Download Complex Debt

This module gives an overview of some complex
debt issues and some tools by which to deal with
them. It draws from web sources – please note these
down as we go you will need to do further research
on them as you work on debt issues in your role as
an adviser. It assumes limited prior knowledge of
insolvency, hardship or mortgagee procedures. This
module does not address technical issues with
respect to filing insolvency applications as it is
outside of its scope. There are specialist advisers
available to assist and answers can be found by
calling 0508 Insolv; www.insolvency.govt.nz or by
researching the personal insolvency toolkit.
You will receive a number of handouts during the
module for you to use as a reference kit. This
module does not offer all of the answers but does
suggest places where information can be found.
1. To look at insolvency procedures
2.
To look at how to access hardship
provisions
3.
To apply these to complex case
scenarios
4. To look at procedures for mortgagee
sales
you must be unable to repay all debts immediately.
you must be in a position to contribute toward
payment in full or in part over the course of the SIO.
 normally three years but may be extended to five
years.


You must continue to pay any:
Maintenance Orders under the Family Proceedings
Act 1980
 Child support under the Child Support Act 1991
 Student loans
 Court fines and reparation.

This is applicable if:
 Candidates have no realisable assets
 realisable assets exclude cash up to
$NZ1,000
 a motor vehicle up to $NZ5,000
 tools of trade
 and personal and household effects)
-
also, candidates must  not previously been admitted to the no asset
procedure
 not previously been adjudicated bankrupt
 have total debts (excluding student loan) not less
than $NZ1,000 and not more than $NZ40,000.
 the debt level when applying for entry to the No
Asset Procedure is calculated including all
unsecured and secured debt
 complete a means test showing you have no
means of repaying any amount towards your
debts.
It can be done for credit contracts
provided:
 Repayments
are up to date
 Unforeseen hardship is defined as –
illness or injury, losing one’s job, the end
of a relationship or other reasonable
cause.
Request for a reasonable variation to the
terms of the credit contract - following
ways:
 Extending
the contract term and reducing
the amount of each payment due under the
contract
 Postponing, during a specified period, the
dates on which payments are due
 Extending the contract term and postponing
during a specified period the dates on
which payments are due under the contract.
The debtor must be able to meet the
new arrangements.
Other arrangements:
A reduction in interest rates,
reduction of the unpaid balance or
other amendments to the contract
can be requested but do not have to
be considered.
Cannot apply if:
currently in default on a payment
credit limit has been exceeded
hardship was reasonably
foreseeable at the time of
entering into the contract
Financial hardship under KiwiSaver
www.kiwisaver.govt.nz/already/get-money/early/hardship
Accessing your Kiwisaver funds is at the discretion
of the scheme provider.
 Hardship under Kiwisaver is defined as:
 Unable to meet minimum living expenses
 Unable to meet mortgage repayments on the home
you live in
 Modifying your home to meet specific needs
because of you or your dependent family member
having a disability
 Suffering from a serious illness

Incurring funeral costs if a dependent family
member dies
 Paying for medical treatment if you or a dependent
family member:
• Becomes ill
• Has an injury or
• Requires palliative care
 You can withdraw - your contributions and your
employer contributions
 You can’t withdraw the $1000 kickstart or any
member tax credits

1.
Look at the main issues –immediate
problems, main concerns
2. Look at what’s possible drawing on what
has been learned today – what would
they suggest to this client?
3. What are the obstacles to solving this
case?

1st missed mortgage payment

Penalty fees are imposed for missed payments.

2nd missed payment – a second letter is sent.


The number of letters sent is determined by the bank’s
individual policy. Anything from 6 – 15 letters sent in a
two month period.
If, after 2 months of the bank observing the account,
there has been no action or contact by the
mortgagee/home owner – the mortgage is sent to debt
recovery or an ‘asset manager’.
After 3 months of mortgage arrears a Property Law Act
Notice (PLA) is sent out.
This is held back if there is any contribution, contact or
payment made on the arrears. The PLA is only issued if
there is no contact.



If after 4 -6 months there has been no contact or
repayment of the full amount owing including penalties
and interest; the mortgagee sale notice is put up outside
the property.
If there is still no response by the homeowner, the
bank’s legal department takes over and the sale is
initiated.

The length of time it takes to make the sale varies
considerably.

The mortgagee/home owner is notified by registered
mail.

The bank will have a specific relationship with a real
estate agent who handles the sale.
Nb – banks all operate differently so there will be a lot of
variation in this process.