Personal Insolvency Information MARCH 2016

Transcription

1 Personal Insolvency Information MARCH 2016

2 b Publishing date: March 2016 ISBN: (print) (online) 2016 PERSONAL INSOLVENCY INFORMATION

3 Contents What is Insolvency? 2 What are the Consequences? 3 Insolvency procedures 4 How do I apply? 5 Information on Debt Repayment Plans (SIO) 6 Information on the No Asset Procedure 8 Information on Bankruptcy 10 Comparison Table 16 Definitions 18 Helpful Contacts 20 ITS contact details 21 PERSONAL INSOLVENCY INFORMATION 2016

4 What is Insolvency? 2 Insolvency is when you are unable to pay your debts on time. Depending on your financial circumstances, you may have several options available to you. Each of these options is described in greater detail throughout this booklet, and a table summarising the key points of the different options is provided on page 16 to help you compare them. If you are unable to pay your debts you still may be able to avoid entering a formal insolvency procedure by making an agreement with all of your creditors to repay some or all of your debts over time or as a one-off payment. A budget advisor, lawyer or accountant would be able to help you with this process. If you try to make an arrangement and most of your creditors accept the arrangement but not all of them, you may still be able to formalise the agreement by getting the Court to approve a Proposal under the Insolvency Act A lawyer will be needed to make an application to the Court and a trustee appointed to collect and distribute the funds PERSONAL INSOLVENCY INFORMATION

5 What are the Consequences? 3 All insolvency options will have implications for your credit rating and your future financial activity. These consequences may include: Your bank closing your accounts or limiting how you can use them. Discuss this with your bank before you apply. Difficulty obtaining credit in the future, even after you have been discharged. Your insolvency will be recorded on a public register and will be on your credit history. Your job may be affected. Discuss this with your employer before you apply. Impacts on your family or business partner. Your name will appear on the insolvency website and other credit reporting websites. In all cases you should seriously consider these impacts before deciding to file for insolvency. You are also strongly encouraged to seek independent advice. PERSONAL INSOLVENCY INFORMATION 2016

6 Insolvency procedures 4 DEBT REPAYMENT PLAN You may enter a debt repayment plan called a Summary Instalment Order (SIO) if you owe less than $47,000 debt (excluding secured debts, student loans, fines, criminal reparations and child support) provided you are able to make regular payments. Creditors are not able to take action to recover their debt so long as you keep your payments up to date. The repayment period is for 3 years, and you will be supervised during this time by an approved Supervisor. NO ASSET PROCEDURE A No Asset Procedure (NAP) is available if you owe between $1,000 and $47,000 debt (excluding any student loan debt) and you have no assets or income that would enable you to repay part of your debts. You remain responsible for student loans, fines, child support payments and debts that you incurred by way of fraud. You may choose to continue paying secured debts if you wish to retain the goods. BANKRUPTCY Bankruptcy is a legal process that enables you to be released from your debts if you owe more than $1,000. Unlike NAP and SIO there is no upper limit to the amount of debt that can be owing. The Official Assignee will manage your bankruptcy and will look to sell your assets or collect payments from you to pay your creditors PERSONAL INSOLVENCY INFORMATION

7 How do I apply? You can apply for any of the insolvency procedures on our website for no charge. To complete an application, go to You need to log onto our website. To do this, select Register. You will need an address. Once you are logged on follow the instructions. You will be asked a number of questions concerning your personal circumstances such as your assets and who you owe money to. Allow at least an hour to complete your application. Once you have completed your application the website will show you what options are available to you. Once you have submitted your application it will be assessed by the Insolvency and Trustee Service. You may be contacted to provide additional information that is required as part of your application. Once your application has been assessed you will be advised of the outcome. If you have been accepted then you will appear on a public register at Your name will remain on the register for the duration of your order. For NAP and bankruptcy your name will appear for 4 years after your discharge and if you have been bankrupt or in a NAP previously your name will remain on the register permanently. 5 PERSONAL INSOLVENCY INFORMATION 2016

