Now is the best time to negotiate with the IRD about your student loan debt. In September the IRD becomes super busy  and this may mean delays in dealing with your case and that it does not get the attention it deserves. Here are some general principles:

• Under some circumstances, the IRD can write off penalty interest and/or ordinary interest. You need to find out how much of each has been charged to your account and whether you have grounds for a write off.
• Some people can get large write offs.
• If you have grounds, and if there is a potentially available write off, the IRD usually has some leeway in how much they will grant you within the leeway zone. "How much" can be affected by your circumstances and other aspects of the case.
• In some cases, ongoing negotiations produce improved results, but generally the IRD has a limit to how often they will engage with a particular debtor before they refuse to engage further and escalate the case to legal.
• If you don't have grounds, don't waste your time by asking for something the IRD can't give. If you don't like the limits that the IRD has for write offs, complain to the politicians who created the system. The IRD is the collection agency for the New Zealand government. It is the New Zealand government that has made the laws that have created enormous debts, bloated with billions of dollars of interest.
• Your debt probably took years to reach the level it is at now and it usually can't be resolved in an instant. Although it is often possible to resolve things with the IRD within 2-3 weeks, sometimes it takes much longer. 

​Whatever the details of your case, we will have seen many similar fact and debt situations before because we deal with so many student loan debtors. This means that we can quickly tell you what your realistic options are. Being fully informed can make a big difference.

Financial stress is hard on relationships, so it can't be much of a surprise that student loan debt destroys marriages. According to a recent survey, 13% of people with a student loan debt blamed the debt for the ending of their marriage. To make matters worse, if a couple separate, debt borrowed by one partner can be shared.

​Student loan debt causes many people unbearable stress. Not only does it destroy relationships, it causes people to be unable to buy a home, start a business, plan for retirement, or start a family. 

The longer you have toxic debt, the worse the potential impact on you and way of life. It needs to be dealt with.

The New Zealand government body, the Tertiary Education Commission, has highlighted that many polytechnics and institutes of technology are at financial risk and their viability is under threat due to falling enrolments and income. Today we have reports that proposed changes to student visas will cause a loss of $486 million, or 17,425 students, per year. Many tertiary providers say this will have a serious impact on their financial viability, and some will have to close their doors.

How is this relevant to student loans? The answer is that, even worse than having a large student loan debt, is having a large student loan debt that you incurred for poor quality tuition, or for a course that you couldn't finish because the provider failed or closed your course part way through. This is another reason to be very careful before you agree to sign up for a life changing amount of debt.

In Australia, the IRD uses BayCorp as a debt collector. BayCorp is an Equifax company. In 2017 Equifax was hacked and data for more than 140 million people was stolen. Those people will be at risk of identity theft and loan fraud indefinitely. 

There are media reports that Australian credit information could be at risk. We recommend that people check the data held on them by credit reporting agencies. If you are contacted about your student loan debt, we believe that it is safer to deal directly with the IRD, or through us, and not through a third party debt collector. We believe that doing so is more secure, and you will be more sure that you have accurate data about your full debt and the full resolution options.

​

Michelle Singletary is a reporter for the Washington Post. While there are some differences between the New Zealand and US student loan systems, the impact on struggling young people is the same.

Michelle's advice is to accelerate the repayment of student loan debt, and prioritise this over retirement savings (except to the extent that you receive some kind of employer or government subsidy for some of the retirement savings). If moving back home, for a while, will allow you to accelerate debt payments, and build a good nest egg then that could be the best option to avoid a lifetime of debt.

If you have to have debt to fund your studies, then getting rid of it as soon as you can should be a high priority.

Here's another interesting article from Kiwi Blog, concerning Winston Peters' $158,000 debt. The point made is that:

Winston owes the taxpayer $158,000 from 2005.
If you apply IRD interest rates to the debt over 13 years you get $983,000.

Winston's debt didn't increase over 13 years. We bet that there are thousands of student loan debtors who would line up to repay their debt if enormous interest hadn't spun them out of control.

We are not criticising Winston, just a system that makes it hard for people who genuinely want to repay their student loan debt to do so.​

Kiwi Blog reports today about growing frustration with the IRD's MyIR computer system. One accountant was quoted as stating that:

"he believed the integrity of the whole tax system was under threat"

Even if these issues haven't affected you, it is a reminder of the benefit of getting things done before the IRD's deadlines, and of keeping copies of everything.

If you are an overseas resident NZ student loan borrower, and you are not on a repayment holiday, you are likely to need to pay half of your annual obligation payment by 30 September. The maximum obligatory payment is NZ$2,500 (assuming you have no arrears). For many people this is a lot of money. In order to avoid budget problems one option is to make regular, smaller payments in advance. For example, if you had $2,500 due, you could instead make 3 x monthly payments of around $833, before the due date, in order to spread the load. If this is still too much, it may be possible to negotiate with the IRD for smaller regular payments to be made so that you are up to date by a future deadline (for example 31 March 2019). 

If you do have any overdue arrears, and they are not under some kind of formal arrangement with the IRD, these must all be dealt with ASAP. Not only are you at great risk if the arrears are not paid, or formally dealt with, if you leave dealing with it until late September the IRD will be very busy, making it more difficult and stressful to get things sorted.

