When you can’t pay your debts: Bankruptcy and other options
Debt repayment orders
What is a debt repayment order?
Insolvency Act 2006, ss 340, 345, 346, 349, Part 5, subpart 3
A debt repayment order sets up a repayment plan with people or organisations you owe money.
After applying for a debt repayment order, a supervisor (see: “Who is the supervisor” below) and the Official Assignee (see: “Who is the Official Assignee?”) will work with you, and the people and organisations you owe money (“creditors”) to arrange the details and your payments. The supervisor notifies all your known creditors about the debt repayment order.
A Debt Repayment Order gives you extra time to pay back some or all of your debt – usually 3 years, though it can be more or less. This allows you to pay back the money you owe (either in full, or to the extent that the court considers practicable) in regular instalments over a period of up to three years (or five years in special circumstances) without the threat of further legal action or further penalties or interest being added to the debt. If you have income or assets, a debt repayment order may be an alternative to bankruptcy.
The Official Assignee can also make orders:
- about your future earnings or income
- about the disposal of goods that you own
- giving the supervisor the power to
- direct your employer to pay part or all of your earnings to them
- supervise the payment of your reasonable living expenses of you and your household.
Who can apply for a debt repayment order?
You can apply for a debt repayment order yourself, or a creditor with your agreement, can apply to the Official Assignee for a debt repayment order, setting out the details of the proposed payment plan. You can apply on the New Zealand Insolvency and Trustee Service website.
When can a debt repayment order be made?
The Official Assignee can make a debt repayment order if satisfied that:
- your total unsecured debts are not more than $50,000 (not counting your student loan, court fines or any child support or maintenance payments), and
- you can’t repay those debts immediately.
Who is the supervisor?
Insolvency Act 2006, ss 345, 346
The supervisor must be a suitable and willing person (you can see a list of approved supervisors on the New Zealand Insolvency and Trustee Service website). They’ll supervise your compliance with the debt repayment order.
What happens if you fail to make the agreed payments?
The supervisor must notify the Official Assignee if you fail to make a payment. Failing to make a payment may mean that the debt repayment order is ended and creditors can start, or restart, legal action to recover the money you owe them. This includes applying to make you bankrupt.
What are the advantages of a debt repayment order?
There is no minimum amount of money you need to owe in order for a debt repayment order to be made.
A debt repayment order helps you to manage the payment of your debts.
A debt repayment order is not advertised in newspapers or the New Zealand Gazette (although it is recorded on a public register on the Insolvency and Trustee Service website for the duration of the order, and the supervisor must send notice to known creditors).
What are the disadvantages of a debt repayment order?
Insolvency Act 2006, ss 354, 360
Certain debts cannot be part of a debt repayment order, meaning you will still need to pay them as normal. This includes court fines, child support, maintenance orders and student loans.
While the debt repayment order is in force and before all your creditors have been paid, you cannot get credit, borrow money or enter into a hire purchase agreement for more than $1,000 without first informing the credit provider that you are subject to a debt repayment order.
