that your creditor changes you loan contract. All Lenders and Debt Collectors have signed up to the UCCC (Uniform Consumer Credit Code) which requires that hardship provisions are made available. The UCCC applies to finance provided to individuals it doesnt apply to finance provided for business or investment purposes.
What is Hardship?
Financial hardship refers generally to not having enough money to cover living expenses. Financial hardship is caused by an involuntary decrease in income or unforseen increase in expenses. The hardship is generally short term. The reason for hardship might include: losing your job, a reduction in overtime, not being able to work due to medical reasons, large medical expenses and unexpected car or house repair expenses.
What are Hardship Provisions?
If youre experiencing Hardship you can contact your creditors and ask for the following changes to be made to your loan contract.
•A reduction in your repayment to a level you can afford
•A temporary stop on payments
•You can ask for a freeze on interest but creditors are not obliged to provide this
What variation you ask for will depend on your circumstances. If you have lost you job a temporary freeze on payment might be the best. If you lost your overtime a reduction in payments might be the best option.
How do I apply for a Hardship Arrangement?
Before you ask you lender or debt collector for hardship you should work out how much you can afford to pay based on your CURRENT circumstances. Sit down and do a budget and work out what an affordable repayment is. It is important that you dont promise something that you cant deliver.
If you have no income determine how long is reasonable for you to find work again.
If you want to apply for hardship you can do so in writing or over the phone. If you do so over the phone request that everything you agree to is confirmed in writing.
Call your lender or debt collector and advise them that your circumstances have changed and you cant make the repayments.
You might want to specifically ask for the hardship department. You might need to be insistent about this.
Once you get through to someone tell them whats happened be as honest as possible. Tell them about your budget and tell them exactly what you can afford to pay.
What are the benefits of Hardship Arrangements?
The main benefit is it will give you short term relief from your debts. Because youve approached your creditors you havent breached you contract and you will generally not be defaulted so your credit history will not be damaged.
What are the disadvantages of Hardship Arrangements?
You will have to pay you debts back in the end. If you creditors dont freeze the interest this will extend the term of your agreement and you may end up repaying more.
Hardship Arrangements are not permanent either. They are subject to review at regular intervals. If your new financial situation is permanent you should look at other options like informal arrangements, debt agreements, personal insolvency agreements and bankruptcy.

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Education

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• Financial
• Hardship