Any Advice? Very bad Credit Card debt...

[Mal]

I would say that looking at the level of debts, that going for bankruptcy would look like the v logical approach. Rather than try and avoid it, look at how it may well be beneficial. I know a couple of people who went through it and it was just the cure for the problem; the 3 year tonic

Declaring bankruptcy is a completely last resort, and should only be used as that, as it is on the public record forever. Much better to get a debt arrangement worked out or some other agreement with creditors.

 

[drron]

Bankruptcy is not as great a stigma as it used to be and many of our successful businesspeople have used it as their way to accumulating wealth.
I myself was declared bankrupt in the mid eighties-a long story which is not going to be told here.I used it to consolidate,but I did pay all my debts in full-of course a zero interest rate when you are bankrupt.
I was still able to travel internationally-never had any documentation when I did and never pulled up anywhere.
However I was able to use a Part X arrangement which I believe is no longer available.So it is essential that you do see a financial counsellor first and if bankruptcy is suggested see a specialist in bankruptcy which I did-the advice was invaluable.
Since completing my period of bankruptcy I have had no difficulty in obtaining new credit,in fact got business loans whilst still officially a bankrupt.So personally I would not be worried by such a route.In fact with my complete change of attitude I am now so much better off than I would have been and indeed better off than many of my colleagues who continued with the same financial advice i was getting prior to my bankruptcy.
You also once more learn that your most important assets are your family and it is imperative they are kept in the loop.I hope you come through this situation and end up enjoying the rest of your life.

 

[bambbbam2]

Bankruptcy is not as great a stigma as it used to be and many of our successful businesspeople have used it as their way to accumulating wealth.
I myself was declared bankrupt in the mid eighties-a long story which is not going to be told here.I used it to consolidate,but I did pay all my debts in full-of course a zero interest rate when you are bankrupt.
I was still able to travel internationally-never had any documentation when I did and never pulled up anywhere.
However I was able to use a Part X arrangement which I believe is no longer available.So it is essential that you do see a financial counsellor first and if bankruptcy is suggested see a specialist in bankruptcy which I did-the advice was invaluable.
Since completing my period of bankruptcy I have had no difficulty in obtaining new credit,in fact got business loans whilst still officially a bankrupt.So personally I would not be worried by such a route.In fact with my complete change of attitude I am now so much better off than I would have been and indeed better off than many of my colleagues who continued with the same financial advice i was getting prior to my bankruptcy.

Well I hate to tell you but the law and rules have changed an awful lot since "the mid-80s".

For example, there is no early discharge anymore. It is also an offence to not tell the person from whom you are applying for credit that you are a bankrupt, if the amount exceeds a certain limit (around $4,350 currently)

Debt agreements have also changed a lot. I should know - I was bankrupt until mid '08 when I made an offer under Section 73 and my bankruptcy was annulled.

Still doesn't do anything for the credit record.. although by the time people are at the bankruptcy stage their credit is generally cough anyway.

Part of the problem must lie with the credit providers, I had 3 westpac cards and a virgin credit card (also Westpac) when I went bankrupt.

To the OP - it does sound like it is relatively out of control though. My bankruptcy was only $120k in credit card debt and ITSA processors were shocked at that..

 

[NYCguy]

There's an interesting article about this very matter in the New York Times this weekend.

The article makes the point that consulting a Credit Counsellor is a good move...

 

[Rick93]

Ok, seems worth thinking about, which I have. .. but will still get to talk to a Financial counselling service.

One more factor to the 'bankruptcy' option....

I didn't mention my 'tax office ' problems. Obviously, I should not detail here, but there are some outstanding issues from over seven years ago.... enough to keep me awake at night ( when I'm not on night shift, that is...).

Just a few short questions though...

If I go 'under', can my wife hold the house mortgage in her name? Can she still hold a credit card in her name?

