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How debts are recovered through the courts

Disputes Tribunal Act 1988, ss 10, 37; District Court Act 2016, s 74

Legal action can be taken against you to recover a debt in:

  • the Disputes Tribunal, if the debt is $30,000 or less, but only if you dispute that you owe the debt. The Tribunal can’t be used as a means of recovering debts that aren’t disputed
  • the District Court, if the debt is not more than $350,000
  • the High Court, for a debt of any amount. However, because of the higher costs of going to the High Court, creditors would usually only bring a claim in this court if the debt was over $350,000.

Note: If a lender brings a claim in the District Court for a disputed debt that’s under $30,000, you can ask the court to transfer the case to the Disputes Tribunal. You can do this by filing a notice of application for the transfer at the District Court.

Debt recovery through the District Court

What will happen if a lender claims against me in the District Court?

District Court Rules 2014, Part 5

A lender can recover debts under $350,000 through the District Court by filing a statement of claim with the court. This gives details of the debt the lender says you owe, including the amount of the debt and how it came about. The lender also gives you, the debtor, a copy of the statement of claim (this is called “serving” it on you).

Along with their statement of claim, the lender must include a list of:

  • all the documents they’ve referred to in the statement of claim, and
  • any other documents they’ve used when preparing their statement of claim and that they intend to rely on at the court trial.

You can then ask the lender for copies of any of the documents in the list, and the lender has to give you them within five working days.

How do I dispute the lender’s claims?

District Court Rules 2014, rule 5.50, 8.4

If you want to dispute the lender’s claim, you have 25 working days to file a statement of defence, in response to the claim, and to serve a copy on the lender.

If you don’t file a statement of defence, the court might make an order that you owe the money (called a “default judgment”), and the lender can enforce the order against you (see: “How court judgments are enforced?” below).

Your statement of defence must either admit or deny the facts alleged by the lender in their statement of claim. To deny an allegation, you must answer the substance of the allegation and not be evasive about it. For example, if the lender claims you received an amount of money, you can’t simply deny receiving that particular amount – instead, you must deny receiving that amount or any part of it, or you must state how much you did receive. If the statement of claim sets out particular circumstances relevant to the allegation, it’s not enough for you to deny it as alleged with those particular circumstances. In all cases, you have to give a fair and substantial answer.

If you don’t deny a particular allegation in your statement of defence, you’re treated as having admitted it.

Your statement of defence must give sufficient details of times, places, amounts, names of people, legal documents and other facts to allow the court and the lender to know what your defence is.

You also have to provide the same information as the lender when you file your statement of defence. You must provide the lender with a list of relevant documents, and the lender can require you to provide copies of the documents within five working days.

What happens after the statements of claim and defence have been filed?

District Court Rules 2014, Parts 7, 10

If you intend to dispute the claim and have filed a statement of defence, the case will then go through the District Court’s case-management process. If you and the lender don’t settle the dispute during the case-management process, the case will go to a trial before a District Court judge.

Time limits for recovering debts through the courts

What is the time limit for recovering a debt?

Limitation Act 2010, ss 11–14, 47 Property Law Act 2007, s 9

Usually a lender has only six years to recover a debt. This time limit starts as soon as the debt is owed, unless you acknowledge the debt or pay part of it, in which case the time limit starts from the date you acknowledge the debt or the date of the last payment.

The exact rules about limitation periods are complicated, but in general:

  • If you last made a payment on or after 1 January 2011 (or if you weren’t required to make any payments until 2011), the lender generally has six years from when you stopped paying.
  • If you last made a payment before 2011, then the debt, if it comes from a simple contract, has to be recovered from you within six years. If it’s a debt acknowledged in a deed (for example, a hire-purchase contract might be in the form of a deed), the time limit is 12 years. (The requirements of a deed are set out in section 9 of the Property Law Act 2007). The time limits start from when the debt is owed, unless the debt is acknowledged or is paid in part, in which case the time limit starts from the date of acknowledgement or the date of the last part-payment.

This doesn’t always apply – for example, student loans. If you aren’t sure if your debt is outside of the relevant limitation period, come into a Community Law centre for advice.

How court judgments are enforced

Once a lender has obtained judgment from the court that you owe a debt, they can apply for an order to enforce the judgment. The different methods of enforcement are explained below.

Financial assessment hearing

District Court Act 2016, ss 145–153

A financial assessment hearing is often used as a first step to establish a debtor’s financial circumstances and whether they’re able to pay the debt. Here you’re ordered to come to court to be questioned about your finances by the court registrar.

The registrar can order you to pay off the debt by instalments or make another kind of enforcement order (listed below).

Attachment order

District Court Act 2016, ss 154–162

An attachment order requires your employer to take money directly from your salary or wages to pay the debt to the lender. These orders can also be made against your benefit or ACC payments. An attachment order can be made once a financial assessment hearing has been held and in certain other situations.

