plonkee money an english-er's thoughts on personal finance

May 28, 2008

getting out of debt Amy’s way

Filed under: credit and debt — Tags: , , — plonkee @ 12:00 pm

You never know when you’re going to have an interesting conversation.

Last weekend I was staying with some friends by the seaside, and whilst we were out I ended up chatting to one of the group, Amy, about my house – which I bought last year. She stated that she was rubbish with money, to the extent that a few years ago, she’d been made bankrupt.

The details of the story are that she ran up £25k of credit card debt in her very early twenties, whilst earning a salary of something like £15k. After talking to a friend who’d been through bankruptcy she decided it was the best option for her, went to court and was made bankrupt. She was put on a payment plan of £100 per month for three years – this was the spare money that she had after basic expenses and could afford to repay to her creditors.

I admired her frankness, although I was then stuck with what to say. I told the truth, which is that I think there is nothing wrong with being made bankrupt – for businesses it’s a cost of providing credit which they should be allowing for. She said that although she’s now eligible for credit she no longer takes it up, and whilst she’s still perpetually skint (not a well-paid job, living in an expensive area), she’s debt-free.

I don’t know whether I conveyed my admiration well enough. I made (for me) the mistake of saying “it’s ok if you don’t do it every year”. I know that she’s right. Bankruptcy isn’t for everyone, but for some people it’s the best way to relieve their debts. It would have been for her as she couldn’t have even payed the interest on £25k, and she had little immediate prospect of a better paid job. Once bankruptcy has been discharged, you can carry on your successful life, hopefully a little wiser for the experience.

If I knew someone in real life who was facing massive debt I’d probably try to put them in touch with her. There’s nothing like hearing personal experience to try to reassure them that there is life after crippling debt, and that bankruptcy isn’t an insurmountable obstacle in the quest for a happy, fulfilled, and eventually rich life.

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