Ki­wisaver raid law planned

South Waikato News - - Gardening Money - ROB STOCK

Let­ting cred­i­tors raid Ki­wisaver ac­counts threat­ens to end one of the more gen­tle­manly prac­tices in bank­ing.

When some­one fails on their mort­gage pay­ments, their home can be sold.

It’s an aw­ful ex­pe­ri­ence for any hu­man to go through.

Pos­si­bly only the death of a loved one, or deal­ing with Earth­quake Com­mis­sion and in­sur­ers af­ter an earth­quake, is more trau­matic.

Gen­er­ally when some­one loses their home in a mort­gagee sale, they have poured ev­ery cent they can into try­ing to save it. There’s noth­ing left to take.

The bank is realistic. It writes off any money left ow­ing, and lets peo­ple leave with their dig­nity and their fur­ni­ture.

In these cir­cum­stances, the bank rarely both­ers to bank­rupt peo­ple. But that could change. Gov­ern­ment has a plan to al­low the Of­fi­cial As­signee (the gov­ern­ment agency that han­dles bank­rupt­cies) to take money out of peo­ple’s Ki­wisaver ac­counts if they are bankrupted.

If the law passes, banks will use it.

For­mer home­own­ers will find the sale of their home is just the main course. Bank­ruptcy will be for dessert, fol­lowed by the ‘‘cheese and bis­cuits’’ of see­ing their Ki­wisaver drained.

Even if bank­ruptcy doesn’t hap­pen, the threat of it will mean peo­ple will will­ingly agree to the next best thing- a Sum­mary In­stal­ment Order.

You can think of this as a form of bank­ruptcy lite but with less stigma. Ki­wisaver will still get drained.

The Gov­ern­ment’s logic is un­de­ni­able. If you bor­row money, you should pay it back. There’s no spe­cial rea­son why money you’ve put in a Ki­wisaver ac­count should be ex­cluded.

And yet, my heart aches at the thought.

Debt trau­mas will be that lit­tle bit worse. There will be no such thing as un­se­cured debt. Ev­ery­thing will be ul­ti­mately ‘‘se­cured’’ against Ki­wisaver.

Re­mem­ber, some peo­ple fail on their home loans be­cause they have re­ally bad luck.

We’ve con­structed a fairly mer­ci­less so­ci­ety with un­sta­ble work and huge mort­gages. There’s more scope for re­ally bad luck than there used to be.

Bankers have been big win­ners from Gov­ern­ment pol­icy which has con­trib­uted to the huge run-up in our col­lec­tive mort­gage debt ($220 bil­lion and count­ing). This law wouldn’t upset them ei­ther.

For or­di­nary peo­ple, it would make tak­ing on debt even more serious than it is now. should be bought out of sav­ings. If you can’t save for them, do with­out.

When you have debt, you should be work­ing hard to kill it as fast as pos­si­ble, and make sure you have ad­e­quate in­surance.

When you are in debt, you have given other peo­ple power over you and your loved ones.

If this law passes, you’ll be giv­ing them power over your Ki­wisaver ac­count too.

PHOTO: MILLA74/123RF

The planned law would give banks the ham­mer to crack open the Ki­wisaver ac­counts of debtors.

Newspapers in English

Newspapers from New Zealand

© PressReader. All rights reserved.