Thanks,
GORDO

 

[Chicken or Beef]

Well not really.. however you will have to get approval from a bankruptcy trustee.

In other words, 'it's harder than normal to leave the country!!'. I don't have to ask anyone to leave (or get written permission), nor have to answer questions about where I'll be, how long I'll be away for and how I am proposing to fund the trip.

 

[Maca44]

Can she still hold a credit card in her name?GORDO

Gordo, it is credit cards that are contributing to most, if not all of your problems. It appears you rely on them constantly and you can't control your spending, so get rid of them all. If your wife was to have a CC you would no doubt do heaps of damage on that card also. Get rid of them all otherwise you will never pay them off. Some of the posts suggest you might have to file for bankruptcy (after you consult the appropriate expert in that field) and given the circumstances this might be your only option.

 

[Rick93]

If I was single, it wouldn't be too much of a problem to just 'get rid of the cards'....

But with four kids, I / we want to give them the best we can ( reasonably ).

My CC debt wasn't run up in up market stores, or on a new 'plasma' screen each year, nor have I gone off on 'status runs' to build any type of FF status etc.

No, my debt has got to where it is, from raising four children; having them in a good private school for a few years ( to help sort out some 'behavioural' issues ); paying for fuel / transport to get to / from work in Sydney ( round trip of 250kms / day ). etc. etc.

Sure, we did do a few short holidays, but only every few years. our last trip to Disneyland / Fiji was mainly for the kids, and was mostly on FF points / timeshare accommodation. ( which I would lose 60 % if I tried to sell ).

If I did not have a single CC, using just cash / EFTPOS.... I would not make it through a month. I need a card to help balance out the 'high income' months, against the 'low income' months.

If I don't declare myself, I'll need a 'special' consideration, from whoever, that will allow me to pool my CC debt, and pay it off with a very minimal interest rate. That's my preferred choice. I just need to find the loan source.

regards,
GORDO

 

[MissBurrill]

Gordon

My suggestion is that when your wife starts working use her income to help pay off the debt. Yes, still use most of your income too towards the debt but Mrs G's income will help pay it down quicker.

All the best.

Karen

 

[markis10]

What ANZ card do you have, I hope you answer ANZ low interest MC, if not then change it to that tommorrow, once done make that your priority card for payments then do balance transfers online for your other cards. Also ring ANZ up when you have some credit available on the card, they have special balance transfer offers with very low interest rates that you can use to debt consolidate. Forget your points and travels, you are fighting to keep your head above water.

 

[oz_mark]

Sure, we did do a few short holidays, but only every few years. our last trip to Disneyland / Fiji was mainly for the kids, and was mostly on FF points / timeshare accommodation. ( which I would lose 60 % if I tried to sell ).

If the timeshare has regular payment requirements, then it may be best off to sell, in your current situation. Sure, no-one likes to lose 60% but your other problems seem more significant to me.

Really, I think you need to get a handle on your budget (with the help of a suitable financial advisor.counsellor etc), work out what can go and take it from there.

As for the tax office, I know someone that got caught out with one of those mass-marketed schemes, and took a sizeable hit. Bynot paying it off the debt grew quickly at tax office interest rates (as I commented when I found out - how can someone on $30K a year have a $60k debt to them).

 

[Saab34]

Gordon. I dont know if it helps, but I will provide a example of what a family relative did in the same situation (at 390k total debt). To overcome this huge debt they did the following:
-Moving. Selling in Gosford and Moving to Melbourne made them pocket an extra 330,000.
-3 Children now go to Public Schools, of which are apparently better than the private in the end of things....Huge savings here
-Cars. Getting rid of the expensive cars, and buying a single family sized car. Not having 2 cars can save a fortune!
-Second Job. The Wife got a fulltime job at BigW and 2 years on is a Assistant Store Manager earning $79k p.a
-Keeping annual holiday, but not flying Qantas overseas, paying a fortune on overseas fares, instead going off-season to Queensland on a cheap flight.
-Dont water the garden!
-Getting rid of that Foxtel
-Garage Sale. You would be shocked of how much stuff you have that is worth heaps, and you probaly wouldn't even know it was gone.
-Internet moved to a cheaper broadband plan/as well as Mobile
-Not eating out at exclusive restaurants
-Quit Smoking. Saved thousands per year
-No credit cards. They now use ANZ Everyday Debit Card.

