Trapped by debt: ‘Life was literally being in a panic room. There’s no way out’

The worst time for worrying about money for Wellington solo mum Mel Siaosi​ were the hours of darkness, when she was alone in bed with her mind racing.

“I would go to bed, and my mind was wide awake, stressing out over the fact of not having the money that we needed. I’d be up for hours, and it wouldn’t be until 3 to 4am in the morning that I finally start to fall asleep,” she says.

Exhaustion and panic were Siaosi’s constant companions in the early weeks of 2020, the result of just over $40,000 of debt she had incurred, some of it to fulfil family obligations as the eldest child in a Samoan family.

It’s all behind her now, after she approached the Christians Against Poverty (CAP) charity, which helped her take steps to get herself debt free.

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Siaosoi’s ordeal when struggling to make ends meet is validated by a growing body of academic research shedding light on the effects of financial distress and scarcity on people’s brains, and their ability to help themselves.

Some studies indicate people have a limited reserve of mental resources to deploy for decision-making.

When they are depleted on grinding short-term money worries, such as scraping together the money to pay for the next day’s dinner, or negotiating over a late payment with the power company, little is left over to chart a course to financial stability.

“Being stressed out every day over financial stuff doesn’t give you time or space to think about further than next week,” Siaosi says.

“Life was literally being in a panic room. There’s no way out. You don’t know how you got there, but you’re in there. There’s just no light to it, so you’re trapped in every way,” she says.

“Your decision-making changes from wiser to survival mode. That’s where I was,” she says.

“All of that stops you from living, like literally living,” she says.

There’s a proven link between financial hardship and mental health.

Health insurer Southern Cross says on its webstite: “Wealth and mental health are very definitely connected; financial difficulties cause stress, made worse by our inability to enjoy what we might consider life’s essentials, which can lead to mental health problems; and mental health problems may make it harder for us to earn, or manage our money and spending.”

Siaosi, 33, is no longer indebted. She’s sleeping again. She’s happy, working part-time as a kindy teacher, and she’s planning for the future, about to complete the final year of a degree as an early childhood teacher.

It’s a far cry from the early weeks of 2020 as the Covid pandemic was making the leap to New Zealand.

“I was pretty much at my last straw. Everything was piling up,” she said.

“I was numb to the world,” she says.

By chance, someone mentioned CAP to her, and she put aside her pride, and called it.

CAP took control of her finances, creating a budget for her which included a reasonable amount for groceries. It set her up with a payment plan for her debts, beginning negotiations with her creditors.

Overnight she went from having $50 a week to spend on food to $150, she says.

She says she can’t imagine how she would manage today on $50 a week for food for herself and her son Ilaisa, now six years old.

In the last year alone, food prices have risen by 11.3%.

“Meat is so expensive now. Meat would be half your $50, and then you’d have to go and find veges, which the prices are so high.”

“We bought eggs yesterday for $10,” she says.

Lockdown in 2020 came as a blessing, keeping her at home with Ilaisa, cutting her costs. CAP organised food parcels.

“For a good year, I didn’t spend much money because we were getting support from people we didn’t even know. People were dropping off things, and I didn’t even know where it was coming from,” she says.

But her debts were so large, CAP recommended she go through the No Asset Procedure (NAP), which is a kind of bankruptcy-lite procedure, introduced in government in 2007.

NAPs were designed to give people with no assets to speak of, a way of getting out of exploitative debt without having to go through the gruelling process of bankruptcy.

High employment, and arguably a lack of knowledge about them, has resulted in very few NAP’s happening.

In December, there were just 39, compared to 52 last year, 66 the year before that, and 93 the previous year.

Last year just 520 NAPs were granted, compared to 1483 in 2018.

The judicious use of the NAP is something Christine Liggins from the Debtfix charity supports, but she warns that it leaves a black mark on a person’s credit record for five years, and it can only be used once in a person’s life.

“We do some NAPs, but only when there’s nothing else,” Liggins says.

Siaosi had never heard of a NAP.

“If I hadn’t had CAP to educate me on these things, I wouldn’t have known anything about it,” she says.

Seven months after Sioasi first spoke with CAP, she was debt-free.

While Siaosi was raised in New Zealand, her parents were born in Samoa. She feels she missed out on a money education at home.

“That’s what happens when you migrate over from an island where money was not important to another island where money gets you the things you need and want,” she says.

A large portion of the debts she incurred were for others. As the eldest child “you are looked at as the right hand of your parents,” she says.

“When you have that responsibility, you will do everything you can to make sure everyone is financially stable, and gets the help they need, especially when it comes to funerals and weddings, and things like that.”

Knowing what she knows now, she urges people in financial distress to seek help, and tells anyone who will listen about CAP.

“I’m not the same person I was two years’ ago,” she says.

“You start to re-find your happiness as you start to release layers of yourself, of the debt you have. I’m at my full 100%. I am happy. I look at life from a different point of view, where everything is possible, as long as I’m smart about it, and strive for it,” she says.

Sam Garaway, CAP chief executive, says the charity sees a lot of “bad” debt which has a destructive effect on people’s life.

“Before coming to CAP, our clients are often living with poverty and hardship and operating in survival mode, focussing on meeting immediate urgent needs,” he says.

They are often in despair, and mental distress.

“Before calling Christians Against Poverty, two in three clients skipped meals, often regularly, seven in ten stayed away from friends, family and community because of debt, and three in four experienced mental health issues such as anxiety and depression,” he says.