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When you can’t pay your debts: Bankruptcy and other options

The no-asset procedure

What is the no-asset procedure?

Insolvency Act 2006, ss 377, Part 5, subpart 4

The no-asset procedure is an alternative to bankruptcy. The procedure gives you protection from creditors that is similar to bankruptcy. When you enter a no-asset procedure, most of your debts are cleared. The people or organisations you owe money to (“creditors”) don’t get paid anything.

However, a no-asset procedure is a one-off opportunity. You cannot use it more than once and your debts must be less than $50,000. It usually lasts 12 months instead of the normal three year period for bankruptcy.

Who can apply for the no-asset procedure?

Insolvency Act 2006, s 363

You can apply to enter a no-asset procedure if you:

  • have no property you can sell to make money (“no realisable assets”) – this is everything you own except a motor vehicle up to a value of $6,500, tools for work, and essential personal and household effects
  • have never been through the no-asset procedure
  • have never been bankrupt
  • have debts of between $1,000 and $50,000 (not counting your student loan, maintenance owing under the Family Proceedings Act and child support owing under the Child Support Act)
  • cannot repay any of your debts
  • any of your creditors would not receive much more if you were made bankrupt instead.

You cannot apply if:

  • you have hidden assets with the intention of defrauding creditors (it is important you are honest about everything you own)
  • you incurred a debt (i.e., owed people money) knowing that you won’t be able to pay
  • a person or organisation you own money to (a creditor) objects
  • a creditor has begun the process to put you into bankruptcy, and it is likely that it will be better for the creditor that you are made bankrupt instead (see: “How does a person become bankrupt”).

How do I apply for the no-asset procedure?

Insolvency Act 2006, s 362

You can apply for the no-asset procedure by filing an application and a statement of affairs with the Official Assignee. This can be done on the New Zealand Insolvency and Trustee website, by clicking on “No Asset Procedures” and “How to Apply”.

What are the advantages of the no-asset procedure?

Insolvency Act 2006, ss 369, 377

Most of your unsecured debts are wiped. Unlike bankruptcy, this does not include a student loan.

The procedure usually lasts for a period of 12 months. By comparison, bankruptcy usually lasts for three years.

What are the disadvantages of the no-asset procedure?

Insolvency Act 2006, ss 366–371

You still have to pay certain debts – court fines, child support, maintenance orders, student loans and debts with secured creditors.

You cannot get credit, borrow money or enter into a hire purchase agreement more than $1,000 without first informing the credit provider that the debtor is subject to the no-asset procedure. Between applying and becoming subject to the no-asset procedure, the limit is $100.

Your name will be published in their local newspaper and the New Zealand Gazette and is also recorded on a public register on the Insolvency and Trustee Service website.

Next Section | Debt repayment orders

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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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