It will take many, many years, but if you keep a control on things, it will be become less painfull.

 

[Alanslegal]

It's very open of you Gordon to reveal so much financial information about your situation. You have pretty much nailed it on the head that the biggest issue you have is your Very bad Credit Card debt....

I guess reducing the number of credit cards is definitely a starting point.

My suggestion would be to see if you expand on your mortgage (where you said its currently $265k). If you could get your house valued again, it may be worth on the upper end and be closer to $350K. Assuming the house is $350K you may be able to extend your mortgage to say $315K (say at 10% Loan Value Ration (LVR) of course there are some loans up to 100% LVR with lenders insurance). Then you can transfer at least some of the $153K of credit card balance from the highest interest rates (say 15-20%pa) to your home loan, at rates of about 6.5%pa and droppping.

Speak to your various credit card companies, advise them of your situation & your willingness to meet you debt obligations, however see if they can offer you any reductions or any repayment plans that is a win-win to all parties.

Also where possible to get the wife to start work and earn some form of income, every dollar definitely helps.

Also a big maybe - And if your kids are approaching their late teens - get them to work and maybe ask them to pay some weekly board (even if its $50 per week from each kid = $200pw) that could go into reducing your debt.

But most importantly, those credit cards needs to be reduced from 7 to 1 as soon as possible.

 

[lovetravellingoz]

Hi Gordon...

Well there is lots of good advice in this thread.


The main thing that I would add is there are no short cuts which reading between the lines you are probably hoping for.

But this thread has revealed much good advice and very practicable tips.

The second thing I would add is to not delay. Act immediately. You must be your families own razor gang.

The wonders of compound interest work well for investments, but when in debt they work against you.

As quickly as possible you need to have your repayments exceed the cost of your combined interest. Once this occurs you will be in the position of removing your debt. You must amend your spend and/ or raise your family income till this is occurring. There are no if or buts to this. You have to achieve it or your position will only worsen.


I suspect that in your search to provide everything for your kids that you have allowed this be in the situation of spending more than you earn.

As others have suggested already examine EVERYTHING that you spend on and for the time being remove all discretionary spend.

Many things in life which people view as required...are not really.

For example do your kids have mobile phones?? Mobiles phones can bleed cash rapidly.

 

[Dave Noble]

If I was single, it wouldn't be too much of a problem to just 'get rid of the cards'....

But with four kids, I / we want to give them the best we can ( reasonably ).

My CC debt wasn't run up in up market stores, or on a new 'plasma' screen each year, nor have I gone off on 'status runs' to build any type of FF status etc.

No, my debt has got to where it is, from raising four children; having them in a good private school for a few years ( to help sort out some 'behavioural' issues ); paying for fuel / transport to get to / from work in Sydney ( round trip of 250kms / day ). etc. etc.

If you are serious about trying to get out of problems, you cannot just switch the debt earning to your wife and have her getting credit cards; you will need to learn to live within means. In bankruptcy, if you go that way ( which I do think you should seriously look at ), you will get an income from your salary allowing for the 4 children; the rest , during the 3 years, will go to the debt (iirc). If you want additional income, then if your wife was to go to work and generate her own earnings, you may have that available too

If I don't declare myself, I'll need a 'special' consideration, from whoever, that will allow me to pool my CC debt, and pay it off with a very minimal interest rate. That's my preferred choice. I just need to find the loan source.

To be honest, I doubt that you will find anyone prepared to fund an unsecured loan of $100,000 to consolidate the debt.

