Bankruptcy

If you have more than $50,000 in unsecured debt, bankruptcy is your only insolvency option.

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

Meet Jono and Sarah

Watch as Jono and Sarah talk about their financial challenges and explore the impact that bankruptcy will have on their individual circumstances. 

I owe more than $50,000 that I can’t manage

Video transcript: I owe more than $50,000 that I can’t manage

[Audio: Gentle music.]

[Visual: Background is 3 geometric triangular shapes in teal, turquoise and coral colours. New Zealand Insolvency and Trustee Service branding in white in the middle of the page.]

[Visual: White writing changes to read ‘I owe more than $50,000 that I can’t manage’.]

[Visual: Screen switches to the presenter standing in a living room setting. In the bottom right corner of the frame, a New Zealand sign language interpreter translates throughout the video.]

[Audio: Presenter speaks.]

Presenter: No one wants to be in a position where they can’t repay their debts.  It can put a lot of stress on you and your whanau. But there is help available if you’re facing financial difficulties and can’t seem to get on top of things. 

If you owe more than $50,000 in unsecured debt that you just can’t repay, bankruptcy might be the right insolvency option for you. 

The good news is that once you’re bankrupt, creditors can’t keep chasing you for payment, which can provide some relief.

[Visual: Teal box appears in top right-hand corner of the screen with white writing reading ‘Bankruptcy typically lasts for 3 years’.]

Presenter: Bankruptcy typically lasts for 3 years, and once it’s over, most of your debts will be wiped clean.

[Visual: Turquoise box appears in top right-hand corner of the screen with white writing reading ‘Debts excluded:

  • Court fines and reparations
  • Child support or maintenance
  • Debts incurred by fraud’.]

Presenter: However, it’s important to know that some debts, like court fines and reparations, child support and maintenance payments won’t be included in your bankruptcy.  You will need to keep paying those debts even when you’re bankrupt.

[Visual: Screen switches to Jono sitting in at a table with bills and invoices spread out in front of him.]

[Visual: Turquoise box appears at lower left-hand corner of the screen. White writing reads ‘Over $50,000 unsecured debt’.]

[Audio: Jono speaks and sighs.]

Jono: Things have been really hard recently, and my debts are getting on top of me.

[Visual: Turquoise box appears at the top right-hand corner. White writing reads ‘Jono has debt from:

  • Mortgage
  • Utility Bills
  • Debt consolidation loan
  • Credit cards’.]

Jono: I had a good job, but I got laid off a few months ago and I’ve been struggling to scrape together the money to pay my bills ever since.  My mortgage payments have fallen behind, and I’ve been missing my utility bills too now. Now I’m getting penalty and interest charges on top of everything else!

[Visual: Both turquoise boxes close from the screen.]

Jono: I already have a debt consolidation loan, but everything is so expensive these days! I’m using my credit card to buy food and fuel, but because I can’t clear the balance each month, the interest just keeps adding up. 

All up, my debts come to over $50,000 now. I just don’t know what to do.

[Visual: Screen switches back to the Presenter.]

[Audio: Presenter speaks.]

Presenter: Thank you, Jono, for sharing your experience.  It’s tough when life throws unexpected challenges your way, and debt can quickly become overwhelming. 

With over $50,000 owing, bankruptcy is the only formal insolvency option available to you.  It offers a fresh start, but it’s essential to understand its implications.

[Visual: Turquoise box appears in the top right-hand corner. White writing reads ‘Bankruptcy will show on

  • Public insolvency register
  • Credit reporting sites’.]

Presenter: Your name will be on the public Insolvency Register throughout your bankruptcy period and for 4 years after your discharge.

[Visual: Turquoise box closes from the screen.]

Presenter: Your credit rating will also be affected for up to 7 years.  This is the usual length of time that your name will appear on the Insolvency Register, but some credit agencies operate public websites, and they may keep your credit history for longer than 7 years. This may affect your access to some banking or money lending services.

If you apply for bankruptcy, the Insolvency and Trustee Service, acting for the “Official Assignee”, will look after your bankruptcy. They will contact everyone you owe money to on your behalf. 

[Visual: Screen switches back to Jono.]

[Audio: Jono speaks.]

Jono: It would be a relief to not have to deal with my creditors anymore. I feel bad about the whole situation, and I just don’t think I can face them. 

What would happen to my car, and more importantly, my house if I go bankrupt?

[Visual: Screen switches back to the Presenter.]

[Visual: Turquoise box appears in the top right-hand corner of the screen. White writing reads ‘You can keep:’]

[Visual: White writing appears in the turquoise box from the right reads ‘Vehicle below $6,500’.]

[Audio: Presenter speaks.]

Presenter: You can keep your car as long as its value is below $6,500. 

[Visual: In turn white writing appears in the turquoise box from the right reading ‘$1,300 in the bank’, ‘Basic household furniture’ and ‘necessary tools of trade’.]

Presenter: You’ll also be able to keep up to $1,300 in the bank, most of your household furniture, and any necessary tools of trade.

[Visual: Turquoise box disappears to the right.]

