Author Topic: New and facing bankruptcy - AUS & NZ  (Read 11847 times)

Stash Potato

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New and facing bankruptcy - AUS & NZ
« on: March 18, 2015, 04:03:25 PM »
Hi I am new and facing bankruptcy.
My debt is at a ridiculous level and it does seem to be the best path but I am obviously not looking forward to it.
I am hoping that it won't affect me too badly as I don't live in the country I need to go bankrupt in.

While I am guessing I am not supposed to save while bankrupt I would like to start saving and investing in a mustachian way as soon as I am able to.
Has anyone else been in this situation?

Thanks
« Last Edit: March 21, 2015, 01:37:15 PM by swick »

swick

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Re: New and facing bankruptcy
« Reply #1 on: March 18, 2015, 04:06:51 PM »
Hi Stash Potato, welcome to the forums!

It sounds like your situation is rather unique (especially going bankrupt in another country) if you are looking for actual advice or suggestions as far as saving and investing, you would need to post some more details about your situation.

theonethatgotaway

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Re: New and facing bankruptcy
« Reply #2 on: March 18, 2015, 05:43:38 PM »
sorry to hear this. I have a friend that considered something along these lines (high debt in uk and now living in us) I'm not sure how this works out for tax purposes etc...

Would you mind posting more about the situation and which country you are in vs which country you are thinking of bankruptcy in?

Stash Potato

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Re: New and facing bankruptcy
« Reply #3 on: March 18, 2015, 10:33:39 PM »
Hi and thanks for your replies.
I need to go bankrupt in New Zealand while living in Australia.

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Re: New and facing bankruptcy
« Reply #4 on: March 19, 2015, 10:55:24 AM »
You might want to think of this as an opportunity: court-enforced mustachianism.  It'll suck, but you'll dig your way out of this hole, then you'll have lots of mustache muscles built up so you can start saving and investing in your future.

Tough times never last, tough people do.  Good luck.

Retired To Win

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Re: New and facing bankruptcy
« Reply #5 on: March 21, 2015, 07:16:25 AM »
Looong ago, and in a galaxy far far away, I went through a bankruptcy due to a business failure.  I found that the bankruptcy court appoints an officer to document and ferret out ALL your assets.  He came to my apartment.  He looked in the cupboards.  He asked to see my jewelry.  He asked me to show him my car and prove that it was indeed my car.

The point?

At least in the US, there is NO way I can see that anyone could "save while bankrupt."  Beyond the prescribed minimum assets you are allowed to keep, the Court will take EVERYTHING to satisfy your creditors.  And that is going to definitely include any savings or investment accounts (unless a 401k or IRA is protected under bankruptcy law).

So the smartest thing is to wait until the bankruptcy is discharged to start building a stash.

zurich78

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Re: New and facing bankruptcy
« Reply #6 on: March 21, 2015, 08:59:45 AM »
Hope you have some (or a lot) in your 401K accounts.  I believe those are untouchable even in a bankruptcy situation.

swick

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Re: New and facing bankruptcy - AUS & NZ
« Reply #7 on: March 21, 2015, 01:38:13 PM »
I edited your post title, hopefully it will attract some more responses from your part of the world.

kiwigirls

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Re: New and facing bankruptcy - AUS & NZ
« Reply #8 on: March 21, 2015, 02:32:30 PM »
Hi - do post some numbers so we can give you some more specific help.  Bankruptcy is a last step and it does have some long lasting consequences ie you will be obliged to disclose that bankruptcy for the next three years to employers and banks etc.  it will be publically listed & anyone in Australia can search that record & see that you are an undischarged bankrupt.  You will need to apply to have your Kiwisaver out to apply in reduction of your debts.  There is the  less drastic option - Summary Instalment Order which freezes all the debts & allows you time to pay them all off at no interest.  See the website www.insolvency.govt.nz.  Both options could have consequences for you future employment - especially if you work in customer service, handling money or any professional industry.  How much debt do you have?  It is all unsecured?  How much surplus do you have in your budget to save/put towards paying your debts?


deborah

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Re: New and facing bankruptcy - AUS & NZ
« Reply #9 on: March 21, 2015, 06:05:47 PM »
I am not an expert in this.However the following appears to be the case:

Because of the Australian Cross Border Insolvency Act, your NZ creditors can seek your Australian assets. A NZ agency can do this, or a separate Australian agency who is more familiar with Australian conditions can be appointed to do it (see http://www.corrs.com.au/publications/tgif/bankrupt-here-and-bankrupt-there-cross-border-insolvency/). When you are asked about whether you have been bankrupt in Australia, you are not asked which country, so you would need to identify your NZ bankruptcy. There are also Trans Tasman treaties which include exchange of information between Aus and NZ.