8 6 Information on Debt Repayment Plans (SIO) KEY POINTS A Debt Repayment Plan, officially called a Summary Instalment Order (SIO) is a supervised repayment plan. To apply, your debts need to be less than $47,000. Before the order is made, you or any of your creditors can write to the Official Assignee about the order. Your creditors will be unable to add any further interest or charges to your debt and will not be able to take any further action against you as long as you make your payments. A Supervisor is appointed to monitor your payments and communicate with your creditors. You will need to select a supervisor when you apply. A list of supervisors can be found on our website, RESPONSIBILITIES AND RESTRICTIONS You must fully co-operate with both your Supervisor and the Official Assignee including notifying them whenever you change your address, name, employment or income. While you are subject to a SIO, it is an offence to raise credit or take out a hire purchase (HP) over $1,000 without first advising the creditor that you are currently in a SIO. You should notify the creditor in writing to avoid any misunderstandings. WHAT IF MY FINANCIAL CIRCUMSTANCES CHANGE? If your financial circumstances change, you can apply to the Official Assignee to have your order varied or discharged. Any of your creditors or the Supervisor can also apply to the Official Assignee to have your order varied or terminated PERSONAL INSOLVENCY INFORMATION

9 WHAT HAPPENS TO THE MONEY I PAY? The money paid by you will be paid to your creditors and to the costs of the supervisor and the Official Assignee. When you have made all the required payments any remaining debts included in the Order will be written off. 7 WHAT HAPPENS IF I MISS PAYMENTS? Your Supervisor must notify the Official Assignee as soon as possible if you fail to make a payment and the order can be terminated. Your creditors can then start action against you for the money you owe them including interest from the date you entered the SIO. Such proceedings may include making you bankrupt. WHEN DOES MY SIO END? Your SIO ends when you have paid creditors the rate specified in the order. A SIO is usually in place for up to 3 years. Upon discharge from your SIO, you are released from all debts that were included in your SIO and you are not liable to repay any further part of them. WHAT DEBTS ARE NOT INCLUDED? Secured debts including mortgage, property rates, hire purchase and any other loans for which you have provided security over some or all of your assets. Fines, criminal reparations, student loans and child support are not included. PERSONAL INSOLVENCY INFORMATION 2016

10 8 Information on the No Asset Procedure KEY POINTS OF THE NO ASSET PROCEDURE (NAP) The NAP is a 12 month insolvency procedure you may enter if you have no assets, and no available income with which to make repayments to your creditors. Before applying for the NAP you should get help from a Budget Advisor as entering this procedure may have a significant impact on your future. RESPONSIBILITIES AND RESTRICTIONS DURING A NO ASSET PROCEDURE You must fully co-operate with the Official Assignee including providing any document or information requested by the Official Assignee and advising if you change your address, name, employment or income. While you are in a NAP, it is an offence to raise credit or take out a hire purchase over $1,000 without first advising the creditor that you are currently in a NAP. You should notify the creditor in writing to avoid any misunderstandings. If a creditor has an objection to you being admitted to a NAP they are able to apply to the Official Assignee to have the NAP terminated at any time during the 12-month period. Your NAP may also be terminated if your financial position changes during the NAP, and you are now in a position to make repayments towards your debts. CRITERIA FOR ENTRY To be accepted into the NAP you must: Have no assets of any realisable value and cannot make payments to your creditors. Have not previously been admitted to a NAP or have been bankrupt. Have total debts of more than $1,000 and less than $47,000 (excluding student loans, fines and criminal reparations, but including guarantees and debts owed as a Trustee). Have not disposed of or concealed assets prior to making the application PERSONAL INSOLVENCY INFORMATION

11 ARE ANY DEBTS NOT INCLUDED IN THE NO ASSET PROCEDURE? Maintenance orders made under the Family Proceedings Act Child support amounts made under Child Support Act Your student loan. Court fines and criminal reparation orders. Any debt incurred after you applied for entry into the NAP. Secured debts where the security has not been released and you want to keep the item. Debts incurred by fraud. 9 WHAT IF CREDITORS CONTINUE TO PURSUE ME? Creditors are notified of your entry to a NAP after 5 working days so if you have just entered the NAP then the creditors should stop contacting you soon. You can direct any creditor that calls you to the Insolvency website where they will be able to confirm that you have been accepted into a NAP. WILL MY CREDIT HISTORY BE AFFECTED? Your credit history is likely to be affected for up to 5 years (this is the length of time that your name will appear on the public insolvency register). Credit agencies also operate public websites and some may carry your credit history for longer periods which the Official Assignee cannot control. WHAT HAPPENS TO MY BANK ACCOUNT? The Official Assignee does not prevent you from having a bank account during your NAP. However, your bank may not allow you to retain an account or may restrict the banking facilities that they make available to you. You should contact your bank before entering a NAP to find out how your accounts may be affected. CAN I STILL GET CREDIT? You may get credit if you meet the requirements of the creditor. However, you will find it harder to get credit. If you are obtaining credit of more than $100 after you have applied for a NAP or $1,000 after you have been accepted for a NAP, you must ensure that the creditor is aware of your NAP. You should notify the creditor in writing of your NAP to avoid any later misunderstanding. PERSONAL INSOLVENCY INFORMATION 2016

