We believe that the way the system is administered should be reviewed and better incentives offered to borrowers who are doing their best to pay. Often the borrowers are in this situation because of no fault on their part. If there were fairer and more flexible ways to settle a cripplingly large debt, more people would pay instead of being forced into bankruptcy as their only realistic option. Although many people can come to a resolution with the IRD, and settle their debt by negotiation, there are also many cases where this is not possible. We know of cases where the borrower has offered to pay thousands more than they borrowed and this has been refused. In some cases offers have even been refused when the borrower has offered family money of close to $100,000. If a borrower can prove that their offer is the best that can be done and that their only other option is bankruptcy, it makes no sense to refuse that offer. If a borrower can prove that factors outside of their control have affected the debt and their ability to pay shouldn't that be taken into account? In the UK and US, borrowers who become disabled can have their debts cancelled. There is no possibility of this in New Zealand (unless they become bankrupt). We have had cases where the IRD failed to let clients know the details of their debt for 20 years, and then when they did, the debt had become monstrous. We have had clients who had to move out of New Zealand because of rape or serious domestic abuse, and others who have suffered extreme and unexpected hardship overseas affecting their ability to pay. Because of political decisions the IRD's ability to deal with tragic situations is often far too limited.
If people are encouraged to pay because the IRD has more options available to it to settle debts then the New Zealand taxpayer wins.
In our opinion there is a financial and human benefit in having a better system for dealing with overseas based borrowers. We had hoped to see change with the new government but this seems unlikely. A concerned parent of an overseas based borrower has shared with us a letter from the Minister for Education. In that letter Mr Hipkins states that there are no changes planned and that the charging of interest to overseas based borrowers "motivates" them to return to New Zealand. We disagree. Many of the borrowers who went overseas felt that they had no choice but to move if they wanted to work in their field or for a fair rate of pay. Returning to New Zealand with unpaid debt arrears may mean that their wages will be garnished.
Because there is little hope of an improvement in the way that overseas based debts are dealt with, there is no point in holding out and hoping that if you delay dealing with the debt that things will get better. The best time to deal with it is now before it grows larger and so that you can get on with your life after debt.