Are you sure you need to be bankrupt? I have a feeling that Australia makes it much more difficult for bankrupts than the US does.


Stash Potato

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Re: New and facing bankruptcy - AUS & NZ
« Reply #10 on: March 22, 2015, 12:39:49 AM »
Hi
Thanks for the replies.
The debt is a student loan so it has to be bankruptcy to get rid of it.
It's currently at around $80k.
I tend to work crappy low paying jobs (I didn't actually finish the degree I got the debt for).
It's all so depressing I just want it gone :(

Flyingkea

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Re: New and facing bankruptcy - AUS & NZ
« Reply #11 on: March 22, 2015, 05:22:25 AM »
Stash potato,
I too am a kiwi living in Australia, with an even higher student loan than yours ~100k.
I spent over a year living in NZ trying to earn a decent wage and pay it off. The result? I earned about 18k over about 18 monthss and paid back 1k.
I have been in Australia, earn a ok wage, and am about to pay off another 10k. That would bring my total repayments since moving to Aus at 24k.
Please don't declare bankruptancy, officials back home will point to you, and say "see? This is why graduates shouldn't go overseas, or why we should scrap the system," which makes it harder for everyone else.

Ok so you didn't get a degree, but remember the min wage in Aus is much higher than in New Zealand, and you're not stuck in low end jobs if you don't allow yourself to be. If you get desperate, go work in the mines as a cleaner! I have friends who did that, they kept almost everything they earned, which was decent money, and they didn't need to do it for long.

deborah

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Re: New and facing bankruptcy - AUS & NZ
« Reply #12 on: March 22, 2015, 05:52:08 AM »
Why should you be rid of your student loan without paying it off? Does this mean that when you buy a house, you will also not want to pay your mortgage off? Did you buy a car with a loan and not pay that off either?

If you pay it off, you have a proven record of paying off loans, so banks and other lenders will be more likely to let you have loans for things like houses, and a cheaper rates, so you can grow your stash more easily.

If you declare bankruptcy, it is terribly difficult to grow a stash at all.

How much do you need to pay each year, and how difficult is it? Maybe people here can help you with your budget, so you can pay it off.

Flyingkea

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Re: New and facing bankruptcy - AUS & NZ
« Reply #13 on: March 22, 2015, 06:28:51 AM »
Quote
How much do you need to pay each year, and how difficult is it? Maybe people here can help you with your budget, so you can pay it off.
In NZ it is interest free, but taken automatically out of your salary once you start earning over the threshold of ~$19k.

In Aus it earns interest of about 5.5% to 6.5% (sorry can't remember exact amount now) from the day you leave yhe country
For his balance he is required to pay 5k pa, in 2 repayment lots. So 2.5k every 6 months.

Btw 80k is high for an incomplete degree, what did you study?
« Last Edit: March 22, 2015, 08:56:38 AM by Flyingkea »

Stash Potato

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Re: New and facing bankruptcy - AUS & NZ
« Reply #14 on: March 22, 2015, 02:34:57 PM »
Hi
Thanks for the replies.
I won't go into what I studied but most of the $80k is interest.

So I did some calculations.
With a loan balance of $80k and an interest rate of 5.5% the interest per year is $4400.
With yearly repayments of $5k the student loan repayment calculator says it would take more than 20 years to pay it off.

If I found a minimum wage job (and yes I am thinking that if being bankrupt might prevent me from finding work then I shouldn't file for it until after I find a job). Then I guess I would make around $30k per year.
With badassity I guess I could save $10k per year. I read a journal where someone in Australia was struggling to live on $15k per year and that was with heavily subsidised rent so I don't think I could do much better than this.

