Bankruptcy

You can become bankrupt if you owe more than $1,000, but it's best for people who owe more than $50,000.

If you owe less than $50,000 you should consider a Debt Repayment Order (DRO) or a No Asset Procedure instead.

If you are living overseas you can still become bankrupt.  Creditors that are not based in NZ will be sent a report if they are listed in your bankruptcy, but they can continue to chase you for any money you owe them.

Your assets in New Zealand become the property of the Official Assignee. If you have assets outside of NZ, the Official Assignee may have your NZ bankruptcy recognised in the overseas country and may deal with those assets also.

You can return to NZ during your bankruptcy, but if you want to leave again you will need to apply for permission.  

The public register can be searched from overseas. Several credit reporting companies operate in more than one country so your credit rating outside of NZ may be affected.

You must:

• help the Official Assignee and provide all records and information you’re asked for
• notify the Official Assignee and your Debt Repayment Order Supervisor if you change your:
  • name, e.g. if you get married
  • address
  • employment
  • terms of employment
  • income and/or expenditure
• keep filing tax returns.

You must not:

• take on any new debt over $1,000 without telling the new creditor that you're currently bankrupt. This should be done in writing to avoid any misunderstandings
• be a director of a limited liability company
• fail to provide information or lie to the Official Assignee
• hide assets
• try to prevent the Official Assignee from dealing with any of your assets.

You need to get permission:

• to leave New Zealand
• to take part in the management or control of any business (this includes if you file your own taxes, ACC levies or workplace insurance, or you’re responsible for meeting any regulations, e.g. health and safety requirements)
• to be self-employed or employed by a relative or a relative’s business.

You can be prosecuted for breaking any of these rules.

Once you're adjudged bankrupt, creditors can't continue to chase you for any debt included in your bankruptcy.

On discharge from your bankruptcy, you are released from most of the debts included in your bankruptcy and you don't have to pay any more of the outstanding amount owed to the creditors included in your bankruptcy.

Included debt

Your bankruptcy will include all debts that you owe at the date of your adjudication unless specifically excluded below.

• contingent debts — e.g. when you sign as guarantor for a friend’s finance agreement. You don’t have to pay any money now but you might have to repay the debt in the future if your friend doesn't pay. These debts are included in your bankruptcy, but will only be paid from proceeds if the contingency actually arises.
• joint debts — if you owe a debt jointly with another person, the creditor has the right to claim the full amount from either person. So while you are released from the debt on your discharge, the other person is not.
• overseas debt — Any debts owed to a creditor that is based overseas are included in the New Zealand bankruptcy. However, if you return to the country where the liability was incurred then that creditor is able to recover any of the debt that you still owe in that country.

Excluded debt

Certain debts are not included in your bankruptcy by law. 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 debt

Secured debts are any debts where the creditor can repossess your property if you stop making payments.

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

When you become bankrupt your assets transfer to the Official Assignee so that they can be sold to help repay your debts — this includes superannuation funds. You can be prosecuted if you don't tell the Official Assignee about all your assets.

While you're bankrupt, you can keep:

• tools needed for your work (up to a certain value)
• necessary household furniture and effects (up to a certain value)
• a motor vehicle worth up to $6,500
• money up to a maximum of $1,300
• items on hire purchase — but you'll have to continue making payments.

If you:

• own a business - it's likely that the business will be shut down by the Official Assignee and any assets will be sold to pay your creditors.
• own a house - it may be sold to repay your creditors. This will depend on whether there is any equity in the house (it's worth more than the mortgage(s) owed on it). If your property is owned jointly with another person, the Official Assignee will talk with that person when deciding how to deal with your share of the property. You must continue to make mortgage repayments and pay rates and insurance on the property while the Official Assignee is making the decision on whether to sell your share or not.
• own a term life insurance policy – if it has no surrender value you can choose to continue to pay the premiums but if a claim is made during your bankruptcy the funds will be used to repay your creditors. If this happens you may be able to claim a refund of the premiums you paid. You can choose to let the policy lapse instead, or someone else could purchase the policy from the Official Assignee if it might be difficult to replace (due to age, medical conditions, or increased premiums). If the policy has a surrender value then it’s likely that it will be sold to repay your creditors.
• are owed any money - you must tell the Official Assignee. If any money is paid directly to you, it must be given immediately to the Official Assignee.

