Changes in life are in unavoidable.
Some changes are planned for; weddings, home buying, holidays. Some are not always planned for; unemployment, ill health, unplanned family additions ….
But what if you simply cannot continue to pay for everything as you did before? If your income is less than you previously earned, or if your expenses have significantly increased, what do you do?
The first step is to re-assess your budget
Are there any luxuries or non-essential items that can be eliminated? (Foxtel anyone? Daily coffees? Bought lunches and takeaways?) Reviewing your budgeted income and expenditure should be a regular task regardless of whether you are struggling with debt or not. Unfortunately this may not be the solution every time.
Budgeting
Restructure your debt
If possible, you may want to consider Loan Consolidation. This is where you apply for one new loan to pay out all existing debts, leaving you with one repayment which should be more affordable to repay. The theory is great however you will still need to meet the lenders credit and responsible lending criteria. If not, you will need to think about your next step…
Next step … Communication!
Speak to those you need to make payments to and ask what help is available. Any lender that is providing you with a financial service or product needs to have a Hardship Policy in place specifically designed to assess and assist those facing financial hardship difficulties. So that includes your mortgage lender, personal loan provider, credit card company, store card provider, even the pay-day lender has to have a hardship scheme.
Hardship Team
The catch? You have to ASK for HARDSHIP RELIEF.
Quite often through lack of awareness, consumers talk to a general customer service line with staff who are not trained nor aware of their company’s hardship policy. This means that the consumer ends up thinking that they have no option other than to pay on the due date or face collections or legal action. Unless you specifically request to “speak with your Hardship team or Department” you will likely not get the assistance you need. Once you are connected to the hardship team, you will need to discuss openly your financial circumstances and what difficulties you are facing. There is absolutely no point in “putting on a brave face” when it comes to asking for help. Here’s the next point to remember; just because you ask for assistance, does not automatically mean you will qualify for relief. Each lender’s financial hardship policy will be unique to that company, therefore you could actually be granted hardship with one bank and not another. It is crucial that you understand and note down the terms of your hardship arrangement as well; eg 3 months of reduced repayments, then on ‘x’ date you must contact the bank to review. If you do not keep to the agreed terms, you could find yourself facing legal or collections action.
Once hardship relief is exhausted (or you have been declared not eligible for it), if your circumstances have not improved you still need a solution to avoid creditor collections, legal action and the last resort of Bankruptcy.
A Debt Agreement is one way this may help;
A Part 9 Debt Agreement is a formal option to compromise your unsecured debts into one manageable repayment via an arrangement with your Creditors. They agree to freeze the interest applied and you are protected from any further legal or recovery action. In return you make one repayment which is split up amongst all of your unsecured creditors after fees to the Administrator and Government have been deducted. You need to be aware of the impact to your credit file where a Debt Agreement will be listed for a minimum of 5 years, however, if you are in the position of already having poor credit listings or simply are drowning in debt then this may not bother you. The record will be removed from your credit file after 5 years or once the Agreement is completed (whichever is longer). Often a Debt Agreement will result in you repaying less than 100% of the debt owed as a means to provide you and your Creditors with the best alternative to Bankruptcy.
Stress relief from debt relief – Life After Debt
At Life After Debt ® we have decades of experience in Debt Agreements, Informal Agreements and Insolvency; as a Registered Debt Agreement Administration firm will assess and advise on whether this is the right option for you – call us on 1300 237 669 or check out our case study for “Reduced Income, Same Debt” here.
A Debt Agreement will not always be the best or appropriate solution for you so it is important that you discuss your circumstances with our team who will give you the best debt advice – without any judgement or pressure.
Quite often, ongoing assistance or basic guidance for everyday expenses may be required which a Debt Agreement is not designed for. Financial Counselling is a great service for those in need;
Financial Counselling – many people will not know that there is a free service of financial or debt counselling available. These trained professionals provide advice and guidance on many topics such as budgeting, Centrelink entitlements, HUGS grants, time-to-pay arrangements for everyday items like rent, electricity, gas, water bills. Financial Counsellors can also assist with hardship variations to credit contracts and creditor mediation. As you can imagine, a free service such as this is heavily in demand so it is best to make contact as soon as possible to check appointment availability.
Which direction are you heading in?
Let the team at Life After Debt ® help you find the right direction! The path to financial freedom is not always clear and that is why we are here to help! Call 1300 237 669 or go to the Contact Us page now.