So back to the calculator with an extra $5k per year and it will take 10 years 1 month.

With bankruptcy I wouldn't be able to save until it had been discharged which is after 3 years.
If I instead saved that $10k per year then after the same 10 years I would have $70k plus interest.

WESTOFTHEHUDSON

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Re: New and facing bankruptcy - AUS & NZ
« Reply #15 on: March 22, 2015, 02:44:49 PM »
Hi
Thanks for the replies.
The debt is a student loan so it has to be bankruptcy to get rid of it.
It's currently at around $80k.

Not sure about in Aus/Nz but in the Us, student loan debt is not dismissible under bankruptcy. I would be curious to know if It is where you are located.

kiwigirls

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Re: New and facing bankruptcy - AUS & NZ
« Reply #16 on: March 22, 2015, 02:46:59 PM »
IMO you should face up to the loan.  Yes its big and yes its going to take you 10 years to pay off based on 30k income but that is your worst case scenario.  Won't you get payrises? Won't you move up in your career or do you see yourself working minimum wage jobs  for 20 years whilst you build your stash?  Could you move to Perth and get a well paid job in the mining industry and attack that debt?  Could you get two jobs for a while - a day job & bar tend/stack supermarket shelves in the evenings.  If you decide that your hair is on fire & you want to do whatever you can to get your finances in order why not work 60 hours a week for a couple of years to get yourself back on track.  The added bonus is that you will have hardly any free time & won't be spending any money...Whilst bankruptcy sounds like an easy option it really isn't and can have far reaching consequences.  They will only let you keep basic household/personal items and a car less than 5k in value.  Everything else you will need to sell.

iamlindoro

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Re: New and facing bankruptcy - AUS & NZ
« Reply #17 on: March 22, 2015, 02:48:02 PM »
I don't think the question is why *mathematically* you should declare bankruptcy, it was why, in general, you think you should do so.  5-6% interest rates are not usurious at all, they're pretty dang reasonable.  Is there some reason you should not be responsible for having accrued this debt?  Is there some reason others should have to shoulder that burden instead, when you're capable of surviving and paying it off?

Flyingkea

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Re: New and facing bankruptcy - AUS & NZ
« Reply #18 on: March 22, 2015, 04:45:57 PM »
Hi
Thanks for the replies.
I won't go into what I studied but most of the $80k is interest.

So I did some calculations.
With a loan balance of $80k and an interest rate of 5.5% the interest per year is $4400.
With yearly repayments of $5k the student loan repayment calculator says it would take more than 20 years to pay it off.

If I found a minimum wage job (and yes I am thinking that if being bankrupt might prevent me from finding work then I shouldn't file for it until after I find a job). Then I guess I would make around $30k per year.
With badassity I guess I could save $10k per year. I read a journal where someone in Australia was struggling to live on $15k per year and that was with heavily subsidised rent so I don't think I could do much better than this.

So back to the calculator with an extra $5k per year and it will take 10 years 1 month.

With bankruptcy I wouldn't be able to save until it had been discharged which is after 3 years.
If I instead saved that $10k per year then after the same 10 years I would have $70k plus interest.

I'm just trying to understand, have you only just moved to Aus? As if you you just left NZ the interest would be written off. Or have you been overseas for a while and just not paid?
You're not going to be stuck in the same 30k a year job for the rest of your life, there are promotions, payraises, just don't let your lifestyle creep. Or could you even go back to NZ to finish your degree?

The New Zealand taxpayer paid for you to study, with the hope you would become a working taxpayer and would repay it eventually. You signed for that debt as we all did, I don't see why you should declare bankruptancy just so you can get out financially ahead.

deborah

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Re: New and facing bankruptcy - AUS & NZ
« Reply #19 on: March 22, 2015, 05:14:42 PM »
The MMM philosophy is one where you are self reliant, and it includes paying off your own debts yourself. He uses the phrase "hair on fire" for overwhelming debts. He advocates PAYING THEM OFF. I have NEVER seen him suggesting that someone goes bankrupt just to get rid of debt, so they can save faster!

