In a recent media statement New Zealand's Official Assignee summed up the purpose of bankruptcy:

"The bankruptcy process is designed to give people a fresh start, which is crucial to counteracting the significant impact of unmanageable debt on people both socially and economically. It helps people who are trapped by debt move forward, bringing a sense of certainty to their lives, while also ensuring the orderly distribution of assets to creditors."

The important point is that bankruptcy offers a fresh start to the stress of unmanageable debt.

In New Zealand there is one Official Assignee who administers personal bankruptcies. This person is supported by the Insolvency and Trustee Service which is a business unit of the Ministry of Business, Innovation and Employment. If you become bankrupt in New Zealand you (or we, if we are assisting you), will definitely have interactions with employees of the Insolvency and Trustee Service, but it is very unlikely that you would have any direct interaction with the Official Assignee himself.

A confusing issue for many Australian residents, is that in Australia, there are various bankruptcy administrators but in New Zealand there is just one and your case will be dealt with by him through his employees.

Many people with student loan debt worry about having to disclose their private information to the IRD or to the Official Assignee. 

We thought it would be useful if we discussed how much needs to be disclosed for the various procedures:

• Application for a lump sum write off: In most cases no details are required, for you or your partner, other than the amount you can pay. In some cases, providing more details can make your case stronger. In rare cases the IRD will require full details in order to consider this procedure.
• Application for a time payment arrangement for your arrears: In most cases a brief, bare outline of your financial situation is required. In rare cases the IRD will require full details in order to consider this procedure.
• Application for hardship: The IRD will require full details of the financial situation for both you and your partner. The information required is primarily the current information, but with supporting documentation that covers the last few months. Many people object to providing their partner's details. Unfortunately, the IRD will generally not consider a hardship application if you leave details out (like your partner's finances).
• Bankruptcy application: This is made to the Official Assignee, not to the IRD. You will have to provide full details of your finances. You will have to provide your partner's income and expenses in your budget. Other than that, if your partner, a trust, a business, or any other person has, or had, assets that have never been owned by you, and to which you have not contributed, those details do not usually have to be included, except if it involves a motor vehicle that is owned by someone else and is used by you. The difference between the information requirements for a hardship application and a bankruptcy application, is that a hardship application requires the same details relating to both you and your partner but the main focus is on the present finances, while the bankruptcy application mainly focuses on you but it considers both the present and the past.

We are able to offer a reduction in our fees for new Australian based NZ student loan debt clients who need general NZ student loan advice, or assistance with New Zealand bankruptcy, before the end of this week. This is made available as we have added extra resources to assist people in difficult student loan situations. Please contact us for more details. 

A common issue that we deal with is the confusion between residency for income tax and student loan purposes. Generally speaking, it is more difficult to become a non-New Zealand resident for income tax purposes, than it is for student loan debt. They are separate issues. If you have moved overseas, and you are still a New Zealand income tax resident, this does not necessarily mean that you are a New Zealand student loan debt resident. This issue is a common one for Australian resident New Zealand student loan debtors.

If you have moved overseas there are exemptions that can allow you to be treated as a New Zealand resident for student loan purposes even though you are not physically in New Zealand. If you can gain this status it can mean that some or all of the interest will be removed from the debt and the relevant payment will be calculated based on your income as if you were still living in New Zealand. The benefit can be significant.

In most cases we can quickly tell you whether you might qualify or not, without needing to involve the IRD, however, we can also discuss the situation with the IRD if we have your permission. 

All New Zealand bankrupts are assessed for contributions. Some key points:

• There is no maximum or minimum income.
  
• Contributions requested are based off your budget and what the Official Assignee considers reasonable in your case.
• Most bankrupts that we work with do not have to pay any contribution.
• If you do not agree with the requested contribution do not panic. The amount can usually be negotiated. A negotiation is usually possible for both New Zealand and overseas based bankrupts.
• If you do not pay, and do not contact the Official Assignee on time (directly or through us), you may be sued without notice, even if you live overseas. It is very important to not ignore the process.
• If you think that bankruptcy may be suitable for you we can provide you with an estimated contribution assessment as part of your decision making process.
• If you do have to pay a contribution, in most cases this will still be significantly less than the debt that you will "save" by becoming bankrupt.
• Contributions are usually payable for the period of the bankruptcy.
• Contributions are usually payable monthly, but different time periods can be negotiated.
• If your circumstances change during the bankruptcy, your contributions may change up or down.

If you have overdue New Zealand student loan arrears, you are an overseas based debtor, and you do not want to become bankrupt, the main options are:

• Offering to pay the overdue arrears off with one lump sum. In some cases the amount to pay can be reduced.
• Offering to pay the overdue arrears over time. Weekly or monthly payments would be usual.
• Applying for hardship.
• A hybrid combination of the above. For example, if you cannot afford to offer to pay all of the overdue arrears in one go, but you can afford a smaller lump sum amount and some kind of ongoing regular payment. Or, for example, you can afford to offer a smaller lump sum or smaller ongoing amounts but nothing more, then this could be combined with a partial hardship application.