Warrant to seize property

District Court Act 2016, ss 167–170

The court can issue a warrant authorising a court bailiff to enter private premises like your home to take (“seize”) money or goods that belong to you. The goods can then be sold to pay off the debt. However, there are exceptions to what can be seized. The court can’t authorise seizure of the following:

  • necessary tools of trade up to $5,000
  • necessary household furniture and items, like clothing, up to $10,000
  • if you’re disabled (or if you’re the main caregiver of a person with disabilities) the court can’t authorise seizure of any items that you (or the person with disabilities) needs to be independent and participate in society. This would include things like mobility devices, medical equipment and specially adapted vehicles.

Charging order

District Court Act 2016, ss 184–189

A charging order stops you from selling the land or property that the order identifies until the lender has the opportunity to seize or sell the property (or until the debt is paid).

Garnishee order

District Court Act 2016, ss 180–183

If someone else owes you money (for example, your bank, if you have money in a bank account), the court can make a garnishee order requiring that third party to pay the money directly to the lender.

Community work

District Court Act 2016, s 163

If the court is satisfied that you can pay the debt but are simply refusing to do so, it can order you to do community work for up to 200 hours. This does not mean you don’t have to pay the debt, however. The court may also make orders (like the ones listed above) requiring you to pay the debt.

Next Section | Repossession

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Credit and debt

Where to go for more support

Legal information and support groups

Community Law

Your local Community Law Centre can provide you with free initial legal advice.

Find your local Community Law Centre online: www.communitylaw.org.nz/our-law-centres

Consumer Protection

The Consumer Protection website has useful information on a range of consumer topics. Consumer Protection is part of the Ministry of Business, Innovation, and Employment (MBIE).

Website: www.consumerprotection.govt.nz
Email: cpinfo@mbie.govt.nz
Phone: 0508 426 678 (0508 4 CONSUMER)

Consumer NZ

The Consumer NZ website provides a wide range of information on consumer issues and template letters you can use to write to traders to enforce your rights.

Website: www.consumer.org.nz
Email: info@consumer.org.nz
Phone: 0800 226 786 (0800 CONSUMER)

Commerce Commission

The Commerce Commission enforces the laws against misleading and deceptive conduct by traders (the Fair Trading Act) and the consumer credit legislation (the Credit Contracts and Consumer Finance Act). The Commission provides information on these areas on its website.

Website: www.comcom.govt.nz
Email: contact@comcom.govt.nz
Phone: 0800 943 600

To make a complaint online: comcom.govt.nz/make-a-complaint

To read consumer rights in different languages: comcom.govt.nz/consumers/read-about-your-consumer-rights-and-business-responsibilities-in-another-language

Citizens Advice Bureau (CAB)

CAB provides free, confidential and independent information and advice. See CAB’s website for valuable information on a range of topics.

Website: www.cab.org.nz
Phone: 0800 367 222
Facebook: www.facebook.com/citizensadvicenz

Find your local CAB office: www.cab.org.nz/find-a-cab

FinCap and Money Talks

FinCap is a non-government organisation providing free financial mentoring services.

Website: www.fincap.org.nz
Email: kiaora@fincap.org.nz
Phone: 04 471 1420

MoneyTalks is a financial capability helpline operated by FinCap. The Financial Mentors offer free, confidential advice by phone, text, email and live chat.

Email: help@moneytalks.co.nz
Phone: 0800 345 123
Text: 4029
Live chat: www.moneytalks.co.nz

Insolvency and Trustee Service (ITS)

The ITS deals with bankruptcies, no-asset procedures, summary instalment orders and some company liquidations. Information about those processes is available on its website. The ITS is part of the Ministry of Business, Innovation and Employment (MBIE).

Website: www.insolvency.govt.nz
Phone: 0508 INSOLVENCY (0508 467 658)

Dispute Resolution Schemes

There are four dispute resolution schemes for consumers dealing with lenders and other credit providers. Contact the scheme your service provider has registered with.

1. Financial Services Complaints

Website: fscl.org.nz
Phone: 0800 347 257

2. Insurance & Financial Services Ombudsman

Website: www.ifso.nz
Phone: 0800 888 202

3. Banking Ombudsman

Website: www.bankomb.org.nz
Phone: 0800 805 950

4. Financial Dispute Resolution Service

Website: www.fdrs.org.nz
Phone: 0508 337 337

Credit Reporting

Your credit record

There are three credit reporting companies that operate nationally in New Zealand. To check your record or correct any information, you’ll need to contact them all.

You’re entitled to a free copy of your credit record. You should make sure you choose the free option when you contact each company.

1. Centrix – www.centrix.co.nz – 0800 236 874
2. Illion – www.illion.co.nz – 0800 733 707
3. Equifax – www.equifax.co.nz – 0800 698 332

Personal Properties Securities Register (PPSR)

Search the PPSR register to see if there is any security interest registered against a vehicle. This can be done for a small fee by registering to check online.

Website: www.ppsr.companiesoffice.govt.nz

Privacy Commissioner

The Privacy Commissioner has information on your rights in relation to credit reporting and how to complain if you feel your rights have been breached.

Website: www.privacy.org.nz
Email: enquiries@privacy.org.nz
Phone: 0800 803 909

To make a complaint online: go to the website above and select “Your rights tab” then “Complaining to the Privacy Commissioner”

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