Black Friday Special: 30% off all new advice and services booked before 5 pm on 30 November 2018 (NZ time). Not available with other offers or discounts. Please contact us now if you need help.
We are offering substantial discounts off our normal fees for assisting with bankruptcies or IRD negotiations, if you proceed during November. We want to help as many people as possible to have a stress free Christmas knowing that their student loan debt has been resolved.
Please contact us directly for details.
There's still time to get your debt problem sorted before Christmas but you need to start now, or very soon. If you are travelling home to New Zealand for the holidays the IRD will receive your contact details and they may even aggressively contact you before you have left the country. You can avoid this by dealing with it now.
We have had two reports today of student loan borrowers being given wrong information by the IRD. In the first example, we are told that the IRD stated that a student loan debt of more than $40,000 was "too low" for a bankruptcy application. This is wrong. If your debt is more than $1,000 you can apply for bankruptcy.
In the second example, we are told that the IRD officer advised that you have to be living in New Zealand to apply for NZ bankruptcy. Wrong again. We have never had any difficulty in processing NZ bankruptcy applications for our clients and they live all over the world.
It is not in the IRD's interests that student loan borrowers seek the protection of bankruptcy, however, we hope this isn't a reason for giving wrong advice.
We have been doing this work for so long, and worked for so many people, that we often receive feedback from people who have come out of bankruptcy after three years and who have been able to start wonderful new lives, free from the stress of student loan debt. It is special to be able to help people through what might otherwise be a stressful and frightening life event. Recently we received unsolicited testimonials from clients who had been, or were about to be discharged:
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 !
I really appreciate your knowledge and services through this period. It has been life changing.
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. Regards,
My time as a bankrupt is nearly completed which is great. I want to thank you again for everything that has helped relieve a lot of anxiety and stress.
Our student loan blog has been chosen as being in the top 40 worldwide, out of thousands of student loan blogs. We appreciate the recognition for the work that we do to educate and assist.
We don't want anyone's Christmas ruined by a student loan debt problem. We know that money is tight for many of you, and especially at this time of year. As a a special pre-Christmas gift, we are offering advice, bankruptcy assistance, and IRD negotiation assistance, at a negotiated affordable price. Assistance will be provided very promptly.
Simply contact us and let us know what you need, and what you can afford for advice or assistance. We will do our best to agree an affordable price that works. Please note that this offer is available until 15 November 2018.
If you start now there is still time to get your student loan debt problem resolved before Christmas (in most cases). Getting it resolved will mean no risk of arrest at the border, or of having your Christmas holiday plans destroyed by debt collectors.
Please contact us if you need prompt help to understand your options or to get a resolution underway.
The Answer: A part finished degree with a student loan debt.
Figures released this week show that 36% of bachelor degree students do not complete their degree. Some students find that the quality of the degree, or teaching institution, is not worth spending more time and money on, others find that tertiary education is not for them. For some it is the realisation that the jobs will not be there for them when they graduate. Lachlan Maclean, a biology and computer science student stated that:
"It's a lot of money to be going to university. There's really no point continuing, doing three more years, if you're going to get a mediocre job out of it."
Our view is that the system is deeply flawed. Nevertheless, we have what we have, for now. Our advice to people thinking about spending tens of thousands of dollars on tertiary education is to be sure that this is what you want, to be sure that the cost is going to be worth the anticipated future return, and that the quality is acceptable.
We are often asked what is the "ball park" amount that the IRD will write off if you offer to pay off your student loan debt. The answer is that there is no ball park, and the likely write off varies from case to case. Some of the relevant factors include the break down of the debt, how much you are offering to pay, how the offer is being funded, your personal circumstances, and why the debt got behind.
In some cases significant write offs are possible, but it will depend on the circumstances.
The IRD is supposed to respond to communications within 10 working days, in most cases. You would think that getting things resolved quickly would be good for business. We have had many clients who say that even though the IRD knew their contact details, they received no information about their debt for many years. During the time that the IRD made no contact, enormous interest was added to the debt. Another example is a case, we know of, where contact was made with the IRD, in March, to try to resolve the student loan debt. It is now 7 months later and the IRD has still not provided a real response. Of course, interest has continued to build.