KiwiMust

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Re: New and facing bankruptcy - AUS & NZ
« Reply #20 on: March 22, 2015, 05:19:27 PM »
I think you should contact the IRD, explain your circumstances and see if they can work out a payment plan for you; I am not sure what options they can offer, but I am sure they will be able to help in some way, at the end of the day they would rather get some of the money repaid than none of it.

CU Tiger

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Re: New and facing bankruptcy - AUS & NZ
« Reply #21 on: March 22, 2015, 09:03:43 PM »
Hi
Thanks for the replies.
The debt is a student loan so it has to be bankruptcy to get rid of it.
It's currently at around $80k.
I tend to work crappy low paying jobs (I didn't actually finish the degree I got the debt for).
It's all so depressing I just want it gone :(

I feel that if you read a lot of the MMM posts, you might be able to snap yourself out of your downer mindset. He talks a lot about living a full, meaningful life with an optimistic outlook.

Why are you settling for crappy, low paying jobs? Stop that!

Find a better job, or a second job. Live frugally. Pay off that debt like your hair was on fire - with focused intensity.

Annamal

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Re: New and facing bankruptcy - AUS & NZ
« Reply #22 on: March 22, 2015, 10:55:21 PM »
Have you thought of doing farm work in New Zealand for a little while?

It's hard and physical and does not pay so well but at least you wouldn't be paying interest and you can usually swing relatively affordable accommodation.


Stash Potato

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Re: New and facing bankruptcy - AUS & NZ
« Reply #23 on: March 23, 2015, 12:32:45 AM »
While I appreciate that people have posted that I will be able to increase my income I don't think that I should overestimate my abilities. After all that's what got me into this mess in the first place!

Also I guess I am a bad person because the idea of scrimping, saving and slaving for a decade just to get to zero and be able to say I did the right thing doesn't fill me with the joy that it apparently should.

Unfortunately from what I have read online the IRD is bound by government policy not to negotiate on student loan repayments. I would love to be able to pay only the amount I borrowed and not the $50k of interest. Alas the IRD has an all or nothing policy and would rather people go bankrupt and pay them nothing than take a partial payment for the debt.

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Re: New and facing bankruptcy - AUS & NZ
« Reply #24 on: March 23, 2015, 12:41:43 AM »
Also I guess I am a bad person because the idea of scrimping, saving and slaving for a decade just to get to zero and be able to say I did the right thing doesn't fill me with the joy that it apparently should.

You are being overly dramatic-- perhaps because on some level, you realize it's wrong to use bankruptcy as a tool to evade a debt you legitimately owe and can pay.

Also, how can 50K of an 80K current balance be accrued interest at 5.5%?  How long has this debt existed with no pay down?  If you only borrowed 30K and the balance is 80K, there is something seriously missing from this story, i.e., "I haven't paid a cent on it in 15 years" or something.

Flyingkea

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Re: New and facing bankruptcy - AUS & NZ
« Reply #25 on: March 23, 2015, 12:46:33 AM »
While I appreciate that people have posted that I will be able to increase my income I don't think that I should overestimate my abilities. After all that's what got me into this mess in the first place!

Also I guess I am a bad person because the idea of scrimping, saving and slaving for a decade just to get to zero and be able to say I did the right thing doesn't fill me with the joy that it apparently should.
It hurts. Believe me, I know it hurts. As I said, I owe IRD 100k, and if I only make min repayments my loan gets higher.
But your first sentence is self defeating. It's saying, I can't do it now, so I'll never do it. Are you able to return to NZ and get work there? That'd stop interest accumulation at the very least. Or find a job here in aus that has room for advancement?

deborah

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Re: New and facing bankruptcy - AUS & NZ
« Reply #26 on: March 23, 2015, 01:02:13 AM »
Bad - definitely not. As far as I know you have not yet engaged in any criminal activity, and thinking of defrauding the government is not yet criminal. People are trying to help you avoid the "bad" label.

However, it appears to me that although your debt might be as a result of your tertiary studies, you appear to have more than just student loan debt. Perhaps it is credit card debt associated with the years you were studying? Write a case study and get the people here to help you to work out how to get yourself out of the mess.