[Visual: Turquoise box appears in the top right-hand corner of the screen. White writing reads ‘Your house’ and ‘Considered an asset’.]

Presenter: However, your house will be considered an asset in your bankruptcy, even if you’re still paying off your mortgage. 

[Visual: In turn white writing appears in the turquoise box from the right reading ‘Equity will be assessed’ and ‘May be sold’.]

Presenter: If there’s equity in the property, the Official Assignee may sell it to help pay back your creditors. They will contact your bank to find out how much is owing on the mortgage and decide on the appropriate course of action from there. 

[Visual: Teal box disappears to the right.]

Presenter: Remember, you must be transparent about your assets.  You’ll need to declare any assets you have to the Official Assignee in a Statement of Affairs. The Official Assignee will then assess their value and decide on the necessary actions.

[Visual: Screen switches back to Jono.]

[Audio: Jono speaks.]

Jono: What happens to my student loan when I’m bankrupt?  Until I lost my job, repayments were automatically taken out of my wages.  Will that start up again when I find another job?

[Visual: Screen switches back to the Presenter.]

[Audio: Presenter speaks.]

Presenter: Your student loan will be included in your bankruptcy debts. You won’t need to make any repayments towards it while you’re bankrupt, and at the end of your bankruptcy, just like the other debts included in your bankruptcy, your student loan will be wiped clean.  

[Visual: Screen switch to Jono.]

[Audio: Jono speaks.]

Jono: One more thing – will the Official Assignee manage my bank account when I’m bankrupt.  Will they tell me what I can and can’t spend money on? I couldn’t imagine that.

[Visual: Screen switches back to presenter.]

[Audio: Presenter speaks.]

Presenter: I understand your worries, and it’s natural to have questions about the Official Assignee’s role during bankruptcy. 

[Visual: Turquoise box appears in the top right-hand corner of the screen. White writing reads ‘Official Assignee’s role:’]

[Visual: White writing appears in the turquoise box from the right reading ‘Won’t manage your bank account’.]

Presenter: The Official Assignee won’t manage your bank account. You’ll still have control over your day-to-day spending. 

[Visual: White writing appears in the turquoise box from the right reading ‘Be aware of income, expenses and assets’.]

Presenter: But they will need to be aware of your income, expenses, and assets. Part of the Official Assignee’s role is to ensure a fair distribution of available funds to your creditors. 

[Visual: Turquoise box disappears to the right.]

Presenter: So they will look at how much you earn and assess whether you’re in a position to be able to make regular repayments towards your debts during your bankruptcy period.

Your bank will have the biggest influence on how you can manage your money.

[Visual: Turquoise box appears in the top right-hand corner of the screen. White writing reads ‘Your Bank may:

  • Close your account
  • Limit how you use their services’.]

Presenter: The bank may close your accounts or limit how you use them. For example, you might not have access to internet banking, or you may not be able to have a credit card or debit card. 

[Visual: Turquoise box disappears to the right.]

Presenter: You may also find that it’s harder to get credit after you’ve been discharged. Each bank has its own policies in regard to bankruptcy.

[Visual: Turquoise box appears in the top right-hand corner of the screen. White writing reads ‘It’s a good idea to:

  • Talk to your bank first
  • Consider future banking needs’.]

Presenter: So, it’s a good idea to talk to your bank beforehand to understand how you might be affected. 

[Visual: Turquoise box disappears to the right.]

[Visual: Screen switches to Sarah, sitting at a desk in a working from home setting.]

[Audio: Sarah speaks.]

Sarah: I own my own business and lately it’s been tough.

[Visual: Turquoise box appears in the top right-hand corner of the screen. White writing reads ‘Sarah has debt from:

  • Inland revenue debt
  • Penalties
  • Interest’.]

Sarah: My Inland Revenue debt has piled up, and I realised 6 months ago that I needed help.  I went to see Inland Revenue about a payment arrangement, but between my original debt, penalties, and interest, it just wasn’t an option anymore. 

[Visual: Turquoise box disappears to the right.]

Sarah: I had let things go on for too long before acting, and now it’s all caught up with me.

It was all too overwhelming at the time, and now the Inland Revenue has put me into bankruptcy.  What happens now?

[Visual: Screen switches back to the Presenter.]

[Audio: Presenter speaks.]

Presenter: Thank you, Sarah for opening up about your situation. Facing financial challenges can be difficult, but we’re here to guide you through this process.

[Visual: Turquoise box appears in the top right-hand corner of the screen. White writing reads ‘Statement of Affairs’.]

Presenter: The first thing you must do now that you’re bankrupt is complete a Statement of Affairs.

[Visual: White writing appears in the turquoise box from the right reading ‘Assets, liabilities, income and expenses’.]

Presenter: A Statement of Affairs is crucial, as it lists your assets, liabilities, income, and expenses.

[Visual: White writing appears in the turquoise box from the right reading ‘Affects your discharge date’.] 

