What happens to my debts?

What you need to know

Once a Summary Instalment Order (SIO) is made, creditors cannot begin or continue to recover or enforce a debt or add any further penalties or interest to the debt you owe.

Certain debts are excluded by law.  You must continue to pay any:

• Maintenance Orders under the Family Proceedings Act 1980

• Child support under the Child Support Act 1991

• Student loans

• Court fines and reparation.

The excluded debts listed above are not provable debts.

Creditors may file ‘provable debt’ claims in an SIO.  Provable debts are debts or liabilities owed at the date of entry which the creditor can prove through invoices and/or agreements.  This includes contingent debts.  Contingent debts are debts that are not immediately payable but which become payable on occurrence of an event such as default.  For example, a guarantor becomes liable for his guarantee only if the debt that is guaranteed does not get paid by the debtor.  The guaranteed debt is provable or included in your SIO.  If you have provided a guarantee to a creditor on another person’s behalf before the date of your entry to SIO, then it is included as a debt for the purposes for determining your eligibility for entry to a SIO.

To enter into an SIO you must be unable to repay all debts immediately.  You must, however, be in a position to contribute toward payment in full or in part over the course of the SIO.  This is normally three years but may, under special circumstances, be extended to five years.

Once you have completed the terms of your SIO, any outstanding amounts owed to your SIO creditors is no longer payable. For example, if you paid your SIO creditors 50 cents in the dollar, those creditors cannot continue to pursue you for the remaining 50 cents in the dollar once you have successfully completed the terms of your SIO. Any creditors not included in your SIO are able to continue pursuing you for payment as they were not bound by the terms of the SIO.

What about debt I owe to Work and Income?

Upon entering a summary instalment order you remain liable for any debt owed to WINZ.  The way any debt owed to WINZ is paid depends on if you are currently receiving a benefit or not.

If you are currently receiving a benefit from WINZ you will continue to repay the debt you owe to WINZ by agreed reductions from your benefit.  If you are not receiving a benefit from which deductions can be made you should include WINZ as one of your creditors in your SIO application.

Overseas debt

If you owe an unsecured debt to a creditor that is based overseas, you can include them in your list of creditors when completing your Statement of Affairs.  Although the creditor is based overseas, they can still be included in your New Zealand-based SIO.  However, be aware that if you return to the country where the overseas creditor is based, that creditor can pursue you for any shortfall that may have been left after completion of your SIO in that country.  For example, if you only managed to pay the overseas creditor 50% of what you owed them during the SIO, they can pursue you once you return to the creditor’s country for the remaining 50% of your debt.  The fact that you were admitted to a SIO in New Zealand does not prevent that creditor from pursuing you for payment.  Your SIO only applies in New Zealand and does not extend to overseas countries.