Dave

 

[markis10]

In bankruptcy, if you go that way ( which I do think you should seriously look at ), you will get an income from your salary allowing for the 4 children; the rest , during the 3 years, will go to the debt (iirc). If you want additional income, then if your wife was to go to work and generate her own earnings, you may have that available too

Dave

In Bankruptcy you would be permitted to earn $55275 nett (after tax) after which 50c in the after tax dollar must go to your creditors, you can have a car worth $6500 and a few other assets. You need to look at the pros and cons of going bankrupt versus the alternatives, your quality of life and what is going to be the quickest way out, you have too much debt for a part IX agreement so that is ruled out.

The other option you have is to access your super to clear your hardship, this will have less impact on your credit worthiness for the future however it will obviously have a big impact on your retirement, but you have some time to address that and it would mean significant controbutions over the next few years to get back to where you were.

 

[serfty]

...
I myself was declared bankrupt in the mid eighties-a long story which is not going to be told here.I used it to consolidate,but I did pay all my debts in full-of course a zero interest rate when you are bankrupt.
I was still able to travel internationally-never had any documentation when I did and never pulled up anywhere.
However I was able to use a Part X arrangement which I believe is no longer available ...

Part X is not bankruptcy!

What you describe cannot be bankruptcy as, if you are bankrupt you:

• No longer have any debt (that's it - nil - all debts are wiped and you have nothing to repay)
• Must get permission to travel internationally
• Generic Bankruptcy lasts for 3 years
• There's a 4 year period after that before your credit record gets wiped of all reference to the bankruptcy and any prior debt ...

 

[oz_mark]

Part X is not bankruptcy!



What you describe cannot be bankruptcy as, if you are bankrupt you:

• No longer have any debt (that's it - nil - all debts are wiped and you have nothing to repay)
• Must get permission to travel internationally
• Generic Bankruptcy lasts for 3 years
• There's a 4 year period after that before your credit record gets wiped of all reference to the bankruptcy and any prior debt ...

Part X can be a viable alternative to bankruptcy in some situations (most importantly it avoids bankruptcy). I know of people that were on the mass marketed investment scheme a few years back and got hit with giant tax bills that used Part X.

 

[QF WP]

Dave Noble, with due respect, bankruptcy is the absolute LAST alternative Gordon should consider.

He has a solid income base with which to work a debt reduction plan (and presumably his wife will earn an income thus increasing their ability to fund a higher repayment schedule) . He also may have equity in his current property, which he may be able to access at significantly lower rates than CC debt.

We don't know his full position (but he is giving more information in each post) and can only speculate as to the full extent of income and debt (now and in the future). Our points are mere postulations...the best information he can get is from a financial counsellor.

There is a lot of very sound points raised by members, which Gordon will do well to consider.

I say this with a great deal of expertise in these matter (given my job).

 

[medhead]

While I'm shocked by Gordon's situation, I'm also amazed that bankruptcy is an immediate consideration.

It sounds like there is sufficient income to service the debt ATM. So Finanicial Advice and a debt reduction plan seem the way to go.

If it was me, I'd do that exactly - try to transfer high interest debt to low interest debt, it doesn't matter if the whole CC debt can't be moved to lower interest any saving is more debt paid off; make the minimum payments on the lower interst debt; redo my budget to reduce spending, pay down high interest debt; permanently retire paid off cards; Ask my wife to get a job.

But that's just me. Finanicial advice help is definitely a first step. See what they say before considering other measures.

Also Gordon you mentioned spending on travel between various jobs, wollongong to Sydney. (Some of that would be tax deductible - better then a kick in the teeth) But is it at a point that getting rid of one job might actually, have a big impact in reducing the travel costs. Maybe in stead of driving because you need to get to job 3 you could just train it between jobs 1 and 2, actually saving driving between all 3 jobs and hence saving more then job 3 is worth. Just a thought....