Presenter: You can fill out this form online, and it’s really important that you do this as soon as possible, as it will affect the date that you’re discharged from bankruptcy in the future.  Putting off completing the form, means you’ll stay bankrupt for longer.

[Visual: Turquoise box disappears to the right.]

[Visual: Screen switches to Sarah.]

[Audio: Sarah speaks.]

Sarah: I appreciate the information, but my business is my livelihood. I’m really worried about its future during my bankruptcy.  Can I continue to be self-employed now that I’m bankrupt?

[Visual: Screen switches back to the Presenter.]

[Audio: Presenter speaks.]

Presenter: Good question, Sarah.

[Visual: Turquoise box appears in the top right-hand corner of the screen. White writing reads ‘Approval is required to:

  • Be self employed’.]

Presenter: You need approval from the Official Assignee to be self-employed once you’re bankrupt.  You can make an application to the Official Assignee, and it will be assessed on your individual circumstances.

[Visual: In turn white writing appears in the turquoise box from the right reading ‘Manage a business’ and ‘Be employed by a relative’.]

Presenter: While you’re bankrupt, you won’t be able to serve as the director of a company, and you also need the Official Assignee’s consent to manage a business or to be employed by a relative.

[Visual: Turquoise box disappears to the right.]

[Visual: Screen switches to Sarah.]

[Audio: Sarah speaks.]

Sarah: I’m finding this all pretty stressful and I don’t have a lot of family around.  Can I go and visit my mum in Australia?  Her home cooking always makes me feel better.

[Visual: Screen switches back to the Presenter.]

[Audio: Presenter speaks.]

Presenter: Support from family can make a world of difference. 

[Visual: Turquoise box appears in the top right-hand corner of the screen. White writing reads ‘Approval is needed to travel overseas’.]

Presenter: However, while you are bankrupt the Official Assignee needs to approve any overseas travel.  It’s best to submit an application and obtain the necessary approval before making any travel plans. 

[Visual: Turquoise box disappears to the right.]

Presenter: Bankruptcy comes with some restrictions, but it does offer a way out from unmanageable debt.  Once you’re discharged, you won’t have these debts hanging over you anymore. You’ll have a fresh start, free from the burden of debt.

[Visual: Screen switch to presenter.]

Presenter: For more information about your insolvency options, go to insolvency.govt.nz(external link).

[Visual: Turquoise box appears in the lower left-hand corner of the screen providing the website address. White writing reads ‘insolvency.govt.nz’.]

Presenter: Remember, bankruptcy is a significant step and it’s crucial to consider all options and seek professional advice before deciding. 

[Visual: Turquoise box disappears to the left.]

Presenter: There may be other alternatives that better suit your unique situation.

[Visual: Turquoise box appears in the top right-hand corner of the screen. White writing reads ‘MoneyTalks’ with the contact telephone number ‘0800 345 123’.]

Presenter: MoneyTalks is a free helpline offering budgeting advice to individuals, family and whānau. They can put you in touch with financial mentors who can help you understand your financial situation, organise your debt and plan for the future. Call 0800 345 123.

[Visual: Screen switched to teal background.]

[Audio: Gentle music.]

[Visual: Teal and white New Zealand Insolvency and Trustee Service branding and Digital Boost branding show in top corners of the screen.]

[Visual: Appearing slowly white writing reads ‘Want to know more? Insolvency.govt.nz’.]

[Visual: Teal background with the Ministry of Business, Innovation and Employment and New Zealand Government brandings in white.]

[End of video.]

What it is

Bankruptcy is a way to clear your debts if there's no way you can pay back the people or organisations you owe money to.

It's not an easy way out — entering bankruptcy means the Official Assignee has control over everything you own (except things like your clothes and household appliances), and can sell them to pay off your debts.

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.

How it works

You can apply for bankruptcy yourself (debtor's application), or a creditor can ask the court to make you bankrupt (creditor's application). You can be bankrupt more than once in your life.

Once you're bankrupt, creditors can't chase you for any included debt or add any further penalties or interest to the debt you owe. 

Bankruptcy usually lasts for three years from the date that you supplied a completed Statement of Affairs, unless an objection to your discharge has been lodged in which case you will be informed separately.  Discharge is an automatic process and your bankruptcy status in the Insolvency Register will change from 'Current' to 'Discharged’.

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.

[diagram] Bankruptcy life-cycle

After you've applied

  • You'll hear from us within 10 working days.
  • For privacy reasons your application won't be put on the public register unless it is accepted.
  • Until your application is accepted you'll need to keep dealing with your creditors and make payments as normal.
  • If we need any extra information from you, we'll contact you. If you don’t provide the information quickly, your application may be rejected.

After your Bankruptcy application is accepted

Once your application is accepted, it is important to note that:

  • your details will appear on our website.
  • all your creditors will be sent a report. They can log onto our website to get updates after the first report is sent.
  • you should contact your secured creditors and arrange to either:
    • keep making payments under the agreement or
    • arrange for the secured item to be returned/repossessed. You can then stop making any payments under the agreement. They can claim against you for any unpaid amount.

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

View Apply for consent from the Official Assignee

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.