Defaults and Hardship: Were You in Hardship When the Default Was Listed?

Being hit with a default listing during financial hardship feels like getting kicked when you’re already down. You’re struggling to pay bills, facing reduced income or unexpected expenses, and then a creditor lists a default that damages your credit file for years.

But Australian consumer credit laws recognise that life happens. There are specific protections for consumers experiencing genuine financial hardship, and creditors must follow particular processes before listing defaults.

If you were in hardship when a default was listed, the listing may not have been recorded correctly. Some defaults are listed without proper hardship consideration, during active hardship arrangements, or without following the required assessment process.

Got a default on your credit file? Lodge it with Default Gone right here, or call us on (02) 5502 7025. $399 flat per consumer per default. We do not guarantee removal — outcomes depend on the facts of each case — but we will prepare and lodge the dispute properly.

This guide explains your hardship rights, what creditors must do before listing defaults, and when hardship circumstances may provide grounds to challenge a listing.

What is financial hardship under Australian credit law?

Financial hardship occurs when you cannot meet your credit obligations due to circumstances beyond your reasonable control. This is not simply being unable to pay – it requires a genuine change in your financial situation that affects your ability to meet existing commitments.

Common hardship situations include:

• Job loss or reduced working hours – unemployment, redundancy, casual work reduction
• Illness or injury – medical conditions affecting income or creating unexpected expenses
• Family breakdown – separation, divorce, death of partner or family member
• Natural disasters – floods, fires, storms affecting property or income
• Economic downturns – business closure, industry changes, COVID-19 impacts
• Unexpected major expenses – medical bills, emergency repairs, family crises

The key test is whether the hardship is temporary and whether you can reasonably be expected to meet your obligations again in the future with appropriate assistance.

Creditor obligations for hardship assessment

Under the National Consumer Credit Protection Act, credit providers must have hardship policies and procedures. When you notify them of hardship, they cannot simply ignore your situation and proceed with default listings.

Required hardship assessment process:

Notice and opportunity – You must be given reasonable opportunity to contact the creditor about hardship before enforcement action

Genuine consideration – The creditor must genuinely assess your hardship request, not just go through the motions

Reasonable timeframes – You must be given adequate time to provide hardship information and documentation

Appropriate variations – If hardship is established, the creditor must offer reasonable payment variations where possible

Documentation – The creditor should document their hardship assessment and decision

If a creditor lists a default without following proper hardship procedures, or during an active hardship arrangement, the listing may be challengeable.

When hardship affects default validity

Not every financial difficulty automatically invalidates a default, but certain circumstances may provide grounds for dispute:

Default listed during hardship negotiation

If you contacted the creditor about hardship and they listed a default while your request was being assessed, this may breach their hardship obligations. Creditors should pause enforcement action during genuine hardship consideration.

Default listed despite active hardship arrangement

If you had an approved hardship arrangement (payment plan, temporary reduction, payment holiday) and kept to its terms, but a default was still listed, this could be incorrect. The original account terms may have been varied by the hardship agreement.

No opportunity given to request hardship assistance

If the creditor moved straight to default listing without giving you reasonable opportunity to contact them about hardship, this may not follow proper procedures – particularly if you were experiencing obvious hardship circumstances.

Hardship request refused without proper consideration

If you requested hardship assistance, provided appropriate documentation, but the request was refused without genuine assessment or for unreasonable grounds, this may affect the subsequent default listing.

Documenting your hardship circumstances

To challenge a default on hardship grounds, you need evidence of your circumstances and the creditor’s response (or lack thereof).

Key documentation includes:

Proof of hardship circumstances:

• Medical certificates or hospital records
• Termination letters or redundancy notices
• Centrelink payment confirmations
• Insurance claim documents
• Bank statements showing reduced income

Communications with creditor:

• Written hardship requests you sent
• Phone call records or file notes
• Letters or emails from the creditor
• Any hardship application forms

Timeline evidence:

• When hardship began
• When you contacted the creditor
• When the default was listed
• Duration of any hardship arrangements

The stronger your documentation, the better your prospects of challenging an incorrectly listed default.

Different types of hardship arrangements

Creditors can offer various hardship assistance options. Understanding what you had (or should have been offered) helps assess whether a subsequent default listing was appropriate.

