Hardship Application
When the unexpected happens and you are struggling to meet your debt repayments, you have two ways of approaching organisations that you owe money to. You can contact your lender as soon as possible to discuss short term changes to your contract or, if you qualify, you can lodge a hardship application with them.
If an application is made under this provision, then the lender has an obligation to consider the request, and to then follow specific processes. However, even if you aren’t able to meet the criteria, a lender still has an obligation to treat you respectfully, reasonably and in an ethical way.
It should be noted, that even if you qualify to make a Hardship Application, the lender is not obligated to accept the application and make the changes requested.
If you have more than one lender to whom you owe money or you are not eligible to apply for hardship, then speak to Debtfix and we will help you explore the alternative options available to you.
Who can benefit from a Hardship Application?
Under the Credit Contracts and Consumer Finance Act 2003 (CCCF Act), a borrower has a right to ask their lender for a change to their personal loan, mortgage, credit card or other consumer credit contract, but to be eligible you have to prove the following:
You have suffered a hardship you couldn’t reasonably have seen coming, such as illness or injury, loss of employment, the end of a relationship, or death of a partner or spouse;
as a result of that hardship, you cannot reasonably meet your debt repayments to the lender; and
you believe that you would be able to meet the debt repayments, if the contract was changed in some way.
An application for hardship has to be made in writing, with you having to explain the reason or reasons for your unforeseen hardship, provide evidence to that effect, and details of the changes that you want made to the contract, such as a payment holiday, a longer period to pay, or freezing of interest and penalties.
You can make a hardship application at any time, unless you have:
been in default for two months or more;
been in default for two weeks or more from when you first receive a repossession warning or Property Law Act notice; or
failed to make four or more consecutive debt repayments on their due dates.
If you need help with this then contact the Debtfix team who can assist with this option.
What Changes can be made?
A borrower can ask for a contract to be changed by either:
extending the term of the contract and reducing the amount of each payment, or
postponing debt repayments for a specified period of time (a payment holiday), or
extending the term of the contract and postponing debt repayments for a specified period of time (a payment holiday).
However, whilst these options will provide temporary relief, they are likely to increase the total amount owing on a loan, as the lender is not required to freeze interest and charges.
KiwiSaver Significant Financial Hardship Withdrawal
Withdrawing KiwiSaver funds intended for your retirement should always be a last resort, but in some cases it may be the only option left to get your finances back on track. You must have exhausted all other options which includes applying to Work and Income for assistance.
Significant financial hardship includes when you:
cannot meet minimum living expenses
cannot pay the mortgage on the home you live in, and your mortgage provider is seeking to enforce the mortgage
need to modify your home to meet your special needs or those of a dependent family member
need to pay for medical treatment for yourself or a dependent family member
have a serious illness
need to pay funeral costs of a dependent family member.