12 Information on Bankruptcy 10 RESPONSIBILITIES AND RESTRICTIONS DURING BANKRUPTCY You must: co-operate with the Official Assignee including providing all information requested. notify the Official Assignee whenever you change your address, name, employment or income. obtain the consent of the Official Assignee before you leave New Zealand. You can apply for leave at notify the creditor that you are bankrupt if you are applying for credit of more than $1,000. You should notify the creditor in writing to avoid any misunderstandings. obtain the consent of the Official Assignee to be self-employed, manage a business or be employed by a relative. WHAT DEBTS ARE NOT INCLUDED IN MY BANKRUPTCY? You will remain responsible for: Maintenance orders made under the Family Proceedings Act Child support amounts made under the Child Support Act Court fines and reparation orders. Any debts incurred after the date of your adjudication, including tax. WHAT HAPPENS TO MY DEBTS AFTER I M DISCHARGED FROM BANKRUPTCY? Discharge from bankruptcy releases you from all debts included in your bankruptcy. This means that you are no longer required to repay them and creditors can no longer pursue you for the debt PERSONAL INSOLVENCY INFORMATION

13 WHAT IF CREDITORS CONTINUE TO PURSUE ME? Creditors are notified of your entry to bankruptcy within 25 working days. If you have just become bankrupt then the creditors should stop contacting you soon. You can direct any creditor that calls you to the Insolvency website and they will be able to check that you are bankrupt. 11 WHAT HAPPENS TO MY ASSETS? You must disclose all your assets to the Official Assignee. At the date of your bankruptcy most assets become the property of the Official Assignee, to deal with for the benefit of your creditors. The Official Assignee may sell your assets and/or require you to make payments if it is likely to be of benefit to your creditors. Any assets that you acquire during your bankruptcy also become the property of the Official Assignee. The assets will remain the property of the Official Assignee until they are sold even after you have been discharged from your bankruptcy. You will be allowed to keep cash up to $1,200 at the date of your adjudication as well as retain necessary tools of trade and household furniture and effects at the discretion of the Official Assignee. You are entitled to retain a motor vehicle up to the value of $6,000. If you own your house this will also be an asset in your bankruptcy, even though there may still be money owing on your mortgage. You should continue to meet your mortgage payments until the Official Assignee makes a decision on whether the house will be sold. Any other assets you own or are entitled to benefit from become the property of the Official Assignee. These may be surrendered for the benefit of your creditors. This includes superannuation schemes or life insurance policies you own. Funds that you have in a KiwiSaver scheme are protected in bankruptcy. However if you withdraw KiwiSaver funds during your bankruptcy, they will become the property of the Official Assignee. If you require funds from your KiwiSaver relating to a financial hardship you will need to notify the Official Assignee before making your request in order to confirm that you will be given an allowance to retain those funds if your KiwiSaver provider were to accept your application. If you transfer any assets (e.g. a car) to another person before your bankruptcy, the transaction could be set aside and the asset recovered by the Official Assignee. PERSONAL INSOLVENCY INFORMATION 2016