​Please ask us if you have any questions.
​

In the past, it was unusual for the Official Assignee to pursue overseas property owned by someone who had become bankrupt in New Zealand. This has changed. The change was gradual at first. The situation now is that if you become bankrupt in New Zealand, and you own a property in certain other countries, that it may be at risk. Not all at risk properties are pursued and this may depend on the amount of equity, which country the property is in, the amount of your debt, degree of cooperation, proposals put forward for dealing with the claim, your circumstances, and the general features of the case. 

In situations where the Official Assignee decides that the bankrupt may be uncooperative or may try to defeat the Official Assignee's potential claim, legal proceedings to pursue the property can be issued in some foreign countries without  prior notice to the bankrupt.

If your debt is much larger than your home equity, you may be willing to take the risk with your home. In some cases, for example, where there is not much equity, or there are difficult personal circumstances, this may increase the likelihood of a mutually agreeable resolution as long as there is a sensible and cooperative strategy for dealing with the Official Assignee. There may also be resolution options that involve payment over time or at a later date.

If you are trying to negotiate with the Official Assignee it is best to have one line of communication, to respond on time to all requests, and to try to be pro active in anticipating their requirements.

We received another lovely testimonial on 11 June, this time from a client who we had successfully negotiated an IRD write off for. She no longer has any student loan debt. Our client had this to say about our work:
​
YES! Thank you, that is such a relief. Please feel welcome to use the following in your reviews.

I am so glad I found this service online. You have been nothing but prompt, clear and concise in your communications with me. I have greatly appreciated your assistance over the previous 3 months. After getting
nowhere fast with my interactions with the IRD, through your knowlege and expertise I was so happy to have all of my late penalties deleted, which reduced my loan payout amount by over a third. My balance is now officially $0. Thanks so much!
Thanks N

This morning we received an amazing email from a client who we had been working with for a few years. We provided her with lots of assistance before she made the decision to become bankrupt and then helped her with the bankruptcy process and during the time of the bankruptcy. Our client is now discharged from bankruptcy and free of her debt and the enormous stress that came with it. This is what her email said:

Good morning Kristina,
I am a former client of yours and I am now automatically discharged from my bankruptcy :)  The date of my bankruptcy started June .., 2015 and was completed June .., 2018.

Just wanted to write a testimonial and to thank you for everything !

Because of Kristina's help, I am now automatically discharged from my bankruptcy ! Three years ago I had a hefty amount of student loans with the interest steadily increasing. I was (and still am) living overseas and didn't know where to begin.  I begin researching online and came across the studentloan.org.nz website. The fees were affordable, the website showed steps to bankruptcy as well as the choices that are available so I contacted Kristina and asked for her help. 

I found Kristina to be extremely knowledgeable, understanding and knew exactly what options were available to me and where to start. If I had questions she was able to answer each one.  She was also able to help me file the necessary paperwork to travel back to New Zealand for my mother's funeral. From the very beginning to the end Kristina made the whole process of a bankruptcy a lot less scary than I had anticipated. My stress was kept to a minimum due to Kristina's expertise and service. I'm so glad I made the decision to use Kristina's services !! I would thoroughly recommend her to anyone thinking about declaring bankruptcy. Thank you Kristina !!!

Thanks again for everything !
All the best supporting others in their financial concerns !

The overseas based borrowers unit of the IRD has several times of the year when it is much busier than usual. This includes the run up to the compulsory payment due dates of 30 September and 31 March, and around the times when high numbers of overseas resident New Zealanders travel home, like Easter and Christmas. Right now is not a particularly busy time which means that applications and questions should be able to be dealt with faster.

If you have a student loan debt that is starting to get out of control, or which you are not paying, we recommend that this is dealt with now, instead of doing nothing and hoping that your life will improve so that you can cover the shortfall in the future. Not only does postponing dealing with the problem for the future not usually work out, but the debt will have grown much faster than most people can imagine. If you deal with the problem, when it is small, you will have more options for resolving it, and the IRD is also likely to be able to offer you more flexibility.

We are here if you need assistance with your situation.

Student loan debt has a significant impact on young people's ability to get on with the normal milestones of life, including owning a home, starting a family, launching a business, or saving for retirement.

A leading financial commentator notes the overwhelming impact of student loans on house ownership: "the fact is that 83 percent of people age 22 to 35 with student loan debt who have not bought a house blame it squarely on their overwhelming loans – not their age, and not their careers"

Jennifer Beeston, a leading mortgage broker states that: “I think student loans are our next big financial crisis as a nation. Student loans are the largest issue I’m currently seeing in potential homeowners. In many cases their student loan payments are as much or more than mortgage payments.”

Although the commentators are speaking from a US perspective, New Zealand student loan borrowers are in many ways in a worse position, as at least, in the US, there are government schemes that allow people with disabilities, long term debt, or government service to have their loans forgiven. There are also many, quality, universities that charge no or low fees, giving young people the chance to start their professional lives without crippling debt.

We have previously discussed the benefit in being deemed as a New Zealand resident student loan debtor, even though you are physically living overseas. Interest can be wiped and there may be no compulsory overseas assessments of up to $5,000 per annum. Instead, your payment will be calculated on your income, just like it would be for someone physically living in New Zealand.

A common issue that we come across is the difference in tax years between New Zealand and Australia. In New Zealand, for most people, the tax year ends on 31 March. In Australia it is 30 June. If you have been granted an interest exemption on your student loan, your income needs to be advised to the NZ IRD for the period of the New Zealand tax year. Because this won't be the same as your Australian tax year income, we advise that you keep pay slips and other records so that the correct period of time can be calculated. We can assist if you need help interpreting or reporting the correct data.

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.