Often clients have told us that they believe that the IRD's delays are deliberate so that more interest can be charged. We were sceptical, but this year we have seen a deterioration in IRD time frames and then we came across this information.
In the 2016/17 year, interest of $120 million was charged, and penalties of $72 million. Total ordinary and penalty interest for one year was $192 million, or $526,027 every single day. Every day that resolution is delayed, the IRD is potentially better off by more than $500,000. Naturally, this amount is spread over a large number of cases, and the longer the delay the greater the chance that the IRD receives zero because the borrower becomes bankrupt or dies, but these figures show that there is a huge benefit to the IRD in delay.
Once again, student loan borrowers are facing shabby, discriminatory treatment. The Government has announced tough new measures to deal with loan sharks. Many people, that we work with, feel that the IRD is the worst loan shark around.
Prime Minister Jacinda Ardern and Commerce and Consumer Affairs Minister Kris Faafoi say that new laws are needed because:
“This Government is committed to making New Zealand the best place to raise a child...to do that we must stop families becoming trapped in the appalling debt spirals and poverty that result from onerous lending and payback terms...These new measures will halt the very worst of those preying on vulnerable and desperate people while enabling borrowing that meets their needs in an affordable way... They will protect families through capping the total interest and fees charged loans, introducing tougher penalties for irresponsible lending
Interest and fees on high-cost loans will be limited to 100% of the amount borrowed (the loan principal). For example, if an individual borrows $500, they will never have to pay the lender back more than $1000, including all fees and interest.
Lenders will have to be responsible, they will face penalties if they misbehave, borrowing costs will be transparent, and there will be access to help during the debt collection process. Shouldn't student loan borrowers also have those protections? Don't they also deserve to be protected from a spiral of debt and poverty? Shouldn't their children also matter? Why are they not protected from irresponsible lending?
We have many student loan borrower clients where the amount demanded by the New Zealand government/IRD is more than 7 times the amount borrowed, not the maximum of double referred to in this legislation. Shouldn't the government have to abide by the same standards as other lenders? Failing to so drives many borrowers to the brink of despair, and the relief of bankruptcy, things that could have been avoided if they were treated with compassion.
Recently we experienced an IRD officer who refused to provide information about a client account to which we (and the client) were legally entitled. In this case it was information about penalty interest.
It is rare that the IRD can withhold information about your debt, including the original loan contracts and charges (note that, in some cases, this information is held by Study Link). Normally the IRD respects its disclosure obligations but there are times when people have to deal with someone who makes things difficult. If this happens to you, we can help, or you can make a formal demand for your information under the Privacy Act and the Official Information Act, make a formal complaint against the IRD, or ask the Ombudsman to help you.
Don't let the process get you down. You do have rights and you also have the right to have your rights honoured.
"Kristina has a no-nonsense approach to her work. She understands your concerns and works diligently to come up with a solution that is best for your situation. She is direct in her communication but above all, she is prompt. Every time I needed to speak with her, despite the time-difference, she would reply within 24 hours. She answered all of my questions to the best of her knowledge and her understanding of the topic is vast. All told, I waited 1 month for my situation to be resolved. Thanks Kristina and her team - I am forever grateful."
Contact Kristina today if you want to talk about putting an end to your debt nightmare.
The IRD is deliberately targeting student loan debtors compared to other tax debtors. It has a large team of 64 people chasing student loan debtors. It has no team dedicated to chasing unpaid tax on property deals even though it was expected that this could yield the IRD $50 million a year.
So single minded is the IRD's pursuit of student loan debtors, that it is collecting 170 times more from Australian resident student loan debtors than from Australian resident income tax debtors. It appears that student loan debtors are treated far more aggressively because they are seen as low hanging fruit and easy targets. Terry Baucher, Accountant, states that the IRD:
targeted people who were likely to pay without fuss. Where the IRD fears it will get push-back it might not try it on, but they're happy to try it on with others, as is the case with student loans.
