Don’t go bankrupt
Bankruptcy has a significant impact on a person’s life and the Debtfix Crew always considers other debt solutions that have better results for borrowers and lenders.
Few people know about the other ways to fix debt problems, including lawyers, accountants and debt collectors so it is not surprising that many New Zealanders find themselves unnecessarily bankrupt. Sometimes bankruptcy is caused by relatively small debts, for something like mounting electricity bills or a maxed-out credit card, and the crew has put together information on other options.
Before you file for bankruptcy please read about the pitfalls of bankruptcy at Debtfix’s blog What you need to know about bankruptcy in New Zealand.
Debt Repayment Order
If you are still earning money and owe less than $50,000 of unsecured debt, a Debt Repayment Order (DRO) could be a good alternative to bankruptcy.
A DRO is an official arrangement made between yourself and the organisations you owe money to. There will be a plan to repay your debts and in some circumstances your debts may be reduced, and late payment penalties and interest will be stopped.
The debts will be repaid during a three to five year period and you will have a DRO supervisor who deals with the organisations you owe money to and makes sure you are committed to the repayment plan. Christine Liggins from Debtfix can be your DRO supervisor and they are appointed by the New Zealand Insolvency and Trustee Service’s Official Assignee, which administers all bankruptcies, No Asset Procedures, Debt Repayment Orders and some liquidations.
A DRO cannot include child support and maintenance debts, student loans, court fines or debt secured against an asset, for example a mortgage secured against a house.
Creditors Proposal
When you have larger debt that you cannot afford to pay and you have a steady income a Creditors Proposal may be a good alternative to bankruptcy.
Debtfix recommends a Creditors Proposal is better for debts of more than $25,000 but it can be used for debts greater than $5,000, and you must owe money to more than one lender or organisation. Also, you may have some assets you can sell to pay off some debt and you will be able to make regular smaller payments to clear the debt throughout three to five years.
Debtfix co-founders, Christine Liggins and Shaun Adams are Licensed Insolvency Practitioners and can be trustees for their clients’ Creditors Proposals.
Debtfix will handle all communication with creditors and manage the court processes required to approve this debt solution, with the assistance of a lawyer. The proposal is a private agreement between you and your creditors, and it does not have the same restrictions of bankruptcy. Therefore, it is a good option for directors of small businesses and people who are self-employed.
Debt Management Plan
When you have a steady income but there’s very little left to pay off debts after you have paid your living expenses – Debtfix could help you with a debt management plan. It is an unofficial agreement between you and the organisations you owe money to, that doesn’t involve courts, lawyers or the New Zealand Insolvency and Trustee Service.
You could work with a budgeting service and possibly a financial mentor to negotiate on your behalf and ensure your rights are protected. Debtfix can work with you and your creditors to establish a debt management plan.
No Asset Procedure
When you don’t have any assets, such as a house or a car that you can sell, and you don’t earn enough to pay your bills a No Asset Procedure could be the right debt solution for you. At Debtfix we look at all other options before recommending a No Asset Procedure because the process can be difficult, and you will need to work with an Official Assignee from the New Zealand Insolvency and Trustee Service.
You could be eligible for this if you owe between $1,000 and $50,000, which also includes secured debts like a TV on hire purchase but not court fines and reparations, or student loans. To keep any assets you owe money for, you need to continue paying the debt repayments however, all other debts included in the No Asset Procedure would be written off by the organisations you owe money to.
The No Asset Procedure lasts for a year, there are application restrictions, and you can only enter it once during your lifetime and if you have not previously been bankrupt. Also, it can be reversed by the court if you have not appropriately declared the information required for this debt solution.
Contact Debtfix before applying for bankruptcy
If a creditor has applied to make you bankrupt or you are considering it, contact Debtfix first and let us review your options.
There may be a better debt solution with less stigma and less impact on your life.