What debts are included when declaring bankruptcy?...

Declaring bankruptcy in New Zealand is a method by which individuals can have their debts written off if they have no viable way of paying them back. This process involves the appointment of an Official Assignee who will investigate the bankrupt’s conduct and financial affairs. As well as this, they will collect the bankrupt’s assets, and sell them to repay as much of their debt as possible.

Once an individual is declared bankrupt in New Zealand, most of their debt will be discharged. 

If you have a contingent debt this will be included in the bankruptcy, but will only be paid from the bankruptcy proceedings if the debt becomes payable. An example of a contingent debt is if you sign on as a guarantor of a debt, and the debtor fails to pay, you then become liable to pay the debt off.

If you have a joint debt, this will be included in the bankruptcy proceeding. However, the other party will be liable for the full amount of the debt.

There are a few notable exceptions to the debts that bankruptcy will provide relief from.

One such exception is debt that has been incurred overseas.

A debt that has been incurred outside of New Zealand will be written off in New Zealand. This means that as long as the bankrupt remains in New Zealand, they should not be pursuable by an overseas debt collector for any debt incurred overseas.

However, if the bankrupt returns to the country where they incurred the debt, their bankruptcy status in New Zealand will not apply, and they may be pursued to repay that debt.

Other exceptions include debt that the bankrupt incurs after being declared bankrupt, child support or spousal maintenance payments, court fines and reparation, and debts that are incurred fraudulently.

An example of a debt that has been incurred fraudulently is a work and income benefit payment to an individual who was not eligible to receive the payment, but obtained it by lying about their income. This kind of debt will not be discharged through a declaration of bankruptcy in New Zealand.

If there is confusion around bankruptcy proceedings in New Zealand, it is wise to seek advice from a professional with experience in the area.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.

Gianna Menzies & Matthew Binnie

Litigation Team
Wellington