Financial hardship is when you cannot afford to meet your debt obligations due to decreased income or increased expenses. This situation is often temporary and may arise from changes such as a decrease in income, a breakdown in relationships, or an illness or injury. If it appears that your circumstances will not improve, you may need to consider more permanent solutions, such as a Part IX (9) Debt Agreement (Debt Agreement), a Part X (10) Personal Insolvency Agreement, or even Bankruptcy - it all depends on your situation.
Signs of Financial Hardship
The most obvious sign of financial hardship is the inability to repay your debts. You may suddenly realise that you are not earning enough to cover all your expenses. Alternatively, it might be a situation that has developed over time, with rising interest rates and increasing credit card balances gradually getting out of control.
Some other signs indicating you are on your way to financial hardship include:
- Using Credit Cards: If you are relying on your credit card to pay for essential expenses like petrol and groceries, this is a sign you are in trouble.
- Applying for small cash loans: You are falling into financial hardship if you are relying on payday loans in order to make repayments on existing debts.
- Making Sacrifices: Not buying an expensive TV because you can't afford one is a smart budgeting decision. But skipping lunch because you can't afford to buy food is a sacrifice you shouldn't have to make.
Financial Hardship Arrangements
Financial hardship arrangements are offered by most financial institutions and service providers, including banks, phone companies, and electricity providers, to help manage your debt when you're struggling to meet your obligations. These arrangements vary depending on the company and the type of debt, but they generally provide short-term relief by making your payments more manageable. Examples of such arrangements include paying interest only, reducing the principal payments, or setting up a plan to pay off smaller amounts over time.
Applying for Financial Hardship Arrangements
People who are struggling with their debts are often too frightened to talk to their creditor because they are afraid their creditor will force them into Bankruptcy. While it is true, if you are unable to repay a debt you owe a creditor could force you into Bankruptcy, creditors often try to avoid this scenario as it doesn't bide well for them. If a creditor forced you into bankruptcy, they would lose a valued client and may not recover any money once you are bankrupt. If you have only just fallen behind or if your hardship is temporary, your creditor will be more inclined to accept a hardship arrangement until you are back on your feet.
You can apply for financial hardship by applying online or calling each one of your creditors and letting them know you are struggling to make your repayments. Each creditor should respond to you within 21 days either via email or over the phone. Their Hardship Department will require you to give further details of your situation.
Alternatively, Revive Financial provides a simple all-in-one way of applying for temporary hardship relief, which fits an affordable payment for you. Our Temporary Hardship Plan allows you to fill an online form and we do the work in applying for hardship with each of your creditors for you.
Your creditors would have experienced this more than you can imagine, so while it is normal to feel nervous or even embarrassed, you will find most of your creditors try to accommodate your needs.
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What if a Financial Hardship Arrangement Doesn't Work?
A financial hardship arrangement is usually only temporary, lasting anywhere from three months to a year or more. If, at the end of your financial hardship arrangement you find you are still struggling with your repayments, you can call your creditor and discuss another hardship arrangement with them.
However, if your situation won't improve in the near future, your creditor may be unwilling to negotiate another hardship arrangement. In such cases, you may have to look at other debt relief options, such as a Debt Agreement. A Debt Agreement is a formal agreement between you and your creditors outlining a new repayment arrangement, one which you can afford. A Debt Agreement will reduce the overall amount of debt you owe while pausing all your interest and fees on those debts, making your repayments very affordable.
Financial Hardship Action Plan
If you are in financial hardship, act now. Pick up the phone and call your creditors to see what they can do to help you.
If you feel your debts are out of control and you don't know what you can do to get a hold of them again, start an online form or call us on 1800 534 534. Our professional debt consultants can walk you through your situation and suggest ways to get out of debt.
