According to the IRD's own research: " There is a tipping point at which penalties and interest decrease compliance, at around $10,000 (total...debt, including core debt, penalties and interest) beyond which people feel that they will not be able to pay off the amount."

In other words, if the debt owed to the IRD is much more than $10,000, for a sole trader or small business, the debt may be too much to cope with. It is important to recognise the early warning signs of a tax debt becoming too much, as this means that there may be a larger number of resolution options available, compared to at a later stage. Please contact us if you would like to discuss your situation.

It seems that whichever government is elected to lead New Zealand at the 17 October election, the provisions for student loan borrowers will become less favourable. The ACT Party wants to abolish interest free loans for domestic students. Labour will not be proceeding with the rolling out of its fees free policy to the second year of tertiary study, and it has also abandoned its promised post graduate student allowance.

If you are thinking about studying, our advice is to investigate whether you have the option to study in another country (many don't charge fees or have a more generous scholarship tradition or aren't as harsh, as New Zealand, on student loan repayment policies). The impact of Covid would also need to be taken into account.

If you are interested in IT, there are many free, or low cost, options which can open the door to the same types of jobs as if you had spent thousands of dollars studying for a 3-4 year degree. In fact, Google has recently announced that it will treat people graduating from a short course the same as 4 year degree graduates. The course's cost is estimated to be around $300 and this could net you a job paying around $90,000 a year. There are choices available that could avoid a massive future debt.

It is reported that more than 5500 overseas-based student loan borrowers have returned to New Zealand since April 2020.

If you are one of these people, these points may be useful:

• You need to let the IRD know that you have returned. 
• Your obligatory payment obligations will change from a flat amount to an income based amount. Some returnees will now have no obligation to make payments (if their income is low and they have no arrears), and others will have to pay more.
• If you have overdue arrears you are now an easy "target" for the IRD to take action against, if you do not resolve them ASAP. The most common methods for dealing with overdue arrears are a hardship application, a payment arrangement, or lump sum payment offer. For some people, bankruptcy may be an option, but, in general, the implications are significantly harsher than if you were living outside New Zealand. If you do not deal with your arrears, the first step taken by the IRD may be to send a letter to your employer garnishing your pay. They have many other tools available. Delaying dealing with arrears is not an option if you are living in New Zealand.
• If you would like to discuss your situation or options, in confidence, please contact us.

The Levy Institute of Economics' research shows that full student debt cancellation would put billions of dollars back into the economy.

​Instead of paying back debts, bloated by interest and penalties, to the IRD, people could spend directly on goods and services, providing an immediate boost to businesses, and allowing the former student loan borrowers to plan for their future by saving for a home, baby, business or retirement. Other sectors of the economy have had billions of dollars poured in to keep them afloat. Helping those who are struggling, and providing a financial life raft, is the right thing to do. Student loan borrowers in other countries have been helped by their governments, why not New Zealand? 

Now is the time to make your voice heard to the politicians. If you are not happy with the student loan debt scheme, or its administration, ask for change now. There are 70,000 NZ student loan debtors living overseas. Together you can be a formidable force for change that brings about better win/win solutions for these debts. Use your voice! Use your vote!

There is growing negativity in New Zealand about helping New Zealanders who live overseas. This can be seen in the increasingly negative comments about Kiwis who are trying to return home, and whose path has been made more difficult by changing airline schedules and shut borders. There are reports of people, in quarantine in NZ, being abused by members of the public. We see a similar escalation in nastiness directed at overseas based student loan borrowers. We understand why you are in the position you are in, but there are many others who are abusive or who believe that Kiwis with student loan debt, who live overseas, are free loaders.

New Zealand has an election in two months' time and we expect to see a deterioration in the government's position towards overseas based borrowers after this. This may be because of the harsh effect of Covid on the New Zealand economy. If the National Party becomes the next government, they are on record as saying that the Labour government's approach is soft on student loan debtors at the expense of "hard working New Zealanders".

If you've had to deal with the IRD, Baycorp, or other IRD student loan debt collectors, in the last three years, I'm sure you won't feel that you have been dealt with softly. We know, from our dealings with so many of you that you want to do the right thing, but that the enormous interest and penalties often make it impossible. 

Our general suggestions: If you have a student loan debt, you should be doing everything possible to get rid of it ASAP, because things are likely to get worse. If you are in financial difficulties, and have little of value, NZ bankruptcy may suit your circumstances. We don't know if NZ bankruptcy will be removed as an option after the election so there may be little time to lose if this fits your circumstances.  If you are struggling but have some assets, an IRD hardship application may be an option. Or getting the debt paid off ASAP (there are options for dealing with this).

If you are based in New Zealand it is not safe to assume that interest free will always be the case.

We are here to help.

Fraudulent student loans can destroy lives. Fortunately, the IRD now has greater powers to deal with fraudulent student loans.

In situations where the IRD is satisfied that the person, who was allocated the loan debt, did not actually take it out, and the actual person cannot be identified, the IRD may be able to write off the loan. Generally speaking, the IRD will deal with such cases where the loan balance was transferred before 1 April 2000, and Study Link will usually deal with loans transferred after that date. 

