Shanks Katrina: Insolvency Amendment Bill — Third Reading 
Shanks Katrina: Insolvency Amendment Bill — Third Reading 
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KATRINA SHANKS (National) 
: 
 It is my pleasure to take a call on the third reading of the Insolvency Amendment Bill tonight. This bill came before the Commerce Committee and I acknowledge the hard work of all the committee members and the officials who helped us with this bill. I also acknowledge the submitters who came forward especially those from the citizens advice bureaux and the not-for-profit groups who took time out of their busy days to present submissions to us. They were very powerful. 
The no-asset procedure or NAP is described as a soft form of bankruptcy procedure. It was introduced as an alternative to bankruptcy in December 2009 and it was mainly brought in for people who are down on their luck as opposed to people who are corrupt or who have tried to take the banks for a ride. The no-asset procedure was for people who have got sick and lost their jobs or who have gone into unemployment for other reasons and have debts owing that due to the change in their circumstances they can no longer meet. It was brought in for people like that who are down on their luck. Those who are eligible have no realisable assets that can be sold to pay the money owed to creditors have not entered into a no-asset procedure or a bankruptcy procedure previously and have debts between the value of $10000 and $40000 with no other means of paying them back. After 12 months the debtor is discharged from the debt that is owed and he or she starts all over again—it is like a fresh start. This legislation is also aimed at people in Pacific Island and Maori communities so that they do not have to go to loan sharks when they are down on their luck to pay off debts. This bill is focused on a certain type of person in a certain type of situation. 
This bill fixes up a few little loopholes in the December 2007 legislation. One loophole related to fraudulent debt. Previously if people had fraudulent debt and went through the no-asset procedure that fraudulent debt was discharged as well. This legislation closes up that loophole so that people who have fraudulent debt can no longer have it discharged; once they come out of the no-asset procedure they will still have to pay back that fraudulent debt and any interest owed on it. 
The other loophole related to gifting. If people who owed money to creditors gifted their money away they were able to get away with that. Now there is basically a claw-back: if people in trouble gifted money away up to 5 years previously that money can be clawed back. It was really important to fix that loophole. 
This bill makes an amendment relating to the official assignee. It extends the period of time that a debtor is participating in the no-asset procedure by a maximum of 25 working days. This measure gives the official assignee a little bit more time to do more work to investigate further areas of concern without affecting the no-asset procedure. 
The bill also makes an amendment to extend the period of time that a debtor’s name remains on the bankruptcy public register. This was probably the most contentious issue for the select committee and for the submitters. Previously people who were participating in the no-asset procedure were on the public register for only 1 year those who were bankrupt were on the public register for 7 years and those who were subject to a summary instalment order were on the register for 5 years. It is really important to get the right balance between creditors and debtors. We have to ensure that creditors understand what they are getting into if they are lending money to people with a bad credit-rating. We had an in-depth and heated discussion on that over many sessions and we came up with a compromise. We thought that 5 years would be an adequate period of time to be on the register. It is a significant increase from 1 year but it is still less than 7 years. People with multiple insolvencies are basically on the register indefinitely. This measure gets the balance right so that creditors who are lending people money can understand what is going on. 
The no-asset procedure is relatively new so we have only quite recent data. From December 2007 to February 2009 4000 people were discharged from the no-asset procedure process. That is quite significant. Previously those 4000 people would most probably have gone through some form of bankruptcy so the no-asset procedure has been good for them. 
Overall though unfortunately insolvency has increased in New Zealand whereas bankruptcy has decreased. New Zealanders have still not got it quite right in being able to pay back money they have borrowed and in how they manage their finances. The select committee discussed the issue of financial literacy. We talked about having a component of this legislation provide for people who went through the no-asset procedure to be educated on financial literacy. We thought that that maybe took things a little too far. At the moment we will see how it goes and we can always tweak it later on if we have to. 
It has been my pleasure to stand in the third reading and present this speech to the House today. Thank you.