Rose and John both struggled to find new jobs and with only their savings to live on they could no longer meet their mortgage repayments.  Unfortunately, they were served with a Default Notice.

If you are served with a Default Notice under the Property Law Act, you will usually be given a period of not less than 20 working days after receiving it to remedy your defaults.  If you cannot do this, then, under the conditions of the mortgage, the Bank may sell your home.

Many people do not realise that if the proceeds from the sale of the house fall short of repaying the mortgage, then the Bank can still pursue you for the remaining sum.  This means that, unfortunately, after the loss of your house, your trials may not be over.

The bank sold Rose and John’s house at a mortgagee sale.  Their house sold for much less than expected and the proceeds from the sale didn’t cover all of their debt, and they were left owing the bank $10,000.

Both Rose and John assumed that because they had given up the security for their mortgage, their house, and let the bank sell it to repay their debt, their obligations as debtors had been fulfilled.  However, this was not the case.

Because they still owed $10,000 the bank was legally entitled to pursue them for the remainder of the money, and did so.  Banks include such terms and conditions in their mortgage agreements, and it is very important for potential and existing mortgagors to be aware of them.  The bank demanded they repay the outstanding monies, and Rose and John had no option but to comply.

Their unfortunate plight serves as a warning to all mortgagors – you may be able to run from a mortgage shortfall, but you can’t hide.
To avoid bankruptcy it is important that debtors take steps to come to a reasonable arrangement with the bank to pay the balance off.  If necessary seek help from a competent professional to negotiate with the bank.

For further information or advice on dealing with your creditors and protecting your assets call us on 0800 733 402.

In these difficult economic times many debtors are holding back and delaying making payments unless put under pressure to do so.  I have recently acted for several firms who have been under financial pressure due to their debtors delaying payments.  Timely action has resulted in immediate payment of the debts much tot he relief of the clients.  Their poor cash flow was threatening their business, but they are now back on track.

You may need assistance at times with debt management, how to avoid bad debts, how to deal with debts that go bad, maximising your chances of getting paid, terms of trade or security interests.

I will be running a seminar to assist in these areas.  This will be in a relaxed atmosphere with plenty of time for questions.  Learn practical tips to avoid having bad debts and collecting those you already have.

To register your attendance, enter your details below and submit or call Maureen Harris on (04) 473 6850.

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Debtor Control Seminar

In these difficult economic times many debtors are holding back and delaying making payments unless put under pressure to do so.  I have recently acted for several firms who have been under financial pressure due to their debtors delaying payments.  Timely action has resulted in immediate payment of the debts much to the relief of the clients.  Their poor cash flow was threatening their business but they are now back on track. 

You may need assistance at times with debt management, how to avoid bad debts, how to deal with debts that go bad, maximising your chances of getting paid, terms of trade or security interests.

I will be running a seminar to assist in these areas.  This will be in a relaxed atmosphere with plenty of time for questions.  Learn practical tips to avoid having bad debts and collecting those you already have.

To register your attendance, enter your details below and submit or call Margaret Owens on (04) 473 6850.

cforms contact form by delicious:days

Debtor Control Seminar

In these difficult economic times many debtors are holding back and delaying making payments unless put under pressure to do so.  I have recently acted for several firms who have been under financial pressure due to their debtors delaying payments.  Timely action has resulted in immediate payment of the debts much to the relief of the clients.  Their poor cash flow was threatening their business but they are now back on track. 

You may need assistance at times with debt management, how to avoid bad debts, how to deal with debts that go bad, maximising your chances of getting paid, terms of trade or security interests.

I will be running a seminar to assist in these areas.  This will be in a relaxed atmosphere with plenty of time for questions.  Learn practical tips to avoid having bad debts and collecting those you already have.

To register your attendance, enter your details below and submit or call Margaret Owens on (04) 473 6850.

cforms contact form by delicious:days

If the liquidator considers that payment to a creditor has given them a preference over other creditors, then the liquidator may file a notice within two years of the liquidation to have payment set aside, and require the return of the funds that were paid to the creditor.

The rules specifically provide that in order to constitute a voidable preference claim the transaction must meet all of the following:

• Payment must have been within two years prior to the commencement of the liquidation; and 
• Be made by a company unable to pay its due debts; and 
• Have enabled the creditor to receive more towards the satisfaction of a debt than they would have otherwise received in a liquidation.

If a creditor receives a payment from a customer that later goes into liquidation and the appointed liquidator considers that the payment has given the creditor preference over other creditors they may file a notice to have the payment set aside.

