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Mar 12, 2010

Financial hardship assistance

In Victoria, a person suffering financial hardship due to illness, unemployment or other reasonable cause is entitled to apply for assistance to help control their finances and pay their debts in a manageable way.

The person must show they "reasonably expect to be able to discharge the debtor's obligations if the terms of the contract were changed".

In practical terms, this usually means a break in repayments, or reduced repayments, and then the resumption of normal repayments after a period of time (usually 2 - 6 months).

For larger debts such as mortgages or other loans, hardship assistance could mean a break on repayments or reduced repayments which are then 'caught up' through higher repayments upon resumption, or the 'capitalising' of these missed payments onto the end of the loan, with no change in the monthly repayment due.

While hardship assistance has been well used during and directly after the global financial crisis, Anglicare Victoria financial counsellors are now reporting a 'tightening up' of many companies hardship policies.

The practice of applying for a moratorium on repayments is being hampered by greater demands for assurances that the customer's situation is going to improve in the near future.

Financial institutions want to know what actions are being taken to rectify the current hardship, and are proving unsympathetic to customers' individual circumstances. Some institutions will only grant one month at a time, demanding a monthly review of the situation and proof that the customer is taking action to improve their position.

Furthermore, where a temporary arrangement of 'no repayments' was once accepted, many banks are now demanding reduced repayments and others are accruing the missed payments and requiring that they be settled in full at the end of the hardship assistance period. Some institutions require financial counsellors to fax the written agreements of all other creditors to hardship arrangements before they will consider granting one.

The utilisation of hardship assistance often provides a much needed opportunity for clients to improve their situation by increasing their income, clearing expenses or debts, or applying for grants, assistance or income entitlements without fear of legal action or defaulting on their financial commitments.

In the main, customers use this time wisely and are then able to resume repayments from a stronger financial position and with a great deal less stress.

While it is true that customers may not always be able to resume full repayments immediately at the end of the hardship assistance period, their position is usually improved and more serious outcomes like bankruptcy or debt agreements less likely to occur.

It is concerning that financial institutions appear to be winding back this assistance.

If you are experiencing difficulties in meeting your financial commitments, or managing your financial affairs, a Financial Counsellor can advise you of your options, rights and responsibilities, assist you to negotiate with creditors, and help you set budgets to provide greater control over your finances. Meeting with a Financial Counsellor earlier rather than later is recommended, as more options will be available at this stage. For a list of Financial Counselling services in your area, go to the Financial and Consumer Rights Council website: www.fcrc.org.au and use the Counsellor Directory. Financial Counselling phone services are also available for those who have been impacted by the global financial crisis at Money Help ph: 1800 149 689.

Have you been denied hardship assistance? Share your experience below.

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Contact Us

Give us a call on

1800 809 722

Or use our contact form to get in touch

@AnglicareVictoria