How To’s

This page has some great tips to help you get out of debt and stay out of debt.

  1. First, take control. WHY because creditors will try and force you into paying more than you can realistically afford or you may be forced into bankruptcy.
  2. Make sure your income is banked into another bank that you do not have any lending or mortgage with. WHY. If you fall behind in repayments the bank will take money from your other accounts.
  3. First, create a cash networth position as at the end of the month so you know how much you owe each creditor. Set up a template if you can. (I will put these on the website soon). One you learn what you actually owe, do the same for the previous 2 months. WHY so you can see a pattern of whether your debt is increasing or not.
  4. Next create  your own monthly budget and list every expense and work out the monthly amounts based over the whole year. Fix every expense that you can. WHY because you can use that fixed budget to make arrangments with creditors to pay off debt. Also make sure its a break even budget meaning all income is allocated. A breakeven budget shows creditors that you have skill with money.
  5. Never use templates from banks, debt collectors or the IRD. WHY you’ll learn the skill of managing your money properly if you create the templates yourself.
  6. Now study your financial position. Will your income cover first your basic living expenses and home mortgage, next a reasonable quality of life, next savings etc, lastly creditor repayments. WHY. Based on my own experience there is absolutely no incentive to better your financial position when you are living on the “bones of your arse” with debt collectors chasing you at the same time.
  7. If you can afford creditor repayments without the quality of your life being destroyed, make the repayments as per your fixed budget. Make sure the repayments will mean that each creditor’s balance owed is being reduced each month. WHY because the purpose is to eventually become debt free and move towards a positive networth.
  8. What if repayments are going to be less than the creditors minimum amount. This is where you need to contact your creditor in the first instance and show them in writing what your financial position is. WHY so you can negotiate a settlement if it is within your budget or make a mutually agreeable repayment plan.
  9. If you haven’t already go and get any signed contact you have with the creditor and actually read it.
  10. Next, the creditor will try and get to commit to a repayment plan over the phone. Or they may outsource the debt to a debt collector. Don’t ever agree to any arrangment or confirm or deny anthing over the phone with a creditor or debt collector. WHY It will be used against you later.
  11. Deal directly with the original creditor. Make sure you and they are complying with any recovery action clauses in the contract. If your debt goes to a collector substantial fees will be added on, even if they have no right in law to do so.WHY because they know you probably won’t be aware of your legal rights and will use your lack of knowledge to get you to pay. Side note – debt being moved to a debt collector does not mean you don’t have to pay it. But there are some tricky legal issues around using third party collection agents. It pays to know your stuff.
  12. If at this point you don’t have a copy of a signed contract with the original creditor, write and ask them for a copy.
  13. Play chess and focus on one move at a time. Use that same strategy when you are negotiating with creditors and turn off your cell phone. WHY because creditors and debt collectors will use your emotions against you to get you to part with your money. You will find yourself acting against your better judgement. They will lie, falsify documentation and threaten further increases and threaten court action to get you to pay them. You need to stay calm and stay in control.
  14. Make sure every creditor and collector communication is noted by you, get names, contact debtails and record all phone conversations. Make sure you let the other party know first that you are recording a phone call.
  15. Find out your legal rights. WHY because once you become indebted, the game changes dramatically. It becomes about obtaining your agreement to continue your indebtedness if the creditor is a bank or a credit card company or other money lender. Your lack of legal knowledge with regards to debt and repayments will be used against you. Its important to know also that the purpose of a debt collection agency even with their first contact to you, is to bring parties together to create a legally binding contract with either themselves or on behalf of the orginal creditor. This is also the function of the disputes tribunal.
  16. When the time comes to make payments to the creditor make sure its on your terms as per your budget. Make sure if you don’t have a written contract in place you get one. Get legal advise. Our country does have a free legal advice service so use it.
  17. More coming soon……