Debt Free Kiwi #26

How much debt have you paid off?: About $15,000.

What was it for?: Bankruptcy debt. I owed close to $50,000 at the time I was bankrupted by the High Court. I had to wait until after I was discharged to offer payments to other creditors.

From deciding to become debt free to making the last payment, how long did it take you?: I didn't ‘decide’: BNZ forced me into bankruptcy. Nobody thought to tell me that BNZ doesn't actually enter into hardship arrangements.

What age did you take on your first debt, and how old are you now?: Probably in my 20s. I am now 55.

Did you do it alone or as a family?: Alone.

Did you pay off debt from your regular income, take on extra work, or change jobs to speed it up?: From regular income.

Did you sell anything or receive cash gifts to contribute towards your debt payoff?: My family gave me an allowance once I was discharged from bankruptcy, and I used some of that to settle the debt directly with creditors. I also continued paying some creditors directly during the bankruptcy. This is actually against the law, but it was the only way to sidestep the corruption in the insolvency sectors. The insolvency office acknowledged I was doing that to another lawyer, and they chose to do nothing about it, so I continued with the payments.

What people, books, websites, podcasts, budgeting tools, debt trackers and resources helped you?: Personal experience and creating my own budgets and financial templates simply because they work for me. The budgeting tool I found most useful was the whole-of-life budget. I read that in a book somewhere. Creating this helps with financial focus and gives some piece of mind. Learning that there is substantial financial corruption in the banking and financial sectors in NZ helps me to stay debt-free today. And understanding the psychology of debt. Once you have to live on a cash basis, how you perceive money changes forever. Another tool is the Money Mind Game, where you start with zero and try and get to a million dollars without using debt. I made it to $1,000 so far and learned that you really can create money from nothing, and it actually gives you the confidence to try different things because you never risk your own money. Love it. On my bucket list is to continue playing that because it's fun and shows what real impact money has without all the hype.

Did you keep an emergency fund while you paid off debt? If so, how much?: Not at the time.

Did you have any setbacks along the way, and how did you overcome them?: Not earning enough income. Unfortunately, I haven't overcome that yet.

What tips/hacks could you share?: Learning about the corruption in the banking and financial sectors. Knowing that when you become bankrupt, up to 1000 points will be wiped off your Equifax credit score. Putting permanent blocks on my credit reports. Building regular payments with essential service providers. That will help you if you have negative reporting on a credit report. And be in credit with them if you can. I got extra discounts for being in credit with my power bill.

Was there a structure to your debt payoff? i.e. paying smallest to largest, or highest interest rate to lowest?: The banks rejected my budgets. If I was doing it today, I would follow Dave Ramsey with his concept of smallest to largest. Because the psychological component is the first consideration.

How did you stay motivated, and what was the most challenging part of paying off your debt?: Prior to the EQ's I had automatic payments set up. The most challenging part was learning that when you take the initiative to pay back the debt, the banks will take a strong stand against you doing that. ANZ also would not enter into any payment arrangement. I personally delivered my budgets to them, and they said they would get back to me, but they never did. In the end, they wanted to take all the debt I owed them, combine it all together and add even more interest on top. It was about that time I understood the meaning of - a fool and his money are soon parted. I wish I understood it earlier.

How did you celebrate making your final payment?: I haven't because bankruptcy was not my choice.

Was getting out of debt worth it, and what have you learned about yourself?: The bankruptcy means I never had the opportunity to get out of debt myself. A better question to ask is, “was getting into debt worth it?” And the answer is absolutely not. The bankruptcy has ruined my life. I have never and will never overcome its impacts. I can't because NZ law ensures bankruptcy remains a permanent mark against a person. What have I learned about myself? That I was stupid to trust the banks and the credit reporting companies. I believed what they said in their marketing and advertising. The reality is the banks will lend to anyone as long as you keep paying them back. I learnt there is a huge psychological component to carrying debt. Living on cash alone is completely different to living with debt. If I could have my time back again, there is no way I would ever borrow money, even for a house.

Will you ever go back into debt again?: Never, and I've put the blocks on my credit report that agencies hold against me, which will make that a lot harder to get into debt. I've also publically written about my bankruptcy. So if anyone was to offer me some sort of credit, they wouldn't have to go to too much trouble to know I was bankrupted in the past. That's an immediate deterrent for most creditors and lenders.

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