And the Judge’s Gavel Fell

Scott,

I have a court judgment against me for a $10,000 credit card debt, along with other credit card and personal loan debts that have accumulated to over $20,000. Over the last three years I have recovered from addiction and mental health issues, as well as homelessness. Through hard work I have finally landed myself a stable job in the industry I studied at uni for, earning $96,500 a year. Still I cannot get ahead. I would like to go bankrupt to wipe the slate clean and start again. Is this a good idea?

Natalie

Hi Natalie

Rising strong!

Congratulations on your continued recovery. That shows courage and perseverance. You’re a fighter.

Yet bankruptcy, in my opinion, is not an option ‒ you’re earning too much dough!So what should you do instead?

First things first, get a copy of your credit file and see what’s on it.

Then, you have a couple of options:

You could contact your lenders (specifically, their hardship departments) and disclose that you took out the debt when you were suffering from addiction, mental health issues and homelessness. If you can provide supporting documentation from doctors and case study workers, you may be able to have the debt waived on hardship and compassionate grounds (and there may also be ways to have the $10,000 court judgement waived as well).

Or you could choose to negotiate a realistic repayment schedule. On your income you’d pay if off inside of a year.

You Got This!

Scott

You’re a Shocker, Barefoot

Mr Pape,

Your ‘shock/horror’ credit card piece in the Sunday Times was one of the most irresponsible financial articles I have read for some time. My wife and I (73 and 78 years old respectively) have been using credit cards for everything since they came into existence. Each month we only have one bill to pay, and it is paid on time every month ‒ very convenient! A more positive article would have explained the virtues of credit cards and how to use them wisely.

Wayne

Hi Wayne,

You don’t seem to understand how this column works.

It’s not my job to explain the virtues of credit cards and how to use them wisely!

(I’ll leave that to Commbank, who teach this to nine-year-old kids who attend their schools education program.)

Now, you gave me a backhander by saying I wrote “one of the most irresponsible financial articles” you’ve read for a long time. (I can imagine the bankers reading this would be giving you a golf clap: “Hear, hear! Finally someone gave it to Barefoot! You’re a jolly good sport, Wayne old boy!”)

Well, let’s talk about financial irresponsibility:

As you know, the banks do their best to lure people, especially young people, into taking up credit cards.

The reason is obvious: while interest rates have fallen to an all-time low, the average credit card interest rates haven’t budged from 18% since Alan Border donned the Baggy Green.

Yet at least the original Bankcard didn’t have a membership fee. Annual fees on today’s credit cards have been increasing by more than 20% per annum to an average of $135 a pop, according to Canstar.

At the same time, the value of credit card rewards points have been slashed. Last year a report by comparison site Mozo found that they were virtually worthless, plummeting a staggering 96% since 2016.

Look, I get that some people ‒ like you ‒ pay off their cards on the due date and get a 55-day interest-free loan.

However, the truth is that for most people ‒ particularly the young and the vulnerable ‒ they’re a debt trap.

Wayne, it’s these people who are subsidising your interest-free loan. So who’s being financially irresponsible, sport?

Scott

Westpac Jackpot!

Dear Scott

I just wanted to say thank you! I received a letter from Westpac today to say that in response to my ‘query’ they have cancelled my credit card repayment insurance and refunded $1,100 in premiums paid over the past four years. Woohoo! One giant leap towards paying off and cancelling my card altogether!

Fiona

Hi Fiona,Ka-ching!

Since I wrote my column a few weeks ago, I’ve had heaps of Barefooters tell me they’ve got thousands of dollars back.

And if you, dear reader, have been sold junk add-on insurance, head over to demandarefund.com and stake your claim.

Scott

Would You Like a Credit Card With that?

Hi Scott,

My 19-year-old daughter just started a job at David Jones. To my horror, one of her KPIs is to sell the David Jones credit card to customers. In fact staff are incentivised $75 for every customer they sign up. There is a lot of pressure on her to meet this KPI, and we both feel very uncomfortable with this. I would be interested in your thoughts on this practice.

Wendy

Hi Wendy,

Would you like a credit card with that?!

Seems the beancounters at David Jones have worked out there’s potentially more money to be made flogging debt than designer duds:

The David Jones American Express Platinum Card has an interest rate of 20.74% on purchases, and a ‘competitive annual card fee of $295’.

(They seriously think that’s competitive? Who the hell are they competing with? Cash Converters?)

Anyway, this is exactly why I’m starting ‘Barefoot’s Money Movement’

Debt has been sold to us so relentlessly, so forcefully and so underhandedly that we’ve become desensitised to it.

Look, I’m not saying that DJs shouldn’t be allowed to sell debt, or that your daughter is wrong for following orders.

(That being said, if she feels uncomfortable about it, that’s a very, very good sign. Encourage her to trust her gut and her ethics. That’s a proud parent moment right there.)

What I am saying is that I’m sure as hell going to do everything I can to make sure kids coming out of school see the trap before they get upsold into the merry-go-round of misery. And in the next few weeks I’m back to my old school (in Ouyen, Victoria) to blend up some credit cards in the classroom!

True dinks!

Scott

My Aunty Has 15 Credit Cards

Hi Scott,

My aunty has got herself into trouble with credit cards. She is not savvy with money and I really do not think she understood what she was doing. After a lifetime of work, she has $10 in her purse – and $211,000 in debt across 15 cards. She has been cash-advancing to make the minimum payments for years. I think most of the debt is interest, and she has nothing to show for it (no car, holidays or smashed avo). At this rate she is going to lose her home. Is there anything I can do to help her?

Max

Hi Max,

It sounds like your aunt is going bankrupt … or at risk of going bankrupt.It also sounds like she has a gambling addiction.

Now you don’t say whether your aunt has any loans against her home, but she’ll eventually be forced to sell it. If the credit card company, or a debt collector who has bought any of her debts (for cents on the dollar), works out that there’s a chance she may have money left after she pays out her secured mortgage, they’ll carve her up.

Your aunt is facing two battles that you can help her with, but I can’t fight for her:

First, you can help her get some independent financial advice.

Encourage her to sit down with a community-based financial counsellor (call 1800 007 007). They’ll help her weigh up her options (either a debt agreement or bankruptcy). They can also investigate the inappropriate lending she’s received. No one should have a $211,000 credit card debt. There are responsible lending laws in place to stop people getting themselves into this mess.

The second, and most important, thing you can do is get her some psychological support.

You’re right to be worried about the state of her mental health. The debts she’s racked up is a symptom of what’s going on in her head. Something is seriously wrong and she needs professional help. Money comes, money goes, but this really is life and death stuff.

Scott