Some points:

• If you have resolved your arrears with the IRD, and keep up with ongoing payments, you will be safe from the risk of IRD action in respect of your NZ student loan debt. You should keep written confirmation of the resolution.
• If you resolve your arrears you will probably still have debt to pay the IRD (unless your arrears are almost the same as the full debt which happens in some cases).
• Minimum semi-annual payments, for overseas based debtors, are usually based on the highest level that your debt reached. These payments (at least) will need to be made until the debt is repaid in full unless you become bankrupt or have a hardship type exemption.
• The arrears amount (or full debt amount) should always be checked, in writing, with the IRD before payment is made as the amount can vary from the amount stated in MyIR or on routine statements.

If you have questions please let us know.

Broadly speaking, the only requirements that apply if you want to become bankrupt in New Zealand are:

1. Debt of $1,000 or more.
2. That you cooperate with providing information about your situation.

Some points:

• A careful application, covering the points that the Official Assignee is likely to want to know about, will make your application process faster and less painful.
• You do not need to be in New Zealand at the time of application.
• New Zealand bankruptcy covers New Zealand student loan debt (as at the date of writing this).
• New Zealand bankruptcy means that you will no longer have to deal with the IRD for debt included in the bankruptcy.
• NAP does not cover student loan debt.
• What you earn, and what you own, is generally irrelevant to whether you are allowed to become bankrupt but it might be relevant to the question of whether it is wise.
• What has happened in the 5 years before the application can be relevant.
• What may happen to your finances and situation during the time of the bankruptcy may be important to your decision on whether to go forward with an application.
• Where you live now, and where you intend to live in the future, can be relevant to your decision.
• If you would like an evaluation of your own situation, or need help with the bankruptcy process, we can help. We are available promptly.

A common question we get asked is can a bankrupt travel?

If you are a New Zealand bankrupt, the only travel restriction from the New Zealand bankruptcy point of view is leaving New Zealand. You cannot leave New Zealand without first obtaining permission from the Official Assignee.  This applies regardless of which passport you travel on. If you leave, without permission, this is a criminal offence. In most cases, permission is not difficult to get.

A bankrupt does not need to tell the Official Assignee if they are visiting a country other than New Zealand.

​If you have a question please ask.

We were delighted to receive this email today from a client who we have been working with for about four years:

"This week I received an email with a letter confirming my release from bankruptcy. 

I would like to sincerely thank you for your help during the process. I am very grateful as it was a stressful and challenging  time. 

Best of luck supporting others in financial trouble. I believe you are providing an excellent service and are making a difference in peoples lives. "

It makes us very happy to know that we have been the light at the end of the tunnel of overwhelming debt worries.  

A common question we get asked is: Can I be self employed if I become bankrupt?

If you are living overseas and your business does not involve New Zealand, the good news is that currently, not only can you be self employed, you do not need to apply for permission to be self employed. If your business involves New Zealand this may or may not apply and in that case the situation needs to be considered in more detail. Other things for you to consider include:
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• If there are, or will be, assets in the business now or during the bankruptcy.
• Any impact on being a company director.
• How and when to report your income to the Official Assignee during the bankruptcy if your income is lumpy. The good news is that this can be negotiated.
• Any impact on lending to the business. In most cases foreign lending is not impacted but this is something that you would need to check with the lender if you are worried.

If you are a bankrupt living in New Zealand the situation is very different. You must not be self employed without first obtaining permission. If you do not obtain permission this may be a criminal offence. You cannot assume that permission will be granted.​

Any questions? Please ask.

The IRD is the single largest cause of bankruptcies in New Zealand. Most of these bankruptcies will be initiated by the IRD rather than the person who owes the debt. 

A significant advantage of becoming bankrupt yourself, without this being done to you by the IRD, is that your bankruptcy application will not be accepted until the Official Assignee is satisfied with your application details (or statement of affairs). Normally this takes no longer than about two weeks, but sometimes it can be as fast as a couple of days. Then, in exactly three years, almost all of these people will be automatically discharged from bankruptcy. They can get on with their new lives free from the debt.

If the IRD (or another creditor) applies for your bankruptcy this will go through without your statement of affairs. Because your bankruptcy runs for three years from the date that the statement of affairs has been provided and accepted, if you never provide a statement of affairs you could stay bankrupt forever. There are over a thousand New Zealand bankrupts potentially in this situation as they have not filed their statement of affairs. An example can be seen in this example from a forum post from Sally:

"To my question as I was made bankrupt by someone in New Zealand even though i was paying, I have not submitted statement of affairs, as i didn't want to confirm my passport number, is it lodged with immigration anyway."

Unless Sally submits her statement of affairs she will stay bankrupt indefinitely. Even if Sally does submit her statement of affairs it is certain that she will stay bankrupt longer than was necessary, which will hamper her ability to get on with her new life. The irony is that the Official Assignee would have little difficulty in obtaining a bankrupt's passport number, so withholding this information only harms Sally's future prospects.

​Occasionally we come across a case where the bankrupt is adamant that they submitted their statement of  affairs but the Official Assignee has no record of this. It is important that you keep proof of your bankruptcy dealings, especially if the IRD (or another creditor) has made you bankrupt.

In summary, if bankruptcy is a possibility, you are almost certain to be better off initiating the process. We have handled many bankruptcies and are here to help you with this process so that you can be free from unmanageable debt.