Common hardship variations:

Payment deferrals – Temporary suspension of payments for a specified period

Reduced payments – Lower payment amounts for a temporary period

Extended terms – Longer repayment period to reduce payment amounts

Interest rate reductions – Temporary or permanent rate decreases

Fee waivers – Removal of late fees, over-limit fees or other charges

Capitalisation – Adding missed payments to the principal balance

If you were offered and accepted a hardship arrangement, the creditor should not list a default for payments affected by that arrangement – provided you met the varied terms.

What to check on your credit file

If you experienced hardship around the time of a default listing, review your credit file carefully for inconsistencies.

Check for:

• Default date vs hardship timeline – Was the default listed during hardship negotiations?
• Multiple listings – Are there duplicate defaults for the same debt?
• Amount accuracy – Does the default amount match what you actually owed?
• Payment history – Does the file show payments you made during hardship arrangements?
• Account status – Is the account shown as closed, settled, or still active?

You can get a free copy of your credit file from each credit reporting body to check these details.

COVID-19 and hardship protections

The pandemic created specific hardship circumstances for many Australians. Financial regulators provided additional guidance about creditor obligations during this period.

Specific COVID-19 considerations:

JobKeeper/JobSeeker recipients – Reduced income due to pandemic impacts was recognised hardship

Business closure impacts – Forced closure or reduced operations created legitimate hardship

Deferred payment arrangements – Many creditors offered automatic deferrals which should have protected against defaults

Extended timeframes – Longer assessment periods were encouraged for pandemic-related hardship

If you had pandemic-related hardship and received a default during 2020-2022, it may be worth reviewing whether proper procedures were followed.

Joint accounts and hardship

Where multiple people are liable for a debt, hardship affecting one person may impact the entire account.

Key considerations:

Individual hardship – One person’s hardship may justify assistance for the joint account

Communication requirements – Creditors should communicate with all account holders about hardship

Separate assessment – Each person’s circumstances should be considered

Joint liability – Default listings typically affect all account holders regardless of individual hardship

Remember that each consumer’s credit file is their own – even for joint debts, you can challenge defaults that appear on your file.

When hardship may not help

Financial hardship is not a universal defence against default listings. Some circumstances may not provide grounds for challenge:

Limited protection scenarios:

Ongoing payment problems – If hardship is permanent rather than temporary

No contact with creditor – If you never notified the creditor about hardship circumstances

Refused reasonable offers – If you declined appropriate hardship assistance

Pre-existing arrears – If you were already behind before hardship began

Fraudulent claims – If hardship documentation was false or misleading

However, even in these situations, other aspects of the default listing process may still be challengeable.

Challenging a hardship-related default

If you believe a default was listed without proper hardship consideration, gather your documentation and consider your options.

Steps in a hardship-based challenge:

1. Document the timeline – When did hardship begin, when did you contact the creditor, when was the default listed

1. Gather evidence – Collect hardship documentation and creditor communications

1. Review obligations – Research what the creditor should have done under hardship provisions

1. Prepare dispute – Draft explanation of why the default listing may be incorrect

1. Lodge formally – Submit dispute to credit provider and/or credit reporting body

1. Track response – Monitor the statutory response timeframes

Hardship-based disputes often require detailed explanation of circumstances and creditor failures, making professional assistance valuable.

What happens if hardship grounds are accepted

If a creditor or credit reporting body accepts that a default was listed without proper hardship consideration, several outcomes are possible:

Potential resolutions:

Complete removal – Default deleted entirely from credit files

Date correction – Default date changed to reflect proper hardship assessment

Amount adjustment – Default amount reduced to exclude hardship-affected payments

Status update – Default marked as satisfied or under arrangement

Account notation – Additional information added explaining circumstances

The specific outcome depends on the facts and the nature of the creditor’s hardship procedure failures.

Business hardship and sole traders

Sole traders and small business owners often have personal and business credit overlap, creating complex hardship situations.

Business hardship considerations:

Revenue loss – Reduced business income affecting personal finances

Industry impacts – Sector-wide problems creating widespread hardship

Personal guarantees – Business debt guarantees triggered during hardship

Cash flow problems – Temporary business difficulties affecting personal obligations

Business-related hardship can be just as legitimate as personal hardship for consumer credit protection purposes.

External review pathways

If direct dispute with the creditor does not resolve a hardship-related default challenge, external review pathways may be available.

Escalation options:

Credit reporting body disputes – Challenge the listing with the credit bureau directly

Industry complaint schemes – External review pathways for different types of creditors

Regulatory complaints – Report creditor failures to relevant regulators

Legal advice – Consider whether court action may be appropriate in serious cases

Each pathway has different procedures, timeframes and potential outcomes.

