Impact of Insolvency

Credit Rating

Any insolvency procedure will affect your credit rating, as does getting into arrears with your creditors. An DRO, NAP and Bankruptcy will make it more difficult to find a bank or other money lender who'll give you credit to buy things like a car or house (and in these procedures you are restricted to obtaining credit), and to find landlords who are willing to rent to you.

Banking and other services

Depending on its policy, your bank can choose to close your accounts (including any business accounts). If they do, you might find that organisations like credit unions or building societies are more willing to let you open new accounts.  Providers of services like power, gas, phone and insurance may choose to stop providing services to you, or they might put restrictions on what services they'll provide to you.

Your employment

Your employer might think your insolvency is a risk to their business and may not want to employ you or continue to employ you, particularly where you are dealing with cash or credit.  Formal insolvency does not automatically entitle an employer to dismiss you (unless there is a clause in your contract of employment that entitles them to dismiss you by virtue of your insolvency).  If you work in an industry which has professional restrictions on you being insolvent, such as a lawyer, accountant, real estate agent, financial adviser, etc., then you may lose your job as your practising certificate may be revoked.

Your privacy

If you enter into a NAP, DRO or Bankruptcy (but not a Creditors Proposal), a record of your entry will be listed on the insolvency register on  www.insolvency.govt.nz, which is free for the public to search.  The details from your file can be seen during your procedure and for a NAP and Bankruptcy can be seen for four years after you are discharged.  If you enter into a NAP or Bankruptcy your name will be published in the New Zealand Gazette.  Credit information agencies will also add this information to your credit file, and generally keep it on there for five years.

KiwiSaver and retirement savings

If you are a member of a superannuation or Kiwisaver scheme then they are not deemed to be assets under NAP, DRO and Bankruptcy, however if you  access the funds during your insolvency, the OA will not accept you into a NAP and will take the funds to pay towards your debts under an DRO or Bankruptcy.  You would not be expected to sign up to Kiwisaver or another superannuation scheme while you're in an insolvency procedure because that money could be used to repay your creditors.  Your contributions may be affected whilst under a NAP, DRO and Bankruptcy as this would be deemed as money you can use to pay for your debts.  Under a Creditors Proposal, it will be necessary to disclose your Kiwisaver and retirement savings to the Trustee, however it may be treated as being exempt under the Proposal.

Your partner

If you have joint services like bank or power accounts, your bank or service provider may decide to close the account once they become aware of your insolvency procedure.  Your partner might also be affected if you have joint assets and you become bankrupt — the OA will either try to sell your share of the assets to them, or all the assets may have to be sold.  Your partner would be given their share of the money from the sale and the rest would be used to repay your debts.

Joint debts

If you have a joint debt with your partner, or anyone else, each person is responsible for repaying all of that debt.  If one person enters into a formal insolvency, the creditor can make the other person pay the whole amount.