What debts are included in your bankruptcy

Unsecured debt is money you owe that isn't tied to any specific property or asset, like a house or a car. So, if you can't pay it back, the creditor can't automatically take something you own to cover the debt.

Some examples of unsecured debt that are included in bankruptcy:

• credit and store cards
• unsecured personal loans and payday loans
• student loans
• gas, electricity, phone and internet bills
• overdrawn bank accounts and unpaid rent
• medical, legal and accounting fees.

If you owe a debt jointly with another person, the creditor has the right to claim the full amount from either person. If you become bankrupt you will no longer have to pay a joint debt, but the other person will still owe money.

Any debts owed to a creditor that is based overseas can be included in the New Zealand bankruptcy. However, if you return to the country where the debt is owed then that creditor is still able to recover any of the debt that you owe in that country.

A contingent debt is a debt that you might not owe now, but you could owe in the future. For example, when you sign as guarantor for a friend’s finance agreement, you don’t have to pay any money at that point. But if your friend doesn’t pay, you might have to pay the debt. 

These debts are included in your bankruptcy but will only be paid from proceeds if the contingency actually arises.

Even if you become bankrupt, some money you owe is not included and must still be paid back.

You must continue to pay any:

• court fines and reparation
• debt that you incurred after applying for bankruptcy
• secured creditors and secured debt – if you wish to retain those items
• debts incurred fraudulently
• child support or maintenance.

Secured debts are any debts where the creditor can repossess (take back) your property if you stop making payments. They can legally sell the asset to get some, or all, of the money they are owed back.

For example, if you stop making the arranged payments for a car you bought on finance, the creditor can repossess the car under the finance agreement.

Secured debt is excluded from the bankruptcy process because the creditor can repossess the property and sell it to get their money back if you don’t pay. If there's still money owing to the creditor after the property has been repossessed and sold, that amount becomes an unsecured debt and is included in the bankruptcy.