5 Debt Management Questions You’re Too Embarrassed to Ask
Picking up the phone to speak to someone about managing your debt is never easy; especially when you’ve got questions you may be too embarrassed to ask.
But as our own debt consultant Amanda Pfeifer knows, there’s no such thing as a dumb question. Amanda has been with us for more than three years and has done her fair share of debt counselling for many people, just like you, who are in debt and desperate to pay it off.
“Lots of people are embarrassed about their circumstances,” Amanda says.
“They’re embarrassed that they’ve gotten themselves into this predicament, or they’re embarrassed to ask for help because the situation has gotten out of control and they’ve had to make the phone call in the first place.”
Amanda talks to us about 5 of the debt management questions many people find difficult to ask.
1. Am I a terrible person/Do other people have this amount of debt?
“This is usually the first thing people want to know and is one of the most common things we get asked,” Amanda says.
“First of all, no, you are not a terrible person and yes, there are people who have the same amount of debt as you — some have even more.
“We try to make people feel as comfortable as we can. They’re worried about what we think of them but there’s not many people who don’t have debt these days. They’re embarrassed to tell you how much they owe; especially if they’ve overextended themselves. But most debt is due to unforeseen circumstances that no one can really predict — a change in circumstance where a person was earning good money and now they’re not.
“Of course there are other reasons too: alcohol, gambling, drug addiction. Debt is a sensitive subject and many people are embarrassed to tell us how it’s all come about but we are here to help and can provide real solutions.”
2. What is the difference between unsecured and secured debt?
“A lot of people don’t know the difference, but that’s why we’re here,” Amanda says.
“Unsecured debt is something like a personal loan or a credit card where they haven’t had to secure an item against it, like a car or a house.
“Secured debt is when the finance company secure the debt against a specific asset. In a car loan the debt is secured against the car so if the person doesn’t make repayments, the finance company can repossess the car and get their money back.”
3. What is the difference between a debt agreement and bankruptcy?
“They’re both acts of insolvency,” Amanda explains. “With a debt agreement you will pay back a portion of the debt with no interest and we can get a payment plan more in line with your circumstances.”
“Bankruptcy completely clears the debt but it comes with a lot more restrictions. Both a debt agreement and bankruptcy will go on the National Insolvency Index. But the debt agreement will only be held by the Government for five years on that index while a bankruptcy will remain permanently and will go on your credit file.
4. My partner and I have joint debt, how will that affect me?
“The affect of that is, generally with joint debt, it’s more beneficial that both look at doing the agreement,” Amanda advises. “If only one person is looking to do the debt agreement, what happens is, if one person (let’s call them Person B and the other, Person A) is not interested in doing the debt agreement, Person A will be chased for what Person B isn’t paying.
“Person A will be liable for it because it doesn’t matter who pays what, if someone is getting a reduced payment, the other person needs to make that up. Joint debt can be a bit difficult to look at if they’re both not willing to do the agreement.”
5. How bad would my debt have to be to declare bankruptcy?
“We’ll always go with a debt agreement over a bankruptcy if we can,” Amanda says. “But in some cases where they can’t even cover their living expenses, they certainly can’t cover their debt.
“If there’s not going to be a change in their circumstances financially or if they’re not employed and have taken on a significant amount of debt based on what they used to earn and a debt agreement won’t work for them, and they’re not in a position to pay the debt at all — this is the only time we’ll look at bankruptcy. Sometimes it’s at a point where, even with what we can do, they just can’t afford it.”