We know that many of you had hoped for a more compassionate attitude, and a greater variety of resolution options, following the change in government. It appears that this will not be the case.
Students are leaving tertiary education with increasing amounts of debt. The chart shows that the class of 2016 was the most indebted group yet, and that average leaving debt has doubled in less than 20 years. Student loan debt is a growth industry in New Zealand.
(Source: Ministry of Education, Ministry of Social Development, Statistics New Zealand IDI and Ministry of Education Student Loans Integrated Model.)
Questions that you should know the answers to:
It's the time of year when people start thinking about a Christmas visit to family and friends in New Zealand. Many of you with substantial overdue arrears will be at risk of arrest if you return to New Zealand. You can remove this risk by sorting things with the IRD, or by becoming bankrupt under New Zealand law. If you become bankrupt you will then need to apply for travel permission to safely leave the country. When do you need to get things under way?
Assuming that it will be slower and more difficult to get things done after around 15 December, this should be the final date by which everything is done. You cannot apply for bankruptcy travel permission until you are actually bankrupt and this process typically takes about two weeks. To be safe, you should allow three weeks as it is a busy time of year. Ideally you would apply for travel permission earlier, and before buying tickets. If we assume that you need to apply for travel permission by three weeks prior to 15 December this gives us a date of 24 November.
You then need to allow time to draft your bankruptcy application (between one day and around two weeks, in most circumstances), and for the Official Assignee to process your application and make the bankruptcy order (usually 2-3 weeks). Taking 5 weeks to be safe, the bankruptcy process should begin in earnest before 20 October if you want to have a trouble free visit to New Zealand. Ideally you would start the process now so that there is plenty of time and you know that everything is sorted before buying tickets.
If you need assistance to get matters resolved we can help. At the moment we have some special packages available. Please ask if this is of interest
In a recent Guardian article, MH Miller discusses the impact of living with a $100,000 student loan debt and of being incapacitated by that debt for many years:
Now 30, I have been incapacitated by debt for a decade. The delicate balancing act that my family and I perform in order to make a payment each month has become the organising principle of our lives...
In many cases, student loan debt allows people to borrow money they have no hope of repaying, transforms the post graduation years into an economic wasteland, and defers, for many decades, the borrower's ability to participate personally in the normal milestones of life like buying a home, starting a family, starting a business, or retiring. Economist Steve Keen states that student loan debt:
[W]ill doom the [country] to stagnation: a generation with too much debt and no prospect of using credit like the previous generation.
As one commentator stated, student loan debts are a place where nightmares are real.
The purpose of laws like the Credit Contracts Act 1981 and the Credit Contracts and Consumer Finance Act 2003, is to protect people when they are taking out a loan, by ensuring that the borrower has sufficient information about the debt and their rights (including interest rates), and by providing protection to the borrower if they get into financial difficulties before the debt is paid off.
Student loans are excluded from the protections offered by credit legislation. Student loans are often taken out by our most vulnerable young people and few of them really understand the massive implications of that debt. Shouldn't they have the same protection as other kinds of borrowers?
To resolve your student loan debt problem you need to start with the truth:
We can obtain your current debt details and advise you on your available options. Then in our ongoing discussions, with you, about affordability, the best answer will usually emerge.
Let's consider two scenarios:
Both William and Kate could apply for hardship which would mean that they were no longer behind on the debt arrears (capitalised on to the core debt with an interest adjusted) and give them an opportunity to have a fresh start with payments. In Kate's case, her minimum payments would then be around $40 per week ($2,000 per year - payable in two instalments) and the IRD states that the debt should be paid off in about 18 years. Kate could try to get a second job and crush the debt by throwing every spare dollar at it. This path won't necessarily be easy, but many people do hit debt hard, and at this level of debt, it wouldn't take long to get rid of it in full forever. In William's case, even if hardship is granted, he will still have a massive debt. If he hasn't managed to deal with his debt in the last 20 years, when it was smaller, is it realistic to hope that he can deal with it now? Some people do manage to resolve a debt at this level but that is rare. For William, a hardship application may take the immediate pressure off but it just means that he still has a debt headache to deal with in the future. William is middle aged and he doesn't have many working years left, compared to Kate. If his arrears are capitalised, and he pays the IRD's minimum of $5,000 per annum, the IRD's calculator suggests that the debt will never be repaid. How will he pay off his mortgage, and save for retirement, with a huge student loan debt millstone?
