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Hardship, What Hardship

If you are in financial difficulty, you can apply for hardship
However, the same organisation that lent you funds in the first place will likely be the one you have to apply to to see if you qualify for hardship.

When is Hardship not hardship?


When you cant afford it?
Thats right,
It has come to our attention that there are a number of organisations out there that have refused hardship for reasons which cannot be explained (or the organisations are unwilling to provide information substantiating their claim) using terms such as positive capacity and negative capacity.

For a number of years one of the organisations (after being provided a financial statement for a debtor) have advised that they do not consider the debtor to be in financial difficulty, although they have not got enough to make the regular payments to their debtors and are on the face of it in a position where the Insolvency Act (Insolvency Act 2006 s325) defines them as being insolvent.

Positive capacity / Negative Capacity

If an organisation declines your hardship due to positive capacity is there a requirement for that organisation to provide their calculations in order that you can check how they have come to that conclusion?

In New Zealand, the answer seems to be no.(although the Privacy Act (1993) says yes).

Although you are allowed access to your information in order to ensure it is correct, and up to date, only one of the financial providers was forward enough to give their calculations, and that was only after laying a formal complaint to their complaints process (as required by the banking ombudsman), and when the information arrived, it was clear that the organisation had made several critical errors, resulting in a misinterpretation of the position of the client.
perhaps that is why they dont want to provide them...

Positive Capacity
If you provide your income and expenditure your finance company or bank will then review your circumstances, and either approve or decline your hardship.
If the calculations the bank performs come out with an excess of income over expenditure they will determine you to have a positive capacity, and in our educated experience, every hardship application with a positive capacity will be declined
Remember this is subjective, with the organisations using their own 'estimates' of costs not yours.
There are many things that are not considered to be acceptable or included in your financial calculations, and some of the finance company 'estimates' which are not published, deffer greatly from what (in our educated and experienced opinion) those costs are in reality.

Negative Capacity
This is a position which when taking into account your income and expenses, there is insufficient to make contributions to your debt (see below)

One of the lenders that a hardship application was going through for stated that the client has a Negative Capacity (an inability to meet their committments), so surely there was a clear case for hardship..
Nope... Due to the negative capacity, the client was not able to receive hardship, however to add insult to injury the account would be left for the debtor to pay the regular payment for the next 5 months, accruing additional penalties, up to the time where the debt was sent to a collector (who in our experience would add further charges to the debt, or continue charging interest), something which seems not just absurd, but IDIOTIC.

If you dont believe it hear the conversation for yourself [HERE]

What is hardship

Writing off the remaining balance of a debt is the only pure form of hardship.

However there are some good alternatives for smaller organisations who may not have the same 'profits' that the major banks have, such as...

Partial writeoff with a zero (or ssubstantially lower) interest rate for the remaining term of the loan.

Freezing the account for an extended period of time in order for the debtor to 'catch up'.

What is NOT hardship

Decreasing the allowable (monthly) payment to a debt and extending the loan for another 5 years

One creditor said that thy would do this for the debtor, which on the face of it sounded good, however when reviewed, this added another $5000 in interest charges as the debtor was to pay over a greater period of time at the same rate of interest.
In this instance it comes accross as a way for a lender to squeeze even more money out of the debtor

Adding the arrears to the end of the loan

This may catch up on the debtors payments but it does nothing for the ongoing situation, especially when those arrears also contain default charges and late payment penalties
by doing this, a creditor is effectively saying.. 'we believe that you are in hardship enough to catch you up on payments, but not in enough hardship that we will reverse the numerous penalties we have charged to your account'
and by the way, the small print possibly says that even though you may have gone through hardship, 'your loan is still due to be paid by the end date or we will repossess any security you may have provided for the loan' (or similar).

Problems with Hardship

So you have a problem with the hardship offered by a finance company or bank, guess what, you have to complain to that organisation, before you have the ability to forward your complaint to the banking ombudsman or the companies dosputes resolution provider.


Yes thats right the same organisation that you have openen your entire life up to, by sending them your bank statements, rental documents, payslips, and copies of your partners bank statements, and copies of every other bill for the expenses you are paying, now requires you to escalate your complaint to them.
Now that hardly seems fair does it?
We agree, and our experience has shown us that the same organisation that provides the loan should use the same level of detail to approve hardship as they do when they give the loan in the first place!

In order to qualify the above remark I went through the online applicaiton for a 'well known' credit card in New Zealand, in order to find out what was required to set up the account. The application would take about 10 minutes online and at no stage was I required to 'qualify' or evidence my estimated budget.

However this same company REQUIRES evidence of every single item of expenditure in the debtors budget, including a copy of the tenancy agreement where the debtor is a renter.

Hardship for beneficiaries

Without question, as soon as a beneficiary contacts an organisation, hardship should be approved

I have seen many circumstances where lenders provide money to beneficiaries, secured against their household items, when they are desperate.
For a start, the benefit is a subsistence income replacement, not a salary, and therefore they probably shouldnt shouldnt have got the loan in the first place.

However if it is a case where someone has a loan and then is put in a position where they are now on a benefit, the circumstances about allowing the hardship are the same...


If you are a lender that extended funds to a beneficiary, you deserve what you get, next time don't be so stupid!

Call for EQUITY

We emplore the NZ Government to enact legislation or set down guidelines to review the meaning of Financial Hardship, and ensure the process for applying to financial hardship provisions is not unweildly