More than 140 people have signed up for the government’s new insolvency scheme, wiping nearly $1 million in debt and giving struggling consumers a once-in-a-lifetime chance to start afresh.

The scheme could slash bankruptcy rates, which hit a 14-year high last year as easy credit helped push Kiwi household debt over $160 billion. While the bulk of this debt is tied up in housing, consumer debt alone is almost $12.5b. Experts say easy access to credit is to blame.

About two applications a day have been approved since the No Asset Procedure (NAP) scheme started in early December. So far, 54 people have been accepted. They owe on average just under $22,000 each with their combined debts totalling $913,772. Most of the applicants are beneficiaries.
 
Softer than the tough bankruptcy conditions which were originally intended for companies, not individual consumers, the new scheme applies to people who have no assets, owe less than $40,000 and have nothing left in their weekly budget to repay creditors.

A total of 147 applications had been filed with the Insolvency and Trustee Service (ITS) by the end of December and budget advisers are gearing up to help more clients in the post-Christmas season as new figures show Kiwi shoppers spent $4b through electronic transactions in December.

Federation of Family Budgeting Services chief executive Raewyn Fox says the NAP system is a useful tool for clients who had unmanageable debt due to a change of circumstances. One successful applicant, a young mother, says she was struggling with her $10,000-plus debt after a relationship break-up and had only $20 left a week for petrol and food. Credit was too easy to get and her weekly repayments were just covering the loan interest. She says the procedure has lifted a huge burden and given her a chance to start again, budget and avoid debt in the future.

Of the 82 processed applications, the ITS has declined 28, mostly because the amount owed exceeded the $40,000 limit.

• www.insolvencygovt.nz, ph 0508 467658
• www.familybudgeting.org.nz or check the White Pages for budget advisers

Source 
Sunday Star Times – February 10 2008
EMMA PAGE and ROB STOCK