Financial Hardship

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Well, what a time! Fires, drought, pandemics, toilet paper shortages and now we are looking down the barrel of a recession. Not many people would have planned for this five years ago, let alone anticipated what an impact this would have on their financial security.

But as we all know, we live in an unpredictable world. One minute, life could be all chocolate and roses, you have a few debts but nothing that you can’t manage, the next minute everything could change. There are many reasons that you could be suffering from unexpected financial stress and struggling to pay your bills, including:

✓ A relationship breakdown
✓ Family tragedy
✓ Major illness, accident or medical expense
✓ Impact of a natural disaster such as fire or flood
✓ Unemployment
✓ Reduction in work hours.

There are many more reasons a person’s life and financial situation could change at the drop of a hat, the list could go on and on. Life is simply unpredictable, and when life is unpredictable it is hard to plan for, making it is easy to get on the debt roller coaster.

Financial hardship is where you are, or will have, genuine difficulty repaying your loans or money that you owe, usually due to an unexpected event.

When your debt only seems to increase, living life can become stressful and frustrating, you can’t sleep at night, your relationships are affected and even everyday things like buying groceries can seem overwhelming. The impact of the stress can lead to physical health problems, including decreasing our capacity to fight off illnesses – which is the opposite of what we all need right now.

To keep yourself from drowning, you could take out more loans or use multiple credit cards, but sometimes the harder you try to get out of debt this way, the deeper you sink, and sometimes if you are only paying off the interest, it can feel like you are trapped. If you are experiencing that familiar sinking feeling of seeing another bill in the inbox or avoiding calls in case they are from aggressive creditors and debt collectors, know you are not alone.

Debt is one of the few stressors in life that doesn’t go away if you ignore it. The worry is always there, along with the feeling that there is nothing that can be done about it. Money and debt worries cause heavy emotional and mental burdens, affecting your health, your work and your relationships.

But if you’re feeling overwhelmed by money matters, we’re here to help you find relief from your money stress. Talking about debt can be daunting. It’s hard to know where to start or what your options are. However, you can take a small step right now by picking up the phone and calling the team at Fix Bad Credit on 1300 406 172. There are always options available to assist you get back in control of your money situation.

What is a financial hardship?

Financial hardship is where you are having difficulty repaying your loans or money that you owe. These debts could include what you owe on your credit card, a personal loan, a car loan, home loan, council rates and even utility bills such as power and/or phone and internet.

There are usually two main reasons for financial hardship:

1. You could afford the loan when it was first obtained but an unexpected change of personal circumstances, such as a job loss, has meant you can no longer afford the repayments; or

2. You could not afford to repay the loan when it was obtained. If this is the case, get in touch with us to speak to one of our credit and debt experts immediately.

Financial Hardship and The Law

Schedule 1 of the National Consumer Credit Protection Act 2009, the National Credit Code (the Code) sections (72–75) specifically addresses financial hardship. Since 1 July 2010, all requests for hardship are under the Code even if the contract was entered prior to that date.

Section 72 of the Code covers the circumstances where you can request a repayment arrangement on the grounds of financial hardship. This is called a hardship variation. Genuine financial hardship is often the result of an unexpected event, the Code specifies you must be having (or will have) trouble making your loan repayments because of reasonable cause (e.g. illness, family breakdown or unemployment).

This is a very wide definition. However, if you have simply been spending more lately on luxury items, overseas holidays, weekends at hotels, dinners, extravagant entertainment, presents and gifts, it will be difficult to claim financial hardship. However, if you can demonstrate that you’ve only used your credit card, for example, for the necessities in life, then your creditors will be far more understanding of your challenges in paying back the money you owe.

What should I do if I’m experiencing Financial Hardship?

If you are suffering from genuine financial hardship, you may very well have rights to ask your creditor for a financial hardship repayment arrangement. A Financial Hardship Repayment Arrangement usually involves a payment arrangement to pay your creditor off over time, deferring payments until you get back on your feet, or making your payments more manageable and affordable, or a combination of these.

