Men get into serious debt trouble when they lose their job in their 40s; women get into serious debt trouble through excessive use of credit facilities in their 20s, says the MBIE ITS

Content re-posted from MBIE

The latest Insolvency and Trustee Services (ITS) statistics show that bankruptcy numbers hit an 18 year low in 2018, due to the introduction of alternate insolvency options.

The No Asset Procedure and Summary Instalment Orders were introduced into the New Zealand insolvency regime at the end of 2007 as an alternative option to bankruptcy. Since then bankruptcy numbers have declined over 50 percent with 1,476 bankruptcies filed last year compared to 3,258 in 2007.

“In 2018 we saw a decrease in bankruptcies offset by a corresponding equal increase in No Asset Procedure and Summary Instalment Orders,” says ITS National Manager Robyn Cox.    

“We are pleased to see the increase in Summary Instalment Orders as an alternative to bankruptcy. This is a formal debt repayment plan which allows debtors who owe less than $47,000 and who have the means to repay all or part of what they owe their creditors to do so over time in a structured way.

“This is a win-win insolvency procedure as creditors are guaranteed a return and the debtors are able to get back on track financially much faster.”

ITS works to assist around 3,000 people a year to deal with unmanageable debt.

“By helping them find the most appropriate pathway, we help to reduce the pressure and stigma of insolvency and get debtors back into a better financial position,” says Ms Cox.

“We also provide creditors with certainty as to what is happening to their debt. We balance this with taking targeted compliance action against the small percentage of debtors who break the rules”.

Each year the ITS runs a client survey. In the 2018 client survey many debtors reported feeling a sense of personal shame or guilt from entering into a formal insolvency option but due to having insolvency options available that can help them get back on track many also reported improved health and family life.

“The positive results show that not only are people getting the fresh start that the Insolvency legislation aims to achieve but that there are benefits to society as well,” says Ms Cox.

Data gathered by ITS shows that in the 2017/18 financial year 62% of bankrupts were males with the highest percentage age group being between the ages of 40-44 and that the main cause of insolvency for all bankruptcy debtors was related to unemployment or loss of income.

However the data gathered for Summary Instalment Orders shows that 63% of debtors were females with the most common age group being between the ages of 25-29 and that the main cause of insolvency for SIO debtors was the excessive use of credit facilities. 

More information on the profiles of debtors is available on the ITS statistics webpage or visit www.insolvency.govt.nz.