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Ford

Diana Clement gets bankruptcy advice wrong

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Reading the article on the Herald by Diana Clement written in 2011

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10719561

"Every year thousands of people give up all hope of paying back their debts and petition for bankruptcy or the lesser No Asset Procedure (NAP)." correction -  Most bankruptcies are by creditor petition and a substantial number of those creditor petitions are by the IRD. People give up hope because creditors refuse to work with the debtor or they onsell debt to collectors who substantially increase the debt beyond what was originally owed and force payments beyond any budget constraints the debtor has.

"You can't manage a business, be a business partner, self-employed or employed by family". correction - you can be self-employed when you are bankrupt. I am. But you need to have permission from the Insolvency Office first. Call me stupid but doesn't a self-employed person manage their own business? Certainly the Official Assignee does nothing to manage my business.

"Even once you're discharged or the order is terminated, bankruptcy and the NAP are noted on your credit record for a further four years, which will hamper you from getting credit" Yes that is correct but there are some banks who will still lend you money for a mortgage. And the insolvency office will literally add thousands of dollars in new debt for administering the bankruptcy. The debt clock continues from the day the bankruptcy begins.

"Nor does bankruptcy free people from fines, court-ordered reparation, maintenance, child support, student loans and debts based on fraud." Correction -  student loan debts do sometimes get written off in a bankruptcy. Mine has been. Its at the discretion of the IRD as to whether they bring forward the loan under the new IRD number.

"If your debts are over $40,000 you can't use the NAP" - wrong. The amount is $47,000 according to the insolvency and trustee website.

 "In the digital era mention of a bankruptcy may remain online for many years on websites such as BDCentral.co.nz, which lists bankruptcies and liquidations of companies" Hmmm - http://www.bdcentral.co.nz looks like a website with articles on insurance. A shame Ms Clement didn't mention that the NZ Gazette which is the publically searchable government paper that lists bankruptcies and NAPs for life. And if the bankruptcy claim is defended in the high court, then the results are also made public for life on the courts webpages. Least we not forget www.insolvencywatch.co.nz which, according to the NZ Police is a credit reporting website. It lists the full name and residential addresses of all bankrupts and NAPs. The owner of that website will also contact and discuss a private individual's bankruptcy with the Official Assignee.

"But Official Assignee David Harte points out that the Insolvency and Trustee Service assesses the reasons for bankruptcy." Really?? The statement of affairs form asks the debtor to state why they believe they are in debt (or words to that effect). Certainly the Insolvency and Trustee Service have never assessed the reason for my bankruptcy. Or if they have, they haven't told me about it. Certainly it was not in the files that the OA holds against me. But they do treat bankrupts as criminals, so they will always be looking for fraud and to build a case against the bankrupt so they can bring a claim to the high court if need be and that need will only be if the bankrupt holds substantial cash or assets that the OA can claim. In my opinion its similar to a police prosecution that brings a criminal claim against a defendent who they believe committed a crime. Reading some bankruptcy court cases it seems to be the High Court Judge that determines what the reasons for insolvency are. But those reasons don't play a part in sentencing, nor do they influence the judge's decisions. Or how the bankruptcy progresses.

"Over and above that, all customers of a company such as GE Money or even the ASB Bank end up paying for the customers who choose bankruptcy or NAP." Really? So they don't have insurance? Least we not forget that a bankrupt would likely have banked with the bank or held credit cards and have been paying a ton more interest to the bank or lender so the cost to the bank in actual money lost is minimal. I've not seen a drop in banks shareholder payouts due to people becoming bankrupt.

What annoys the banks and lenders most, is not the outstanding debt but the fact that the bankrupt will no longer be able to obtain lending for the next three years. That is the real loss of income.

Our laws mean the poor bankrupt is forced to wear the bankruptcy burden for the rest of their lives, even though it "takes two to tango"

"If you choose that last course of action, get guidance from an accountant or business adviser. " Question. And just how do you suppose a bankrupt is going to pay for an accountant or lawyer. Bankrupts don't get access to legal aid. Bankrupts who have a high networth do use lawyers but it doesn't make a difference to the outcome. But its better to use the money for a lawyer to defend their claims than have to give it to the official assignee who is going to use that money to invest with, which they can do under the insolvency act. And to pay the outrageously priced bankruptcy admin costs, which, during the course of a bankruptcy can be hundreds and thousands of dollars. Bankruptcy is a hugely profitable business for the government. And we are suckers at the other end of it!

Ford

 

 

 

 

 

 

 

 

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