For almost 9 years now I have been assisting clients with copious credit cards, personal loans and a plethora of unsecured debt. What I do is only one option for people with ample debt and even this option has many catches leaving me with the opportunity to assist only a very small portion of our population struggling with this debt. It’s frustrating, tedious and extremely stressful but the results are often life changing for my clients. With this in mind, I thought I would share a particular story that is both typical but special too.
While on holiday with my family over the Christmas break, I received a phone call on my mobile from a number I’d not seen before. You can understand my hesitation in answering the call being that I’m about to take the kids down to the pool for another day of wonderful Queensland weather. But something told me to take the call, so I did.
There is a lovely gentleman on the other end introducing himself to me after being referred by one of the specialist lenders I work very closely with. He sounds defeated but hopeful and wants to share his story. I sit down, grab the back of the holiday itinerary, a pen and start listening and writing.
He and his wife have accumulated over $185,000 in unsecured debts made up of personal loans, credit cards and a few payday lenders. My head explodes. Wow, how do they cope? How do they manage these repayments? Even after 9 years, it never ceases to blow my mind. They have a family home and want to use the equity in the home to clear their debt and wipe themselves of this crippling situation. We run through the figures but my shoulders slump. Including their mortgage, this couple has WAY more debt than equity and the chance to refinance is just not possible.
What do I do? What do I say? How do I break it to him that I can’t help? How do I tell him that NOBODY can help? It’s just impossible for this client to consolidate and payout this debt and keep his home. It’s a very difficult message to deliver and 9 times out of 10, it’s ignored. “I’m not selling my family home! This is our one asset. It’s all we’ve got to show for after 20 years of work”. How do you tell someone that they don’t actually own that home? People just don’t want to hear it. I’ve discovered that many people don’t realise that just because credit card debt is ‘UNSECURED’ doesn’t mean the banks can’t attack your assets. They can force you to sell, they can bankrupt you, and they can garnish your wages. It’s unsecured, but not…
I take a deep breath and start my explanation. “Unfortunately Mr Smith, not only will I be unable to assist you but nobody will. You have a $500,000 mortgage, a vehicle loan of $32,000, family loans of $65,000 and $185,000 in various debt (totalling $782,000) and a house worth $685,000. Your loan to value ratio is 115%.” There is a long pause and a huge sigh. I can feel his heart breaking through the phone. I can feel his disappointment. I can feel his hope diminish…
“Mr Smith, there is one option I could offer you but it would mean a huge sacrifice from you and your wife. A very difficult decision for you both to make but if you can make it, I could potentially wipe out ALL of your debt and possibly even leave you with a small amount of money left over.”
“What? What is it?” he replies very quickly
“Sell your home”. Another long pause.
“Yes, I thought that might be the case” he says.
It’s not quite the answer I usually get. It sounds as though this is something he’s already considered. So I push for more information. He’s made the realisation that they have their back up against the wall. It’s just a matter of time before they lose control. It’s his wife that is very reluctant and I can understand why. Women are different creatures. Our house is our home. It’s our pride and joy. There is a very strong emotional connection to it and letting it go is a very difficult decision.
We chat a little more. I explain in more detail how this would work, the possible results, my background, his background, my business. We spend quite a bit of time on the phone and quickly develop a rapport. He wants to speak to his wife and discuss this and other options so we say goodbye and I truthfully don’t expect to hear back from him.
Over the next two days he calls me back a few times asking many very good questions and we discuss many possible scenarios. It seems as though this couple is seriously considering my option. I’m pleased that they’re being realistic and researching. At one point, the option to take out further credit is mentioned to which I lose all hope. I see so many potential clients take out more credit only to come back to me when they’ve increased their debt by a further 20% and have lost control. The banks are taking them to court and it’s often too late to get the results I could’ve achieved if they bit the bullet earlier.
Mr Smith calls me about 10 days after our initial conversation and delivers the news. “Gab, my wife and I have made the very difficult decision to sell the house and have the utmost faith in you and the results you could potentially achieve for us”. I’m both pleased and anxious at the same time. This is going to be a big challenge for me and Mr & Mrs Smith until they come out on the other side. But this is normal. I take a deep breath and remind myself, one step at a time; you’ve done it so many times before and you’ll do it again. With a great outcome … again.