“Unforeseen hardship” means an event such as illness, injury, loss of employment or the end of a relationship that causes the debtor to be unable to meet their obligations under a credit contract in the short term.

What is a hardship application?

A debtor in this situation can apply for changes to the credit contract.

They apply to you in the first instance – if you refuse, they can apply to the Court.

What changes can the debtor apply for?

The only changes that debtors can apply for under a hardship application are:

extending the contract term and reducing the amount of each payment due under the contract
postponing the dates on which payments are due
extending the contract term and postponing payments.

They may not seek changes to reduce the annual interest rate or the unpaid balance under the contract.

The changes are to give the debtor short-term relief so they can meet their contract obligations in the long term. They may not seek any changes to the contract that are more extensive than necessary for this purpose.

The debtor’s statutory right to apply for a hardship variation does not limit any changes that may be made by agreement between the creditor and the debtor.

When can the debtor not apply?

The debtor must show that they have suffered unforeseen hardship. They cannot apply if:

they are currently in default on a payment (the payments must be up to date)
they have exceeded a credit limit
the hardship was foreseeable at the time they entered the contract - eg, if a debtor sustained an injury before entering the contract.

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