Both Kate and William could consider a payment arrangement with the IRD for the arrears. If this is accepted, they will have to pay their minimum annual payments in addition. Under this scenario, Kate is also much better off than William as both her arrangement payments and annual obligations are likely to be far less and, therefore, more manageable. The IRD may also look more favourably on Kate as she has come to them at an early stage.
If bankruptcy needs to be considered, Kate is also in a much better position than William. Bankruptcy usually lasts three years and Kate will still be young when she comes out of it. Kate is used to managing on a small budget and being bankrupt won't make much difference to her lifestyle. She has no assets to lose. She will have plenty of time to rebuild her life financially. William owns a home and he may lose it if he becomes bankrupt (this outcome is not certain but it is possible and will be affected by various factors). William's lifestyle expenses are likely to be curtailed while he is bankrupt, and he may face having to restart financially when he is around 50 years old. William's bankruptcy option is more difficult than Kate's, but if bankruptcy is William's best option he is probably better to do it now when he is in his late 40s, rather than when he is even older.
We deal with people like Kate and William all the time. It is much better to deal with your debt sooner rather than later. Not only is there less debt to deal with, there are better resolution options, and the impact of resolution on your life, now or in the future, may be significantly less. If you are a William, please don't let that get you down. You can still deal with the debt knowing that it is better to do this now rather than to put it off even longer.
Bankruptcy in New Zealand is generally a civil matter. It is a clinical remedy that gives people, with overwhelming debt, a fresh start in life. Most people who find themselves in this situation have been affected by factors beyond their control like unexpected unemployment or illness. In the case of student loan debt, a common scenario is a demand for payment of an enormous amount by the IRD, after many years of silence during which the debt has grown to an unmanageable size.
Most bankrupts find the process relatively smooth and wish they had done it sooner. Unfortunately a small minority end up crossing the line and becoming bankruptcy criminals. Bankruptcy criminality can attract severe punishment, including prison time. There are a number of ways that a bankruptcy can become criminalised, mostly revolving around dishonest information or dealing with assets, however, the most common one may be leaving New Zealand without prior permission. It is a criminal offence to leave New Zealand without permission if you are a New Zealand bankrupt. It is an offence that can be easily detected by the Official Assignee and which could cause serious consequences for you during the bankruptcy, or many years later. There is no need to be in this situation as the permission application process is straight forward, and bankrupts who live overseas, but wish to visit New Zealand, are rarely declined. It is best to apply for permission before you travel to New Zealand, but if you've had to come here urgently because a family member is sick you can apply while you are here.
Bankruptcy is an effective remedy that can resolve overwhelming debt stress and give you a fresh start. Don't let it become a problem.
A recent media article highlighted New Zealand's longest bankrupts: one person has been bankrupt since 1998, three since 2000, and one since 2001.
For the vast majority of bankrupts, who file a debtor petition, discharge from bankruptcy occurs automatically at exactly the three year mark with no fuss. For bankrupts who have had a creditor petition filed, it is likely that they will be bankrupt for more than three years, and there is no upper limit if those people do not complete the correct paperwork.
If you need to become bankrupt it is worth making sure that it is done right so that there is light at the end of the tunnel.
Official Information Act figures show that, in one recent month, the IRD hung up on 45% of callers before they could get through. That was 286,392 calls. Callers often face long waits, that is if they get through. If you email, the response period can be 2-3 weeks, but in some cases it takes up to a year.
The IRD charges interest and the longer it takes for you to get through and resolve your debt, the more the IRD earns. We believe that this is an unacceptable conflict of interest.