The push for relief for student loan debtors is growing in many countries, including the US, but not in New Zealand. Many of our overseas based student loan debtors are under a burden so heavy that it impacts their mental health and quality of life.

With Covid, many borrowers have suffered a reduction in income, making it even more difficult to pay a debt that has grown out of control. A complete reworking of the scheme would be best in order to provide better resolution options, however, at the very least why aren't we granting an interest/repayment holiday while Covid is affecting so many of our borrowers? If we can do this for mortgages and all kinds of other debt, why are student loan debts (some of which are the size of mortgages) treated differently?

​As the Al Jazeera article notes, governments should be investing in people, including those who have student loan debt: "Everyone deserves to live a life of dignity and the opportunity to reach their full potential."

We were delighted to receive this lovely email from a recent client:

​If you need help, please drop us an email.

Thousands of student loan debtors have lost their jobs, or a large part of their income, or had their health affected, because of Covid-19. Our thoughts are with you at this time.

In terms of your overdue student loan debt, if you don't want to go bankrupt in NZ, and you have suffered because of Covid-19, now could be a really good time to apply for hardship.

Hardship is principally assessed on your current financial situation, and if you are one of the millions for whom this is bad, then your chances of success have increased. It may be difficult to deal with the student loan debt when so many other urgent matters need to be dealt with, but right now may be the best chance you have had for a long time, and dealing with it will take some of the stress off.

​Other resolution options like a lump sum offer/penalty write off or bankruptcy, may also be easier to deal with at the moment. Please email us if you need help.

If you want to study computer science or programming there are hundreds of free options available online from universities like Harvard. Although this list relates to computer courses, many of these universities offer courses in a wide range of science and arts subjects, for free. No student loan required!

Another student loan debtor has been arrested while attempting to return to the country that she now lives in. The woman had been visiting her sick mother. She spent a night in jail and had to attend Court.

In most of the Western world, debtors prisons were abolished in the 1800s. Yet New Zealand has a form of this Medieval practice for student loan debtors. In order to avoid being arrested, going to jail, and missing your flights, if you have a student loan debt and want to travel out of New Zealand you need to know how much your overdue arrears are and to be dealing with them on an official basis. There are several options for dealing with your arrears. Please contact us if you need help and to discuss your options. 

The government is losing millions of dollars each year because of the large numbers of student loan debtors feeling that they have no choice but to choose bankruptcy. In many cases, student loan bankrupts have been hit with enormous interest, decades of repaying far more than the original borrowing amount with no end in sight, and an inflexible response from the IRD.

In the financial year 2016/17 the government lost $19.9 million of student loan debt because of bankruptcy. In the financial year 2017/18 the amount was $32.2 million. 

Being able to get rid of a student loan debt through bankruptcy is relatively unusual compared to other countries. Australian and UK student loan debtors continue to be stuck with their debts even if they become bankrupt (i.e. it is not discharged in bankruptcy). US borrowers have the theoretical option of bankruptcy, but the reality is that it is so hard to get that for most people it's a waste of time trying. In Canada, student loans can be covered by bankruptcy, but only if the debtor files more than 7 years after the end of their education (in some limited cases this may be reduced to 5 years). In New Zealand becoming bankrupt usually takes 1-3 weeks and is straight forward and stress free in most cases.
​
From 1 April 2020 it is expected that there will be slightly more scope for the IRD to help some types borrowers than is currently the case. It's not hard to see that the government could make the argument that because a small amount of additional help is being provided, that the bankruptcy option is no longer needed. The Minister of Education is on record as opposing student loan bankruptcies and there is public and official concern at the large number of people who have been able to get rid of their student loan debt burden through a New Zealand bankruptcy. Our view is that student loan bankruptcy provides an important safety valve for when people have become overwhelmed with impossible debt, usually through no fault of their own, or because they were never told what would happen to their debt if they moved overseas, however, because New Zealand is out of step with comparable countries, and given the large amounts at stake, our view is that a change could be expected. If the government did change the law and abolish, or restrict, student loan bankruptcies it would probably do so without much notice in order to avoid a surge of applicants.

​There is light at the end of the student loan debt tunnel.
 
Make 2020 the year that you finally sort out your debt. We know that January can be a hard time of the year financially, so for a very limited time we are offering a 25% discount on NZ bankruptcy assistance where your main debt is a NZ student loan debt. Offer does not include prior advice (this is available separately if required), but it does include drafting your bankruptcy application, advising you of any apparent issues with your application, obtaining your approval of the draft, and then filing the bankruptcy application. We can also assist with communicating with the Official Assignee and any other questions that arise at the time of filing and during your bankruptcy. Conditions: Mention this deal when you email us. Must be booked and paid for no later than 11 January 2020 (NZ time). After that we will email you a short list of questions and you will need to email us your responses within two days (the sooner the better). In most cases, we will provide the draft to you within two business days of receiving your responses.  Please note that we reserve the right not to act.

​There is light at the end of the student loan debt tunnel.
 
