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Dealing with financial hardship

How to cope when you're experiencing money trouble.

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Money is an occasional stress for most people, but if you’re experiencing financial hardship, you’re probably under severe pressure to make ends meet. There are many situations that can put you under financial hardship including losing your job, having large medical expenses, going through a separation or divorce, having more debt than you can afford or just struggling to meet everyday expenses.

In this guide, we’ll take you through examples of financial hardship and what to do about it.

  • If you are experiencing financial hardship as a result of COVID-19

    Job loss. If you have lost your job as a direct result of the coronavirus pandemic, you may be eligible for income support from the government.

    Debt concerns. If you’re worried about how you’re going to pay your personal loan, credit card or car loan debt because of financial concerns due to COVID-19, many banks and other lenders are offering payment deferral or other temporary debt relief options to help out.

    Difficulty paying utility bills. If you can’t pay your utility bills because of financial hardship caused by the current pandemic, many providers are taking measures to help their customers.

    Struggling business. If you’re a small business owner and your company is suffering because of the economic fallout from COVID-19, there are various tax relief measures in place, as well as special business loan options that may be able to help.

    Another difficulty. Learn more about the Canadian government’s COVID-19 Economic Response Plan to find out what options are available to you.

What is financial hardship?

Financial hardship is when you can’t, or find it extremely difficult to, pay your bills and everyday expenses.

Financial hardship usually occurs after a change in your personal circumstances. This can include losing your job, a personal relationship breaking down, the death of a loved one or having to cover unexpected medical expenses.

When you experience financial hardship, you may find yourself struggling to pay rent or mortgage payments, credit card or loan bills, or even everyday expenses like food and transport.

Stressed couple looking over finances in kitchen

What should I do if I’m experiencing financial hardship?

If you’re experiencing financial hardship, it’s important to get in touch with your creditor or service provider to find out what options are available or to make individual arrangements to help you meet your payment obligations. Remember, your lenders would likely prefer that you pay a little later or make smaller payments than not pay at all. Most companies will be more willing to work with you than you might think.

Unable to pay your credit card minimum payment? Here’s what to do.

How to apply for relief programs with your bank or lender

Banks and lenders have relief programs in place to help you if you are experiencing financial hardship. Here’s how these processes work:

  • You notify the bank about your financial hardship. This can be verbally or in writing. And it simply involves telling the bank you cannot, or believe you cannot, afford your repayments.
  • The bank will ask you for information. This may include a statement of your financial position (income, expenses), details of your employment and income and evidence of your medical circumstances, if relevant.
  • The banks will assess your application. It will take into account the reasons for your hardship, your finances, your ability to rectify your circumstances and whether or not you have received hardship in the past.
  • You will be notified of the outcome in writing. If the bank agrees to provide hardship assistance, you will need to comply with the terms of the agreement. In the case that your hardship application is not approved, your credit contract will not be altered.
  • If your application isn’t approved. The bank may suggest alternatives such as making early withdrawals from an RRSP or your CPP before retirement (which will be subject to a high, penalty tax rate), government support programs or financial counselling.

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What to do if you can’t pay your utility bills

If you’re struggling to pay your electricity, phone or gas bills, you need to contact your utility supplier. Similar to your credit provider, your utility provider may have a hardship process in place.

Once you call your provider, ask to speak to a hardship officer. The officer may help you work out a plan to pay the bill in installments or you may be offered some other solution. There is also the option to consider calling a financial counselor.

If you are not happy with the response of your utility company to your application for hardship, you can lodge a complaint with the Better Business Bureau, which may mediate the conflict on your behalf, or you can contact the department or organization that handles consumer complaints in your province/territory.

What happens to your credit score

During your discussion with the hardship officer ask how the creditor will report your repayment history if you enter into a hardship variation, and request that it is not listed as default or overdue payment on your credit report.

In the event your lender agrees to the repayment arrangement, but does not agree to not list your hardship variation as default, you can report this to the department or organization that handles consumer complaints in your province/territory. If the creditor agrees to an arrangement and you are making the agreed upon payments, you are not considered to be in default, and the situation won’t be reflected on your credit report.

How to rebuild your credit score

Alternatives to applying for financial hardship

If your application for financial hardship isn’t accepted, or you don’t want to apply just yet, there are alternatives to consider. These include:

  • Financial counseling. If you’re unsure what to do about your finances you can connect with a counselor, ideally one that is Accredited Financial Counselor Canada (AFCC) certified. You can also get debt counselling from organizations like Credit Counselling Canada, or Credit Canada.
  • Free legal advice. If you’re in debt and are also experiencing legal issues, you may be able to get free legal help from pro bono lawyers. Contact the legal aid society in your province or territory for more information.
  • Low interest loans. Get an affordable loan through organizations that cater to clients with below-average credit scores and who have trouble qualifying for loans offered by banks and other lenders.

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