Personal finance: Why creditors supporting debtors key in debt crisis

The debtors road to recovery and financial freedom is a two-way street that must be fully supported by any creditor, more specifically banks and financial institutions.

Without the creditors full support, the debtor’s hands is literally bound with no hope of recovery.

Why do some creditors tend to make life more difficult for debtors facing a debt-crisis after they are approached?

Firstly it takes a huge amount of courage for any debtor in a dire situation to reach out to their creditors because of the degree of fear and the stigma attached to this negative adverse situation. It is really pointless to be unco-operative when a creditor is obviously in a position of strength with the ability to support a debtor who approaches them.

Yet I find some creditors use this opportunity to enforce more power, to squeeze the life-blood out of debtors who are completely wiped out with limited ability to repay their debt.

They have made the effort to compile a budgetary schedule which they present for restructure or consolidation restructure over a longer tenure, at a realistic fixed rate of interest reflecting the estimated monthly payment to consider. At that point there is so much demand for downpayments, or defaults to be cleared first with the knowledge that the debtor is incapable of meeting these requests.

However, then the next step is informing the debtor of immediate legal action to be taken,  where in some cases in spite of the debtor making an effort to borrow money from family or friends to meet that requested payment partially.

In other cases the payment request is met by the debtor but then the creditor never proceeds to secure approval for the restructure or consolidation, until the next month’s dues are called for and sometimes demanded, with no recourse for the debtor, also no support.

My point is that meeting a partial payment must hold some form of credibility and commitment in most instances, so why continue the legal action process instead of trying to help the debtor?

I really do understand the financial institution policies as an ex-senior banker, but then I also question the factors pertaining to empathy, consideration, support and the willingness to help the debtor because as experienced bankers it takes a few seconds to evaluate a debtors personality, intentions and level of sincerity.

Yes there are debtor chancers around who do not have good intentions, but most of them come in good faith, because anyone is susceptible to making bad decisions at some stage of their lives.

Then there is the issue of the creditor never assuming that they could face the same problem one day because nobody is immune to facing a debt-crisis.

Anyone could come to work one fine day and be informed they are redundant and then they face the issue of their own credit liabilities but they never assume it could happen to them, much like we all assume it can never happen to us, yet it can and it does.

The response would probably be the financial institution is not a charity and sure, I get that however if a debtor’s liabilities are restructured and/or consolidated it means nobody loses, the creditor is repaid their investment and the debtor returns the good faith.
 
Then why is it so difficult to fully co-operate with debtors in the most civil manner? Part of our job as employees in the world I know today, is to reach out and help people transform their lives because no battles were ever won fighting fire with fire.

I found some creditors continue to delve on the history of the debt-crisis outcome, i.e.
a.     How did the debtor spend the money?
b.     How come they have zero to show for it?
c.     Why have they spent it on travels, entertainment, unecessary expenditure they could not afford?

And many more questions.

The point is it is history, period and we don’t progress going backwards because the damage is done and nothing that is questioned or said will change the debtors situation.

We have all made mistakes and bad decisions at some stage of our lives, where some of us keep it under wraps so nobody knows. Hence we never know when a creditor is facing the same problem on a personal level because nobody likes to talk about their debt situation, especially when they are on the positive side of the fence.

Therefore my plea to creditors today is:

a.     When a debtor facing a dire debt-crisis reaches out for help, then try to do your best to help them because you have no idea of the degree of strength it takes to approach you.
b.     If you were only kind and considerate to one debtor per day, it means in a 5 day working week, you could change 20 lives.
c.     If there were 20 creditor representatives in the same department helping 1 person per day, then your organisation would be changing 400 lives per month and 4,800 lives per annum and if 30 such organisations applied this policy, 144,000 lives will be completely transformed.
d.     If 144,000 lives of debtors facing a debt-crisis is transformed where an estimation of say 3million of the population are facing this problem, then 5% of the population would be positively contributing to the countries GDP, not only by repaying their debt timely, but also repaying their debt completely, being more positive and enthusiastic to increase their productivity and performance levels in their jobs and businesses, fostering mammoth escalations all-round.

Hence, the cycle of good faith and positive impact has huge benefits to everyone, not just the debtor, however the latter party gets to rebuild their life and look forward to a brighter future.

Therefore the positive contribution from creditors holds many progressive keys in an economy and so one creditor can never assume that if they support a debtor that their contribution will not have a positive impact, because clearly it will.

Alternatively you can simply imagine if the projected figures above were negative how adverse the outcome would be for this complete cycle within an economy.

[Note 1:  Theda Muller is a UAE-based author of two books: Embrace Financial Freedom Volume One: 10 Proven Ways To Release Debt And Emotional Fears In Today’s Economy, and Volume Two: Releasing Fear And Bouncing Back From A Debt Crisis.]

Note 2: The views expressed are the author’s own and do not reflect in any way, the views of Emirates 24|7. Readers are advised to carry out their own due diligence before taking any decision.]

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