How to undergo bankruptcy within New Zealand

Should I undergo bankruptcy?

In some situations when you are genuinely unable to pay your debts, bankruptcy can be the best way for you to move forward. But before deciding to begin bankruptcy proceedings you may wish to attempt to discuss your situation with your creditors, and see if they are willing to accept small repayments over an extended period of time.

Who can initiate bankruptcy proceedings?

Bankruptcy proceedings can be initiated either by a creditor or by you, the debtor. The different procedures for initiating bankruptcy are set out in the INSOLVENCY ACT 2006.

How do I initiate bankruptcy proceedings myself?

You may lodge your own bankruptcy petition (a "debtor's petition") with the Registrar of the High Court.

You will be declared bankrupt from the date on which you filed the petition, and an Official Assignee will be appointed to control your affairs.

When can a creditor initiate bankruptcy proceedings?

A creditor may initiate proceedings if:

• you owe a debt of at least $1000, and
• you committed an "act of bankruptcy" (see below) in the three months before the creditor filed the petition, and
• the debt is a liquidated sum payable either immediately or at some certain future time (a "liquidated" sum means a fixed amount, as opposed to an amount that is not fixed and must be proven, such as damages in a car accident)

If the court declares you bankrupt, an Official Assignee will be appointed to investigate your affairs.

What is an "act of bankruptcy"?

The INSOLVENCY ACT 2006 contains a long list of acts that constitute an act of bankruptcy. Two common acts are:

• Failing to satisfy a bankruptcy notice - A creditor can get a bankruptcy notice from the Court if he or she has obtained a Court judgment that you owe the debt. The notice requires you to pay the debt, or to give security for it or settle it in some way, to the satisfaction of the creditor or the Court. If you don't do this within 14 days you have committed an act of bankruptcy.
• A return of nulla bona - This is where a Collections Officer (bailiff) from the court has attempted to seize your property under a distress warrant to satisfy the debt, but found no property of yours to seize ("nulla bona" is Latin for "no goods").

What is the effect of being adjudged bankrupt?

For the duration of your bankruptcy you are not permitted to:

• be a director of a company
• enter into or carry on a business

How long does the bankruptcy last for?

You will be automatically discharged from bankruptcy after three years. However, you may seek a Court order that you be discharged earlier.

What are the Official Assignee's powers once I've been ruled bankrupt?

The Official Assignee has many powers under the INSOLVENCY ACT 2006 as to how to deal with your property and your creditors. One that can have a significant effect is the power that the Official Assignee has in certain circumstances to set aside transactions that you entered into during the three months before the court declared you bankrupt.

Is the bankruptcy order publicised?

The bankruptcy order will be advertised in the newspapers. It will stay on your credit rating.

Cautionary notes

• A bankruptcy order has many far-reaching effects that will impact on you for the rest of your life. It will have a profound effect on your business dealings in the future. For these reasons you should think carefully before you decide to lodge a debtor's petition for bankruptcy. You should obtain legal advice so that you are aware of all the consequences.