Make 2020 the year that you finally sort out your debt. We know that January can be a hard time of the year financially, so for a very limited time we are offering a 50% discount on initial advice on your student loan debt options (usual price AUD$150 for Australian residents and NZD$200 for others). Conditions: Mention this deal when you email us. Advice must be booked and paid for no later than 11 January 2020 (NZ time). After that we will email you a short list of questions and you will need to email us your responses within two days (the sooner the better). In most cases, we will provide the advice to you within one business day of receiving your responses.  The deal includes further related questions from you for up to one month after the advice has been provided. Please note that we reserve the right not to act.

​We have availability over the Christmas and New Year period so please contact us if you need help or advice.

The student loans team of the IRD will be closed for Christmas from 2 pm on Monday 23 December 2019 until 6 January 2020. This means that if you receive an IRD letter during this period, have issues upon arrival to New Zealand, or want to speak to someone in the IRD about your debt, that there will nobody available in the IRD during this two week period.

If you start now it is not too late to get your IRD debt resolved, or to make good progress towards resolution, before the Christmas close down. If you want to gain access to MyIR (recommended) this should be organised ASAP and before the Christmas close down.

If you are a New Zealand bankrupt, and you want to leave New Zealand (for example: after a Christmas holiday visit home), it is essential that you obtain permission from the Insolvency Service before you leave New Zealand.

If you leave New Zealand without first obtaining permission, you can be punished with a jail term of up to one year and a fine of up to $5,000, or both. It's not worth the risk. It doesn't matter which passport you travel on.

The Insolvency Service will be closing from 3pm on Tuesday 24th December and will re-open at 8.30 am Friday 3rd January 2020.  If you need travel permission for the Christmas period,  we recommend starting to plan ahead now. Once you have applied for permission it can take up to 10 working days to be granted. Being granted permission is not automatic, but in most cases it is granted. There are various factors that will increase your chance of receiving permission to travel.

​We recommend that you try to apply for permission once you know your travel dates, but before booking tickets, just in case permission is refused. If permission is refused you may lose your travel payments. If you are already in New Zealand, you will legally be unable to leave. 

If you are not yet bankrupt, and this is what you intend to become, you need to go through that process first, and obtain the bankruptcy order, before the travel permission process can begin. It usually takes about two weeks after filing the bankruptcy application, before the bankruptcy order is made, but we would expect this time to become longer the closer it gets to the busy Christmas season. If you need to apply for bankruptcy and have it done and dusted well before the Christmas period we recommend starting this now, or in the next 1-2 weeks.

It is 9 weeks from now until the middle of December, when everything slows down in New Zealand, as people shift their focus to Christmas preparations. Government offices, like the IRD and the NZ Insolvency and Trustee Service  also completely shut down for a period of time over Christmas and New Year.

If you have decided that a New Zealand bankruptcy is the most realistic way to resolve your debt problem, and you start now, you are likely to be bankrupt in plenty of time before Christmas.

If you start now with an IRD negotiation, there is also a good chance that things could be sorted well before Christmas.

Either way, if the debt is sorted, you will be able to relax at Christmas time knowing that the IRD will not be chasing you, and that there is no risk of arrest if you travel home (you will need permission to leave if you are bankrupt but this is usually easy to obtain).

By starting now, or soon, you will avoid the delays that arise when people apply at the last minute just before things shut for Christmas.

People who have student loan debt arrears get different kinds of letters from the IRD. Common types are described in this blog post.

​At one end there is the letter that comes out of the blue, after not hearing from them for 20 years, where they ask you to contact them. This letter means that you are on the IRD's radar, they know where you are, and the debt is not going to go away or be forgotten by the IRD. While it may be some time before the IRD takes serious steps against you (or it may be tomorrow), this type of letter means that it is time to get the debt sorted before things gets worse and before you run out of time.

A common stronger letter will be one that insists that you make contact within a stated amount of time (usually 30 days). This type of letter should not be ignored as doing so will mean that you will probably receive a demand notice in the near future. If the IRD knows that you are working hard and trying to find a solution this lessens the risk of their action against you being escalated.

Then there is the type of letter that is a "final notice" and which often states that the debtor has broken the law, is at risk of arrest, and that legal proceedings will  be taken if payment is not made within a short time frame. Based on our many years of experience, these letters are not bluff and the IRD may even have the legal proceedings drafted and ready to go at the time when the letter is sent to you. Sometimes the letter will arrive personally via a process server, or by post, or by email. This type of letter is very serious and doing nothing may mean legal action and bankruptcy not just in New Zealand, but in the country in which you live. If you do get this kind of letter, urgent action is needed. Even if bankruptcy is your only real choice at this late stage, if you have the choice of bankruptcy in New Zealand or overseas, you are usually better off to try to keep this to New Zealand only, as the impact on your overseas credit rating, or your life overseas, may be minimal if you don't have much in the way of assets or income. If the IRD bankrupts you in the country in which you live the impact on your credit rating will be serious.

Jessica Buck is typical of many of the people we work with. A large student loan debt ruining her life and relationships. Student loan debt is constantly on her mind:

Ms Buck's problem is US student loan debt, but the effect on many NZ student loan debtors is the same. Having a student loan debt can easily cause anxiety, depression, and loss of quality of life. The sooner you deal with it the better.