14 WILL THE OFFICIAL ASSIGNEE TAKE ALL OF MY INCOME AND CONTROL MY MONEY? 12 No, the Official Assignee does not manage your income for you. You will, however need to complete a budget form. This will allow the Official Assignee to calculate whether you are able to make regular contributions to your bankruptcy estate for the benefit of your creditors. You are required to keep the Official Assignee informed of any change in employment or financial circumstances. There is no limit on the amount you can earn while bankrupt. IF I SAVE UP TO BUY SOMETHING DURING MY BANKRUPTCY, OR COME INTO MONEY, WILL THE OFFICIAL ASSIGNEE TAKE IT? All assets you obtain during the period of your bankruptcy are the property of the Official Assignee. If you wish to save and buy something of little value the Official Assignee is not likely to take an interest. However, if the purchase is significant you should discuss it with the Official Assignee prior to purchase to ensure it is not claimed by the Official Assignee. WHAT HAPPENS TO MY BANK ACCOUNT? The Official Assignee does not prevent you from having a bank account during your bankruptcy. However, your bank may not allow you to retain an account or may want to restrict your banking facilities. You should contact your bank before becoming bankrupt to find out how your accounts may be affected. WHAT HAPPENS TO JOINTLY OWNED ASSETS? If the Official Assignee is satisfied that a third party owns the assets and you have no claim on them, they will not form part of your bankruptcy. Your spouse s income cannot be claimed by the Official Assignee, although it will be taken into consideration when assessing your ability to make contributions. The Official Assignee may take steps to recover the value of your share in a jointly owned asset if it will be of benefit to creditors. Your partner/spouse or any joint owner of the asset will usually be given the option to purchase your share from the Official Assignee PERSONAL INSOLVENCY INFORMATION

15 WHAT HAPPENS TO MY TAX REFUND? The Inland Revenue Department will send you a new IRD number shortly after your bankruptcy. IRD will forward your tax refunds to the Official Assignee during the course of your bankruptcy, as they are an asset in your bankruptcy. However Family Tax credits will still be paid to you and will not be an asset in your bankruptcy. 13 WHAT HAPPENS IF SOMEONE OWES ME MONEY? Money owed to you will now be owed to the Official Assignee. The Official Assignee will try to recover the debt for the benefit of your creditors. Any documentation you have as evidence and any funds you receive for debts owing to you should be forwarded to the Official Assignee. DO I NEED CONSENT FROM THE OFFICIAL ASSIGNEE TO WORK? While you are bankrupt you must obtain the consent of the Official Assignee to do the following: Be self-employed (this includes contracting or operating any form of business where you are directly responsible for payment of tax, or employ another person); or Take part in the management or control of any business or company (directly or indirectly); or Be employed by a relative, or by any company, trust, or other entity that is owned, managed or controlled by a relative. By doing any of these things without the Official Assignee s consent, you commit an offence under the Insolvency Act 2006 and you may be prosecuted. PERSONAL INSOLVENCY INFORMATION 2016

16 WHAT IS THE PROCESS TO APPLY FOR EMPLOYMENT CONSENT? 14 You must apply in writing to the Official Assignee for consent and provide an Affidavit (a written statement sworn on oath) to support your application. You should provide as much information as possible. For further information, you can visit our website Each application will be considered on a case by case basis, taking into account your best interests and those of your creditors and the business community. You will be notified in writing of the decision. If consent is given, it will usually be subject to conditions that the Official Assignee considers appropriate. You must obtain the consent of the Official Assignee if you wish to change any of the agreed conditions at a future date. CAN I TRAVEL OVERSEAS WHEN I AM BANKRUPT? If you wish to leave New Zealand during the term of your bankruptcy, you must first obtain the consent of the Official Assignee or the court. It is an offence under the Insolvency Act 2006 to leave New Zealand without this consent. To apply to leave New Zealand you must submit an application form to the Official Assignee, giving enough time for it to be considered before you plan to leave. Apply for travel at Each application to the Official Assignee will be considered on its merits, taking into account your best interests and those of your creditors and the business community. WILL MY CREDIT HISTORY BE AFFECTED? Your credit history is likely to be affected for up to 7 years (this is the usual length of time that your name will appear on the public insolvency register). Credit agencies also operate public websites and some may carry your credit history for longer periods which the Official Assignee cannot control PERSONAL INSOLVENCY INFORMATION

