Tauranga woman warns of debt dangers after declaring insolvency

A Tauranga beneficiary who hit her $5000 credit card limit buying food, clothes, petrol and a coffee machine had to be declared insolvent after interest grew her debt to $8400.

Now she is warning others about the consequences of impulsive spending and not repaying debt.

Helen Bryan applied for insolvency in May 2022, wiping the credit card debt, and paid back other loans to become debt-free five months later.

Bryan had a Purple Visa Card with a limit of $5000 and an interest rate of 24.90 per cent.

“I was so stressed and anxious … I couldn’t afford to buy anything,” she said.

Her comments come after a recent Centrix report showed consumer arrears rose to a seven-year high in January, with 13.09 per cent of accounts behind on repayments.

It said 480,000 credit users nationwide were behind on payments. In the Bay of Plenty, 14.09 per cent of users were behind on payments, compared to 12.79 per cent a year ago.

In Rotorua, the number rose slightly to 15.84 per cent, compared to 15.54 per cent a year ago.

Helen Bryan had to declare insolvency. Photo / Alex Cairns

Bryan said she felt guilty for declaring insolvency and not paying off her debt.

She said it would have taken her seven and a half years to “get clear” of her debt, so she sought the help of Christians Against Poverty (Cap), which suggested “insolvency for me would probably be a good idea”.

Bryan called the financial advice organisation for help in December 2021 and was clear of her debt in May 2022.

She remains on the official national insolvency register.

“I had good credit before this, and I’ve had to accept that I’ve lost my credit.”

Bryan managed to repay other debts such as a phone loan and reimbursing a friend who lent her money to buy a car.

“I paid as many debts off as I could.

“I do feel bad [for] the credit card company. I’ve always paid my debt as best as I can … it just got over my head, and then everything went up.”

She said her rent, power, food and phone bills had increased at the time.

Helen Bryan had to declare insolvency. Photo / Alex Cairns

“I’m not poor, but I just got so behind with everything.”

She said she was “never, ever” going to apply for another credit card again because it was “too easy to stuff it up”.

“I like to be accountable for my behaviour. I know I did this to myself.”

Bryan said she worried about “other families struggling”.

She said she was “scared to answer the phone” in case it was the credit card company following up on her missed payments.

She said “shame” was “the biggest” emotion she felt during the process of declaring insolvency.

“I’m not taking anything on credit.

“I’m not buying something, and you have to pay later. I don’t want that anymore.”

She advised “impulsive” spenders not to get a credit card.

“If you have an issue with buying, you cannot get one.”

Tauranga C3 City Church centre manager and debt coach Errol Saul.

Tauranga C3 City Church centre manager and debt coach Errol Saul had supported Bryan through her debt struggles.

Saul said declaring insolvency meant the debt was “wiped clear” from her records with the credit card company.

Now she was debt-free, Saul said he was “absolutely proud of her”.

“From the first visit, once we got sat down and we explained the process... you could see the light coming back into her eyes.

“She was in quite a bad space.”

Purple Visa Card explains

A spokesperson at Finance Now, which owns Purple Visa Card, said: “Our approval process for a Purple Visa Card is based on a variety of factors, including regular income, credit history and an assessment of the applicant’s ability to make regular repayments.”

It said the company does not automatically exclude beneficiaries based on their status.

“Each application is assessed in the same way, and the same approval process applies, based on the same variety of factors, including regular income, credit history and an assessment of the applicant’s ability to make regular repayments.”

It said if a customer did not repay their debt, there would be a late payment fee, suspension or a cancellation of the card.

What is insolvency?

• Insolvency is when a person is unable to pay debt and the total debt outweighs any assets.
• Insolvency is not the same as formal insolvency, which requires an order from the official assignee or the court.
• The insolvent person’s name will appear on the public Insolvency and Trustee website for the duration of their insolvency and remain on the list for four years following discharge.
• Their credit rating will be affected and some banks may limit banking facilities.
• The person cannot be a director of a company.
• The person requires the official assignee’s consent to be self-employed or employed in a relative’s business.

Source: Ministry of Business, Innovation and Employment

Types of insolvency

There are three insolvency options managed by the Insolvency and Trustee Service. Each targets a different situation and comes with its own rules, expectations and restrictions.

• Unsecured debt of $50,000 or less: Debt Repayment Order if you are able to make some repayments.
• Total debt of $50,000 or less: No Asset Procedures if you have no extra money or assets to cover the debt.
• Unsecured debt over $50,000: Bankruptcy if there is no way you can pay back the people or organisations you owe money to.

Source: Consumer Protection.

Tips to manage debt:

• Shop around for the best deal on a credit card interest rate.
• Don’t use a credit card to buy something unless you are sure you will be able to pay it off within the interest-free period.
• Don’t ignore the debt, hoping it will go away.
• Try to pay more than the minimum amount (on store cards).
• Prioritise debt repayment.
• Look into interest-free loans that can be applied for to clear high-interest debt.

Sources: Sorted, Tauranga and Rotorua Budget Advisory Services.

Michaela Pointon is an NZME reporter based in the Bay of Plenty and was formerly a feature writer.