Cushion the shock

A financial emergency can strike at any moment, but you don’t have to deal with it alone

- Michelle Baltazar

In July 2010, the federal government passed a new law designed to help people who are going through tough times. Under Section 72-75 of the National Credit Code, an individual who is struggling to make ends meet due to a change in their personal situation can re-negotiate their mortgage and credit payments with their bank.

On grounds of financial hardship, this law protects the debtor from getting sued or incurring penalties for breach of their credit contract.

While everyone knows what can cause financial hardship (things such as job loss, illness, natural disasters), the details behind this important reform are little understood. At the very least, it means that since 2010 banks are required by law not to list the matter on the debtor’s credit report. This is important because it would have otherwise made it harder to borrow money in the future. The law also prevents banks from charging additional default fees and default interest payments as long as the debtor complies with the new and temporary arrangement.