17 WHEN WILL MY BANKRUPTCY END? If you applied to make yourself bankrupt, your bankruptcy will end three years from the date that you entered bankruptcy. If you were made bankrupt on the application of a creditor in Court, the discharge date from your bankruptcy will be three years from when the Official Assignee received a fully completed Statement of Affairs from you. If you do not complete and provide the Official Assignee with a satisfactory Statement of Affairs, you may remain bankrupt for longer than three years. During this extended time all the restrictions of bankruptcy continue to apply and any assets that you accumulate become the property of the Official Assignee. You may apply to the Court for an early discharge. However, the Court will only shorten your bankruptcy in limited circumstances. Please obtain legal advice as you will need to apply to the High Court. It is also possible for creditors or the Official Assignee to object to your discharge by applying to the High Court. 15 WHAT HAPPENS IF I CAN PAY MY DEBTS IN FULL? You can have your bankruptcy cancelled by paying your debts in full including the Official Assignee s costs. You will then need to apply to the Court (or the Official Assignee if you applied for your own bankruptcy) to have your bankruptcy annulled. PERSONAL INSOLVENCY INFORMATION 2016

18 INSOLVENCY TYPE SUMMARY INSTALMENT ORDER TYPICAL LENGTH OF INSOLVENCY: 3 years 16 Are able to immediately pay debts Owe more than $47,000 unsecured debts YOU ARE UNABLE TO ENTER IF YOU: WHILE IN THE PROCEDURE YOU ARE RESTRICTED FROM: Incurring $1,000 credit or more without disclosing your insolvency status PUBLICATION ON ITS WEBSITE: Yes On Summary Instalment Order public register for the period of the SIO only ADVERTISED IN GAZETTE: No DEBTS THAT YOU REMAIN RESPONSIBLE FOR: Maintenance Orders & Child Support Student Loans* Court fines* & Criminal reparations* Secured debts where you wish to retain the goods* *not included in the $47,000 debt limit above ASSETS: Excluded unless you choose to include them in the Order FEES & COSTS: $ fee + 10% of the contributions Taken from your regular payments. EFFECT ON CREDIT RATING: Listed on public SIO register Will show on credit reporting sites/credit checks for 7 years PERSONAL INSOLVENCY INFORMATION

19 NO ASSET PROCEDURE BANKRUPTCY DEBTOR S OR CREDITOR S APPLICATION 1 year 3 years Owe less than $1,000 or more than $47,000 total debts Have realisable assets or can make repayments Have previously been bankrupt/nap Have committed possible offences under Insolvency Act 2006 A creditor intends to bankrupt you and a better outcome for creditors is likely Owe less than $1, Incurring $100 credit or more without disclosing your insolvency status after applying but before acceptance Incurring $1,000 credit or more without disclosing your insolvency status after accepted Incurring $1,000 credit or more without disclosing your insolvency status Overseas travel without approval Self-employment without approval Company management/ Employment by family without approval Yes On Insolvency public register for period of NAP + 4 years or permanently if you later go bankrupt Yes On public Insolvency register for period of bankruptcy + 4 years or permanently if multiple insolvencies Yes Yes Maintenance Orders & Child Support Student Loans* Court fines* & Criminal reparations* Secured debt if you keep secured property *not included in the $47,000 debt limit above Maintenance Orders &Child Support Court fines &Criminal reparations Secured debt if you keep secured property Can t have any assets of value to enter a NAP. KiwiSaver will not be considered an asset unless you are over 64 years old. All realisable assets vest in the Official Assignee No fee Listed on public insolvency register Will show on credit reporting sites/credit checks for 5 years minimum. Could affect ability to get continued/ new services (eg banking, power phone) job security or future job prospects. $ (debtors application only) Official Assignee s costs (All fees and costs are recovered from monies collected in the bankruptcy) Will show on credit reporting sites/credit checks for 7 years minimum. Could affect ability to get continued/new services (eg banking, power phone) job security or future job prospects. PERSONAL INSOLVENCY INFORMATION 2016