If you have already been bankrupt or in a NAP and then you become bankrupt again, the record of all your procedures will stay on the Insolvency register permanently.

Although a bankruptcy can help to resolve your financial problems, it will have a wider impact on your everyday life.

You can check your estate details on our website to make sure we've been told about the creditor. (You should have been sent a code and instructions for setting up an account when your bankruptcy started, if you didn’t already have a username and password.)

1. Search the Insolvency Register for your own name.
   
   
2. Click on your name (in blue and underlined) to see the basic details screen.
   
   
3. Click the More Info button to see details of the claims and check whether the creditor is on the list.

If the creditor is not listed against your estate, give your estate officer their details so that they can be contacted and given a chance to file a claim.

If creditors keep chasing you for payment then give them your estate (insolvency) number and ask them to contact your estate officer. They can also search for your insolvency details on our public register.

Once you have entered bankruptcy you need to cancel any direct debits, unless the type of debt isn’t included in your bankruptcy, e.g. court fines, Child Support. The Official Assignee cannot cancel the direct debit for you. You will need to contact your bank.

If you have an attachment order over your wages for a debt that is included in your bankruptcy, your creditor should tell your employer to stop making the deductions once they receive the report from the Official Assignee. If this does not happen you need to take a copy of your bankruptcy acceptance letter to the District Court that made the order and ask them to cancel the order.

You must apply to the Official Assignee for consent to:

• leave the country, even if it's just temporarily.
• be self-employed, or involved in the running of any business — your application needs to include details of an independent person with financial experience who has agreed to monitor your financial affairs and make sure that you meet all your tax and financial obligations. You must include a letter from them confirming this.
  
  You are considered to be self-employed if you are responsible for paying income tax, GST, ACC or any other tax for yourself or any employees; if you are paid on commission (including if you get wages but also commission that doesn’t have PAYE paid); or if you pay withholding tax eg if you are a building contractor or real estate agent.
  
  You are considered to be involved in management if you are involved in decisions or policies about the finances or business of the company, or if you do more than carry out decisions as an employee. If you are unsure, please ask your Insolvency Officer.
  
  
• be employed by a relative (or a company or trust they control). A relative includes your parent, spouse, child, brother, or sister, and also your spouse’s parent, child, brother, or sister. And your spouse includes your husband, wife, and de facto or civil union partner.

Download a consent form

• Bankruptcy application for consent to enter into business (affidavit) [PDF, 249 KB]
• Bankruptcy application to be employed by a relative (affidavit)(external link)

An annulment is a cancellation of a bankruptcy. An annulment can be granted by the Official Assignee or the court if:

• you should not have been declared bankrupt
• you have fully paid or satisfied all your debts and the Official Assignee's fees and costs
• there has been a substantial change in your financial circumstances since the date you were made bankrupt and you can now pay your debts
• the court has approved a composition.

A bankrupt can apply for an annulment at any time. Because this is a legal process, you should get expert advice before applying.

An application for annulment is made either to the Official Assignee if you applied personally for bankruptcy or to the High Court, if you were bankrupted on the application of a creditor.

You can apply to the Court for a discharge at any time during your bankruptcy. The Court will decide whether to discharge you or not, and whether to add any conditions eg that you can’t be in business for a period of time. Because this is a legal process, you should get expert advice before applying.

Once your creditors have been notified of your bankruptcy, some details of your file will be available on this website. You can log in to see your file and track the progress of your bankruptcy.

• If you applied for bankruptcy online, you can use the same details to log in and look up your file.
• If you applied manually, you should have received an activation code or link with the written confirmation of your acceptance into bankruptcy. You can use this activation code to activate your account on the website.

1. Once you’ve logged in, scroll to top of page and click on Insolvency Register(external link) in the header of website.
   
   
2. Enter your estate number or your name, and click Search.
   
   
3. Click on your name when it appears in blue - this will show you basic information about your file. This information is also available to the general public.
   
   
4. View extra information about your file by clicking on the More info tab at the top of the page.