KiwiMust

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Re: New and facing bankruptcy - AUS & NZ
« Reply #27 on: March 23, 2015, 01:06:22 AM »
From the IRD website:

If you're significantly behind on your repayment obligation and you haven't talked to us recently about your loan repayments you may be stopped from leaving New Zealand next time you come home for a visit.

If you are uncertain, or concerned that this may apply to you, you should contact us as soon as possible. We can work with you to arrange a repayment plan that will suit your situation and get you back on track with your loan.

They sounds like they want to help to me, I certainly think it is a good first step instead of just assuming they won't help, at least this way you can say you have tried. Maybe the other sites you have been looking at can offer you better advice for getting out of paying back what you borrowed, I don't think this is the right forum for you to get the answer you're looking for.

nzmamma

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Re: New and facing bankruptcy - AUS & NZ
« Reply #28 on: March 23, 2015, 02:11:35 AM »
I get an overwhelmingly negative vibe from your comments  stache potato. There are some great people on this forums who want to help you. I think the debt is yours and you should pay it. And I reckon it's going to be real hard if you think it's going to be real hard...

louloulou

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Re: New and facing bankruptcy - AUS & NZ
« Reply #29 on: March 23, 2015, 03:42:56 AM »

Also, how can 50K of an 80K current balance be accrued interest at 5.5%?  How long has this debt existed with no pay down?  If you only borrowed 30K and the balance is 80K, there is something seriously missing from this story, i.e., "I haven't paid a cent on it in 15 years" or something.

iamlindoro, you can leave New Zealand without notifying the IRD and thus not pay anything off your student loan potentially for many years. 

StashPotato, if your earning so little in Australia, why don't you consider returning to NZ? Your student loan will cease earning interest upon your return and you will have a real chance of paying it back.

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Re: New and facing bankruptcy - AUS & NZ
« Reply #30 on: March 23, 2015, 07:00:03 AM »
Tell us a bit about yourself, we're all interested to hear more! You can read about us as most of us have a journal. I noticed you said "if I got a minimum wage job in Aus." What exciting adventures have you been having over here, since it sounds like they didn't involve working?

Stash Potato

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Re: New and facing bankruptcy - AUS & NZ
« Reply #31 on: March 24, 2015, 12:19:06 AM »
I guess I could consider writing a case study but I am not sure that I am comfortable sharing all my personal information.

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Re: New and facing bankruptcy - AUS & NZ
« Reply #32 on: April 04, 2015, 02:04:07 AM »
Are you able to return to NZ and get work there? That'd stop interest accumulation at the very least. Or find a job here in aus that has room for advancement?

+1!

I don't know your circumstance, but I think our 0% interest when in NZ is a pretty sweet deal. You basically don't need to worry about it all, aside from the minimal compulsory payments once you earn over 18k or so, and you're free to save via Kiwisaver and/or any other ways alongside paying it back. You essentially wouldn't need to think about the loan in your everyday life.

Strawberrykiwi75

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Re: New and facing bankruptcy - AUS & NZ
« Reply #33 on: April 04, 2015, 03:12:29 AM »
Don't go bankrupt! Talk to the IRD, you can definitely work out a payment plan- I know, my brother did. If you don't take responsibility for this debt, this will be a mark on your permanent history which you can't take back. I know technically it gets discharged after 7 years but you will still have to disclose it for the rest of your life and you will be discriminated against for it (when applying for jobs and/or credit).

I'm guessing that you've been outside of NZ for many years to accumulate all the interest- plus I'm guessing fines as well for it to get to this level? I think it's time for you to man up and take responsibility for your actions. Your replies to the thread are extremely defeatist and as a fellow Kiwi it pisses me off. You signed up for the debt, now pay it. Our taxes are not for you to waste

agent_clone

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Re: New and facing bankruptcy - AUS & NZ
« Reply #34 on: April 04, 2015, 03:49:08 AM »
Using a mortgage repayment calculator for $80k with 5.5% interest if you paid $200pw you could pay it off in 10 years. $113pw will pay it off in 25.

