Word of Advice

9 February 2009

Difficulty with debts

You bought a few things on credit when you thought you would have plenty of money to pay it off. But now money is tight and you need more cash for the basics.

If your financial situation has changed and you are finding it difficult to keep up with debt repayments contact the lender as soon as possible. You can ask the lender about options that could make life easier.

Ask to reduce payments

You can ask the lender if you can pay less each payment. If you pay less on your debts each week you will have more money available in your budget. However, it will take longer to pay off the debt and you with end up paying more in total. You and the lender have to agree on any changes in writing.

Apply for hardship conditions

You can ask the lender to change the terms of the contract if you can show that you have experienced unexpected hardship. Hardship could be from an illness or injury, losing your job, or ending a relationship. You can apply to delay payments or to reduce the amount you pay each week, or a combination of these options.

When you apply, you need to be up-to-date with your payments and within your credit limit.

If the lender refuses to vary the contract, you can apply to the Disputes Tribunal, or for larger amounts, the District Court, for an order to vary the contract.

Take the goods back

If you have bought items on credit (or used something valuable as security) you can ask the lender to take the goods back. This is called ‘voluntary repossession’. If they agree to take the goods, they will sell the goods to pay for your debt. The lender can charge you for the costs related to selling the goods, and if the sale of the goods doesn’t pay all of the debt you will still have to pay the extra amount. The lender can’t charge you repossession costs unless you asked them to pick up the goods.

Refinance your current debts

Refinancing puts your debts into one payment. Make sure that you refinance at a lower interest rate than you’re currently paying. Check how much the set-up fee is, and if there are any penalties for cancelling your current credit contracts. Work out how much you will pay in total because the new loan may provide for lower repayments but over much longer time periods.

Other options

If you still have debts that you can’t pay, you could make a budget to help control your spending, or sell some of your things for cash. You could apply for a summary instalment order from the Insolvency and Trustee Service for a structured way of paying back part, or all, of your debts.

For more information on these options, call 0508 BUDGETLINE (283 438) to find your nearest service or to speak directly to a budget adviser. Or visit the New Zealand Federation of Family Budgeting Services website .

For more information about your consumer rights, visit our website or your local Citizen’s Advice Bureau.