The negotiated new payment plan could include:

  Reduced payments
  Lower interest rates
  Less fees
  Freezing or deferring payments to allow you to get you back on your feet
  Extending the length of the loan to reduce the size of payments
  Settling the debt for a lump sum that is less than the full amount
  A payment arrangement so you can pay them off over time rather than as an unaffordable lump sum.

The steps below will allow you to get an idea of the Financial Hardship application process:

1. Work out how much you owe

It’s not uncommon to have multiple debts owed to different creditors all due at different times. So, it’s easy to see how someone can lose track of what they owe to whom. Before you even contact the credit provider, it’s important to understand your financial position. If you don’t already have an accurate budget, we suggest you get a copy of the last 3 – 6 months of your bank statements and make a note of:

a. Your income, this might include:

   Any side hustle or second job
   Centrelink/pension payments
   Family Tax Benefit/child support payments

b. Your expenses (be realistic, most people underestimate what they spend), including:

   Food – groceries, takeaways, eating out etc
   School fees
   Birthdays/Christmas gifts
   Car maintenance/fuel/parking
   Travel/Public transport costs
   Medical costs
   Contingencies (an amount for things that you haven’t allowed for like parking or speeding tickets)
   All bill payments, how much you pay back for each one each month, the date, and if appropriate and where possible, the interest rates you are paying for each one.

It is also recommended that you get copies of your credit report(s) to check you haven’t missed anything. You can find out more about your Credit Report here. From the above exercise you should have a good idea on what you can afford to pay back or where you can make cuts in your spending.

This is the first step in getting back in control of your money situation. Having this information prepared before you contact the credit provider will certainly make the conversation, and the negotiation process with the credit provider faster and far less stressful. Fix Bad Credit has a free budget planner template that we will happily provide, and our credit and debt experts can assist you with this exercise.

2. Contact the creditor(s)

You can phone, write to, or email the creditor and let them know that you cannot afford to make your current repayments, are claiming financial hardship, and you would like to organise a hardship arrangement or a hardship variation.

Once you have contacted the creditor(s) they must legally cease any legal action until they respond. Although, be aware that if they already have a court judgement in place, this does not apply.

A hardship variation may include, for example:

  1. Extending the term of the loan and adding arrears to the end of the loan.
  2. Reducing or freezing the interest rate for a period of time (under the Code the lender does not need to do this and they are unlikely to for a secured loan on a car or house, but they may consider doing it for a credit card as a once off).
  3. Waiving enforcement expenses (they don’t have to, but ask!)
  4. Accepting no payments for a period of time.

3. The Creditor(s) must respond

Under the credit law, if you request a variation of your contract on the grounds of financial hardship then:

  1. The lender can request further information. This request must be made within 21 days of your request for hardship.
  2. You must provide any relevant information requested.
  3. The lender must then respond in writing within 21 days stating:

Whether the lender agrees to the change;

Or if the credit provider does not agree to the change, notifying you of:

  The contact details of the internal dispute resolution scheme (IDR): see our Dispute resolution fact sheet
  Your right to go to External Dispute Resolution (EDR) with the Australian Financial Complaints Authority (AFCA), and
  The lender’s reasons for refusing the hardship application.

If the lender does not agree to the application for change then you can apply to AFCA for the requested change


Dealing with creditors can be intimidating but debt solution experts, like Fix Bad Credit, can take a lot of the stress and emotion out of the process for you. Experienced negotiators, like Fix Bad Credit’s debt solution experts, have good relationships with creditors and may be able to reach an agreement more quickly, while also getting a better deal than if you go it alone.

Financial Hardship laws in Australia are in place to protect the consumer and the team at Fix Bad Credit are well versed in the legislation, and compliance that a credit provider must comply with. Our team of legal experts identify areas where the credit provider may have breached its legal obligation, and use that as leverage to get the best possible outcome for our clients.

With years of experience in the industry, we will achieve an outcome that’s best for you, allowing you to get on with living a debt free life.