20 18 Definitions ADJUDICATION Adjudication is when your application is accepted by the Official Assignee, or when the Court makes an order on the application of one of your creditors. ANNULMENT Annulment is effectively the cancellation of your bankruptcy by the Official Assignee or the Court. It may be ordered that the annulment take effect as if the bankruptcy never occurred or it may take effect at a date after adjudication. If annulled, all of your assets revest in you and you become responsible for the payment of all your debts and any outstanding interest on them. CLAIM FORM A claim form is a written statement which is completed either manually or online by a creditor to provide details of a debt being claimed in a bankruptcy, SIO or liquidation. DEBT, DEBTOR AND CREDITOR A debt is a specific sum of money that is owed. A person who owes the debt is called a debtor. A person to whom the debt is owed is called a creditor. DISCHARGE This is when an insolvency procedure (NAP, SIO or Bankruptcy) is completed. The restrictions that were in place come to an end and the debts included in the insolvency procedure become unenforceable. This generally occurs 3 years after filing your Statement of Affairs for bankruptcy. Discharge from NAP is automatic 12 months after being accepted into the NAP. DIVIDEND A dividend is a payment made to creditors by the Official Assignee from funds realised from contributions, asset sales or collection of debts. It may be the full amount or a part of the debt owed. ESTATE An estate is a term for a bankruptcy, NAP or SIO that is administered by the Official Assignee. GUARANTOR A guarantor is a person giving a guarantee who agrees to pay another person s or company s debt e.g. if they default on their loan payments PERSONAL INSOLVENCY INFORMATION

21 INSOLVENT Being insolvent means that you are unable to pay your debts as they become due for payment. OFFICIAL ASSIGNEE The Official Assignee is a government official responsible for administering all bankruptcies, No Asset Procedures (NAP) and Summary Instalment Orders (SIO). The Official Assignee also makes orders for bankruptcy on the application of a debtor, orders for NAPs and making SIOs. PROVABLE DEBTS All debts owed by an insolvent person (Bankrupt, NAP or SIO) at the date of their adjudication and for which creditors can file a claim. A creditor cannot pursue these debts after adjudication and can file a claim with the Official Assignee for what they are owed. Specific exemptions include court fines, reparation orders and any debts incurred after the date of adjudication. SECURED DEBT Secured debt is where you have a formal agreement with the creditor that they can repossess something from you if you don t pay, e.g. your house if it is subject to a mortgage or a computer on hire purchase. The creditor retains the right to repossess the asset if you fail to meet the terms of the agreement, irrespective of which insolvency option you enter. STATEMENT OF AFFAIRS A Statement of Affairs form is a document completed by applicants to enter an insolvency procedure (NAP, SIO, Bankruptcy) which provides details of the applicant s assets and liabilities. SUMMARY INSTALMENT ORDER SUPERVISOR A Supervisor is the person that monitors your Summary Instalment Order. Their role is to accept claims by your creditors, keep track of all funds, make sure all contributions are received and arrange for dividends to be paid. TERMINATION A termination is where a NAP or SIO is cancelled if a person was wrongly accepted or becomes ineligible for the NAP or SIO during the order. UNSECURED DEBT An unsecured debt is one where a creditor does not have the right to repossess and sell an asset towards repayment of the debt eg. a phone account. 19 PERSONAL INSOLVENCY INFORMATION 2016

22 Helpful Contacts 20 CITIZENS ADVICE BUREAU or SORTED WEBSITE COMMUNITY LAW CENTRES INLAND REVENUE DEPARTMENT or NEW ZEALAND FEDERATION OF FAMILY BUDGETING SERVICES or WORK AND INCOME NEW ZEALAND (WINZ) or CHRISTIANS AGAINST POVERTY or You can also seek independent legal advice from Lawyers, Accountants and others in the budgeting and financial Advice fields 2016 PERSONAL INSOLVENCY INFORMATION

23 If you have any questions please contact us: 21 Freephone within New Zealand: 0508 INSOLV ( ) Freephone from Australia: International callers: info@insolvency.govt.nz NZ Fax: International Fax; Private Bag 4714, Christchurch 8140 NORTHERN BUSINESS CENTRE Northern Business Centre, Level 18, 135 Albert Street, Auckland 1010 Private Bag 92513, Wellesley Street, Auckland 1141 Fax: (09) NAPIER 19 Bower Street, Napier 4110 Private Bag 6001, Napier 4142 Fax: (06) SOUTHERN REGION Southern Business Centre, 55 Wordsworth Street, Sydenham, Christchurch 8023 Private Bag 4714, Christchurch 8140 Fax: (03) HAMILTON Level 2, 678 Victoria Street, Hamilton 3204 Private Bag 3090, Hamilton 3240 Fax: (07) WELLINGTON 205 Victoria Street, Wellington 6011 Private Bag 5901, Wellington 6145 Fax: (04) PERSONAL INSOLVENCY INFORMATION 2016

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