Mind you, I am also confused, you don't currently have a full time job (your posts seem to indicate this...)? i.e. what are you living off currently?  Like the other posters I am curious, why the desire to stay in Australia? I'm not sure about the bankruptcy proceedings in NZ, but I'm pretty sure that they have issues with you going overseas when bankrupt in Australia, they may have the equivalent for NZ (this may affect you if you go visit NZ).

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Re: New and facing bankruptcy - AUS & NZ
« Reply #35 on: April 04, 2015, 05:42:26 AM »

With a loan balance of $80k and an interest rate of 5.5% the interest per year is $4400.

I would love to be able to pay only the amount I borrowed and not the $50k of interest.

At 5.5% interest, and assuming no repayments ever, starting at 30k and compounding to 80k, the debt is 18 years old?!?

deborah

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Re: New and facing bankruptcy - AUS & NZ
« Reply #36 on: April 04, 2015, 06:13:22 AM »
Assuming he came over to Australia the minute he decided not to finish his studies.

Cathy

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Re: New and facing bankruptcy - AUS & NZ
« Reply #37 on: April 04, 2015, 12:18:23 PM »
Although the debt is likely old, it looks like it may not be as bad as 17-18 years. Assuming no payments were ever made, calculating the actual age of the loan looks like a pretty complicated problem to solve analytically, assuming the information on this webpage is accurate. There are two things making it complicated: (1) the interest rate is floating and was different in the past, and (2) there is a very high late payment penalty which is a function of the amount of the balance overdue. Thus, figuring the late payment penalty requires knowing when the loan originated, which is exactly what we are trying to find. :) In other words, this is a recursive problem.

Based on the webpage, it looks like the late payment penalty was 24% per year of the overdue balance before April 1, 2007, but it became significantly more generous after that.

It would really be a lot of work to even estimate the age of this loan (and it also depends on the original amortisation, since the overdue balance is a function of that), so I'm not going to bother.
« Last Edit: April 04, 2015, 12:24:46 PM by Cathy »

JLR

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Re: New and facing bankruptcy - AUS & NZ
« Reply #38 on: April 14, 2015, 07:15:57 AM »
I think we need more information about this. You don't have to provide all of your personal details, but I think it would help to explain how the debt got so high, what sort of work have you been doing, etc.

Stash Potato

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Re: New and facing bankruptcy - AUS & NZ
« Reply #39 on: August 09, 2015, 08:23:02 AM »
I had a thought.
Wouldn't be nice if I could have a deal with the IRD that they leave me alone and then I leave them everything in my will.
After all it seems that if I became mustachian then I would have a big stash that I would live off the interest on and leave the majority of when I died. I don't have any dependents.

Or what if you could buy a life insurance policy that paid out to them.
It would be less than the minimum payments they require and then they would get a nice lump sum.

Yeah I know they won't go for it but I wish they had better options for those with ludicrously large loans.

alsoknownasDean

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Re: New and facing bankruptcy - AUS & NZ
« Reply #40 on: August 09, 2015, 08:50:27 AM »
I had a thought.
Wouldn't be nice if I could have a deal with the IRD that they leave me alone and then I leave them everything in my will.
After all it seems that if I became mustachian then I would have a big stash that I would live off the interest on and leave the majority of when I died. I don't have any dependents.

Or what if you could buy a life insurance policy that paid out to them.
It would be less than the minimum payments they require and then they would get a nice lump sum.

Yeah I know they won't go for it but I wish they had better options for those with ludicrously large loans.

How's progress with working and paying them off?

Do you think you could get a job that pays higher than minimum wage (or work nights/weekends to get extra cash)?

Would you consider moving back to NZ to avoid paying interest on the loan?

Even MMM has said in a previous blog post that that amount of debt is hardly insurmountable, and that others have been able to repay even larger amounts.

You can do it, good luck!

deborah

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Re: New and facing bankruptcy - AUS & NZ
« Reply #41 on: August 09, 2015, 03:41:01 PM »
It appears to me that you are still not taking responsibility for this debt. You did the course(s).  You didn't pay anything back. You moved to Australia, rather than staying in New Zealand, which meant that the debt started to earn interest.

Start to pay it off before the trade treaties between Australia and New Zealand become even tighter, and you start getting it taken off your tax in Australia.