Liquidators must issue Court proceedings as long as the creditor objects in writing to the liquidator’s notice within 20 working days.  Previously the liquidator could issue a notice and the creditor was required to commence Court action if it disagreed with the notice.

Generally difficulties with proof and cost mean liquidators will only worry about large payments within the last six months.  If you had due debts paid within six months of the liquidation the onus is on you to prove you don’t have to give it back.  Beyond six months the burden of proof is on the liquidator.

The problem for creditors is how to avoid claw-back when you know that your customer is in trouble.  It is hard to say you didn’t know they were in trouble when you only got paid as a result of stopping credit or sending the debt for recovery action.

To prevent a claw-back the creditor must be able to show that it:

• Acted in good faith; and 
• Could not reasonably have suspected that the company was or would become insolvent; and 
• Gave value for the property or altered its position in the reasonable belief that the transaction would not be set aside.

It appears that ignorance of the debtor’s perilous position will provide a defence and this flies in the face of good credit management.

Our advice to businesses providing goods on credit is to:

• Have terms of trade in writing and make sure all customers have a copy.  Send out statements to all customers that owe you money each month. 
• Look for a clean credit history and a demonstrated ability to pay. 
• Undertake diligent and regular bookkeeping. 
• For those that do not settle their account within the agreed payment terms, this customer must be closely monitored to avoid the debt becoming seriously overdue.  Don’t delay… make the time to call and ask for payment. 
• Also, be aware that it is worthwhile “screening” new customers to make sure they can pay.  Do not be a victim of those unreliable, late-paying, customers that often shop around for an easy target in hard times. Remember the old adage, “If it seems to good to be true, it probably is”. 
• Just because the banks have less money to lend it doesn’t mean that you should start being your customers’ bank!  Remember banks require interest as well as payment on time! 
• Trade business will be competing for a limited amount of cash.  That means many clients that usually pay on time are likely to find it harder to continue doing so.  Your debtors could stretch out beyond the number of days you currently tolerate, putting extra pressure on your cash flows.  To combat this, your business must be particularly diligent about managing cash.

I was contacted recently by a client regarding their security registered over one of their customer’s properties.  The customer was a director of a number of companies and wanted the security which was currently registered under the name of one of his companies to be transferred to another property which was registered to another company.

I was contacted by the customer’s solicitor advising that the matter was urgent and that they required confirmation from our client that they would consent to a withdrawal of the caveat over one of its properties in exchange for a new caveat to be registered over a different property.  If this is agreed to it is necessary for new loan documentation to be signed by the customer to support the caveat being registered.

The credit account application and agreement to mortgage also must be in respect of the property which the caveat is to be registered over.  A failure to take these steps would have seen the security become worthless and the potential loss of tens of thousands of dollars should the customer default.

• Diligent, regular book keeping.
• Stringent credit checking of applications for new accounts.

We can assist with systems to avoid bad debts.

However, every firm at some time has bad debtors, and for the sake of the company’s survival and the job security of its employees (and its own credit rating), bad debts must be identified and dealt with promptly.  Early attention to debt recovery is vital to its success and how necessary it is to deal with recalcitrant payers firmly at the earliest opportunity.

We, at Rainey Collins, have a dedicated debt-recovery team.  We have a great deal of experience in the debt collection field and are very aware of what a drain on a firm’s resources bad debtors are.

Some of the steps, which may be involved in debt collection, are:

• Letter of demand. 
• Phone calls to debtors at home and or work. 
• Instalment arrangements to suit. 
• Judgment (undefended): 
  • Preparation and filing proceedings, 
  • Appearance on judgment. 
• Judgment (defended): 
  • Preparation and filing proceedings, 
  • Receiving a statement of defence, 
  • Preparation of all timetabling matters, 
  • Attending to discovery of documentation, 
  • Briefing any witnesses, 
  • Preparing for hearing, 
  • Attendance at hearing. 
• Enforcement: bankruptcy, attachment of wages, writ of sale of property, winding up of company.

Fees will vary depending on the complexity and amount of the claim and the steps involved in pursuing the debtor, the cost of serving proceedings will depend on how difficult the debtor is to locate, advertising costs vary depending on location.

We charge for an initial letter of demand at a set fee which includes some follow up contact by phone with the debtor.

We are engaged to collect debts throughout New Zealand for individuals and large corporate clients.  We have a reputation for success. Give us a try with your bad debtors.

