Many organizations have attempted to define hardships with regard to financial debt. This is because financial hardship is not something new and there are many people who have been through that road.
Financial hardship definition
To define financial hardship it is best to first define hardships. Hardship is something that entails or causes suffering. It is a state of misfortune or affliction. It can also be defined as a state of adversity resulting from unfavorable outcomes.
Financial hardship borrows its meaning from the definition of hardship. Financial hardship refers to a situation where a customer is willing but unable to keep up with the payment of bills and debts. The customer in this case is unable to discharge his financial obligation in accordance with his contract with the supplier. In other words, the customer is expected to fulfill his obligation of paying for goods or services he bought in debt, but due to financial hardship is unable to do so. Organizations try to define hardships whenever they are considering offering their customer relief from certain payment obligations.
There are two types of financial hardships:
- You were unable to repay the debt right from the time it was obtained; or
- You were repaying the debt initially when it was obtained but due change of circumstances you have been unable to continue with repayment.
Causes of financial hardship
Financial hardships can actually happen to anyone since they are unforeseen changes or unexpected events that affect one’s cash flow. So, what are some of these unexpected events that lead to financial hardship? Here are the common causes of financial hardship:
- Natural disaster or emergency event
- Illness or injury
- Significant life change such as death of a key family member or relationship breakdown
- Change in employment status such as having a cut on working hours or losing a job
Financial hardship can be over a short period of time, a prolonged period or even permanent. In most cases, however, a customer in financial hardship is expected to recover from the position if appropriate assistance is provided.
Banks have support services, practices and programs to assist people with financial hardship. For instance, a bank can offer you a financial hardship loan to help you recover from the hardship. You may use the loan to secure a new source of income ultimately helping you start the debt repayment process. Other arrangements that your bank might offer include:
- Loan restructuring (loan extension)
- Interest-only repayments
- Deferred or postponed payments
- Loan freeze
There are a few cases of permanent change in the financial position of a customer. In such a scenario, there are various options that you might want to consider. They include:
- Insolvency arrangements
- Pursuing bankruptcy
- Refinancing a business
- Selling a property
Financial hardship counselors
After seeking assistance from your bank, it might be important to seek additional advice from an independent financial counselor. They will advise you on the options available and more importantly give you legal advice. They will also give you the much needed emotional support to keep you calm through the situation. Check Debt Mediators for more details.
For more information, just visit us at https://www.debtmediators.com.au/personal-debt-solutions/financial-hardship/