What to check: Hardship default checklist

Use this checklist to assess whether hardship circumstances may affect a default on your credit file:

• Timeline alignment – Was the default listed during or shortly after hardship circumstances?
• Contact records – Do you have evidence of contacting the creditor about hardship?
• Hardship documentation – Can you prove the circumstances that created hardship?
• Creditor response – How did the creditor respond to hardship requests?
• Arrangement compliance – If you had a hardship arrangement, did you meet its terms?
• Default accuracy – Is the default amount, date and details correct?
• Communication gaps – Were there periods where you tried to contact the creditor without response?
• Policy compliance – Did the creditor follow their stated hardship policy?
• Reasonableness – Was any hardship refusal justified based on your circumstances?
• Alternative options – Were other hardship assistance options available but not offered?

How Default Gone helps

Default Gone helps Australians challenge unfair, incorrect or unlawfully listed defaults. We collect the relevant information, prepare the dispute, lodge it with the credit provider and/or credit reporting body, track the response and explain the outcome in plain English.

The standard Default Gone service is $399 per consumer, per default (limited launch pricing — normally $399). There are no stage fees, no success fees and no surprise invoices. The fee covers the work performed, not a sought outcome.

Our automated review system assesses hardship-related default challenges by examining the timeline, creditor obligations and available evidence. We prepare disputes that clearly explain why hardship circumstances may affect default validity.

When to act on hardship-related defaults

Don’t wait to address hardship-related default listings. The longer a default remains on your credit file, the more it affects your financial options.

Time is important because:

• Evidence becomes harder to gather over time
• Staff who handled your hardship request may no longer be available
• Credit file damage continues while defaults remain listed
• Some external review pathways have time limits

If you experienced genuine hardship when a default was listed, and the creditor did not follow proper procedures, it may be worth challenging the listing sooner rather than later.

Disclaimer

Default Gone is not a law firm and does not provide legal or financial advice. We do not undertaking that a default or judgement will be removed. Outcomes depend on the facts, documents and response from the credit provider, credit reporting body or relevant legal pathway.

Frequently asked questions

Q: Can any financial difficulty be considered hardship for default purposes?

A: No, hardship must be due to circumstances beyond your reasonable control and should be temporary. Simply being unable to afford payments is not enough – there must be a genuine change in circumstances like job loss, illness, family breakdown or unexpected major expenses that affects your ability to meet existing commitments.

Q: How long does a creditor have to assess my hardship request before listing a default?

A: There is no specific timeframe in the legislation, but creditors must give you a “reasonable opportunity” to contact them and provide hardship information. This typically means at least 14-21 days after you first contact them about hardship, depending on the complexity of your situation and what documentation you need to provide.

Q: If I had a hardship arrangement but missed some payments, can they still list a default?

A: It depends on the terms of your hardship arrangement. If you missed payments that were covered by the arrangement (like during an approved payment holiday), a default should not be listed for those payments. However, if you missed payments outside the arrangement terms, those may still result in a default listing.

Q: Can a default be removed years later if I can prove I was in hardship at the time?

A: Yes, hardship circumstances can potentially support a default challenge even years later, provided you have adequate documentation. However, gathering evidence becomes more difficult over time, and you need to show that the creditor failed to follow proper hardship procedures, not just that you experienced hardship.

Q: Do hardship provisions apply to all types of credit defaults?

A: Hardship provisions apply to consumer credit under the National Consumer Credit Protection Act, which covers personal loans, credit cards, home loans and car loans. They generally do not apply to business credit, utility bills, telecommunications defaults or other non-consumer credit arrangements, though some of these may have their own hardship policies.

Q: What if the creditor says they never received my hardship request?

A: This is why documentation is crucial. Keep records of phone calls (dates, times, who you spoke to), emails, letters and any reference numbers. If you called, ask for file notes to be made and request a reference number. Send follow-up emails confirming phone conversations. Without proof of contact, it becomes your word against theirs.

Q: Can I request hardship assistance after a default has already been listed?

A: Yes, you can still request hardship assistance after a default is listed, and the creditor should still assess your request. However, this won’t automatically remove the default. You would need to separately challenge the default listing on the basis that proper hardship procedures weren’t followed before it was listed.

Q: How do I prove my hardship was “beyond my reasonable control”?

A: Provide documentation that shows the circumstances causing hardship, such as medical certificates for illness, termination letters for job loss, insurance claims for property damage, or Centrelink confirmations for reduced income. The key is showing that the hardship resulted from external circumstances, not poor financial management or lifestyle choices.

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