Insolvency Overview. Presented by Richard McCulloch October 2013

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1 Insolvency Overview Presented by Richard McCulloch October 2013

2 Insolvency and Trustee Service Who are we? Business unit within the Ministry of Business, Innovation and Employment Primary role is to identify and realise assets for the benefit of creditors. ITS operates from 5 locations across New Zealand - 5 Regional offices - National Resources Group based in Christchurch

3 Insolvency What is it? Insolvency is when you find yourself in a position where you cannot pay your debts as they become due.

4 Summary Instalment Order Formal arrangement with creditors to pay back an agreed percentage (%) of the debt over up to 5 years. Not be in a position to pay their debts immediately. Debt level under $40,000 of unsecured debt. (Child Support, Student Loans and Court Fines are not included) Has the OA or an approved Supervisor to oversee. Creditors cannot take further action to recover their debts. Will appear on the SIO Register for the term of the SIO only.

5 No Asset Procedure One off opportunity for relief from debts that lasts only 12 months. Total debt level under $40,000 No ability to repay debts or to make on-going contributions No realisable assets Not available to anyone who has previously been bankrupt, admitted to a NAP, or committed Insolvency Offenses. Creditors can object to a NAP if they believe the debtor should not have been admitted. Child Support, Student Loans and Court Fines are not included. Will appear in the New Zealand Gazette and will remain on the Insolvency Register for the duration of the NAP plus four years.

6 Debtors Application - Debtor applies to the Official Assignee - Discharge from bankruptcy occurs 3 years after entry Bankruptcy the Basics Creditors Application - Creditor applies to the High Court - Discharge occurs three years after a completed Statement of Affairs is provided by the bankrupt - Minimum $1,000 debt, no maximum - The Official Assignee appointed to administer the bankruptcy - All assets vest in the Official Assignee, who will sell assets of value for the benefit of creditors - Once bankrupt, a creditor cannot pursue any outstanding debt, but should file a claim - Debts not included in bankruptcy include child support, court fines, debts based on fraud etc. - The bankruptcy will be advertised in the New Zealand Gazette, and appear on the ITS register for the duration of the bankruptcy plus four years

7 Information for Creditors If you are owed money by a person who has entered an insolvency procedure such as Bankruptcy, No Asset Procedure or Summary Instalment Order, or if by a company, Liquidation, you are a creditor. Before considering formal insolvency options, try to negotiate an informal arrangement with the debtor Commencing Insolvency Proceedings Lodge a claim (Proof of Debt) Monitor regular updates

8 STATISTICS

9 Number of insolvencies ITS Insolvency Volumes per Financial Year Liquidations Summary Instalment Order No Asset Procedure Creditor Application Debtor Application 0 *Introduction of the NAP and SIO on 03/12/2007 Financial Year

10 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Insolvency Volumes 250 Personal Insolvency Volumes per Month Debtor Creditor NAP SIO

11 Personal Insolvency Procedures Administered in 2008/09 5% Personal Insolvency Procedures Administered in 2012/13 8% 29% 32% Debtor Application Debtor Application Creditor Application 50% 16% Creditor Application No Asset Procedure Summary Instalment Order 37% 23% No Asset Procedure Summary Instalment Order

12 Percentage of Orders Made 40% Summary Instalment Orders entered into during 2012/13 35% 30% 25% 20% 15% 10% 5% 0% Repayment Rate; Cents in the dollar offered

13 ISSUES

14 Superannuation (including KiwiSaver) SIGNIFICANT FINANCIAL HARDSHIP Living expenses Mortgage Repayments Costs of Disability, Illness, Injury or Palliative Care Funeral Costs MEMBER S ACCUMULATION LESS CROWN CONTRIBUTION Members Contribution Employers contribution Fee Subsidies Transfers from Australian scheme BANKRUPTCY Contributions Holiday Will be withdrawn by OA at earliest opportunity NAP Contributions Holiday Withdraw everything before eligible SIO Contributions Holiday Withdraw and include in order

15 BREACH OF RESTRICTIONS Employment Self-Employed Management of a Business Incurring credit or liability

16 WEBSITE

17 Website and Online Services