In a recent case, even though lawyers are not permitted to represent people in the Disputes Tribunal, we assisted with preparation of the case and this enabled the best evidence to be put forward and holes in the debtor’s defence to be exposed. This resulted in Judgment against the debtor for the full debt and an order for payment within 10 days.

As part of the small business relief package, the Government has announced increasing the maximum level at which claims can be considered in the Disputes Tribunal.

With maximum claim levels a significant $15,000 or $2,000 with the consent of both parties, you may want to obtain professional advice. We often assist clients on how best to present their evidence, find witnesses and make submissions. We can also advise you on what questions to ask the other side to expose flaws in their claim or defence.

Disputes Tribunals decisions are very difficult to appeal. We can assist you to get the best possible results, so you can get your money into your bank account where it belongs and get on with running your business.

You do not have to watch helplessly as your debtor wastes money or disappears while you wait for a Court order.

In certain circumstances the Court can make orders protecting a debtor’s assets which will secure a creditor’s position until a Final Judgment can be made about this debt.  In urgent situations the Court can make an order before you have time to put together all the documents needed for a full Court case against your debtor.

What follows are a couple of options available to creditors in protecting their position pre-Judgment.

An Injunction (known as a “Mareva” injunction) (Freezing Order)

This Court order freezes a debtor’s assets and prevents a debtor from selling or otherwise disposing of any property without the Court’s approval.  That includes bank accounts, land, vehicles, or any other assets.

An example is the Court freezing the assets of boxer David Tua’s management company.  Those assets were frozen until the dispute over Tua’s boxing income could be resolved.

A Court order freezing assets is an extremely useful tool for a creditor owed money and concerned about getting paid.  However, the Court is careful about making such an order because of the serious restrictions it imposes on people and the damage that could result to a business.

To get such an order creditors need to be able to show the Court that:

1. The debtor resides or carries on business in New Zealand.
2. The debtor owns assets in New Zealand.
3. They have a good arguable case that the debtor owes them money.
4. There is a risk that the debtor is going to dispose of the assets without paying the debt.
5. There is no good reason that the Court should not make an order.

A creditor will also need to satisfy the Court that they will be responsible for any unnecessary damage to the debtor that arises from the order freezing assets.  The Court will also want information about other people that might be affected by such an order, such as other creditors, or innocent parties to contracts signed by the debtor.

A Mareva injunction will not give a creditor any rights in the debtor’s property, nor any priority over other creditors.  Once Judgment is obtained, a creditor will need to enforce against the debtor’s assets by way of writ of sale or other procedure in the normal way.

Charging Order

This Court order charges a debtor’s specified assets with payment of the amount for which the creditor may later obtain Judgment, and is a useful tool in securing the creditor’s position pre-Judgment.  The Court is careful in making such an order because of the potential damage that it can cause.

To get such an order a creditor needs to be able to show the Court that:

1. They have a good case the debtor owes them money; and
2. There is a risk that the debtor is going to dispose of the assets without paying the debt.

A pre-Judgment Charging order will not give a creditor any priority over any other creditors.  Once Judgment is obtained it will be necessary for a creditor to enforce against the debtor’s property by way of writ of sale or other procedure.

If you believe you are owed money and that the debtor is going to dispose of assets or leave the country to avoid paying their debts always act quickly to protect your position.

Not only can terms of trade allow you to pass the costs of recovery on to your customer and allow for interest to run on the outstanding balance to the date of payment but they could also allow for other protections that can be used to seek Judgment when Court Proceedings are issued.

Such protections can be seen in a recent example where one of our clients instructed us to file Proceedings and seek Judgment for payment of outstanding money owing under a credit account.  The relevant protections included in our client’s terms of trade included:

1. Our client’s ability to exercise their discretion to allocate any payment made by the customer to the account as it saw fit; and
2. Payment of the amount owing to our client had to be made free of any counterclaim, set-off, deduction or other claim.

These provisions proved invaluable when the customer in question came into financial difficulties and tried to dispute the debt that was owing to our client and responded to the threat of litigation by stating that they would file a counterclaim. 

We were able to respond to the customer’s argument on two fronts.  Firstly by stating that as our client had allocated payments to the account as it saw fit the outstanding balance in question did not relate to the supply of goods that they disputed and secondly by pointing out that in any event they had agreed to terms which required them to make payment of the outstanding balance free of any counterclaim.

Our client successfully obtained Judgment against the customer for full payment of the money owing under the credit account.

Had these protections not been included in the credit contract then our client would have had to respond to the factual allegations raised and this would have delayed obtaining Judgment and put up costs as the case went through the standard rather than Summary Judgment processes.