Shanks Katrina: Insolvency Amendment Bill — Second Reading 
Shanks Katrina: Insolvency Amendment Bill — Second Reading 
[Volume:655;Page:4998] 
KATRINA SHANKS (National) 
: 
 It is my pleasure to stand here tonight and talk to the Insolvency Amendment Bill. I would like to acknowledge the Otari Probus Club whose members are in the gallery and had dinner at Bellamy’s tonight. They are sitting there listening to this great debate that we are having tonight. 
The no-asset procedure is quite an interesting procedure. It is something that not many people know a lot about because it is relatively new. It sits in a different place from most bits of insolvency legislation. I will give members a couple of facts about the no-asset procedure so that they can understand who is eligible for it. The official assignee may admit a person to the no-asset procedure if satisfied on reasonable grounds that the debtor has no realisable assets has not been previously admitted to the no-asset procedure has not been previously adjudicated bankrupt has total debts of not less than $1000 and not more than $40000 and has absolutely no means of repaying any amount towards those debts under a prescribed means test. That is basically people who have run up debt and do not have any assets at all to pay it back. Between 2007 and March 2009 3194 people applied for this procedure but only 2094 were granted entry to it. So 983 thought that they fitted the prescription but they actually did not. They would have had assets or most probably their debts would have been outside the range we are talking about today. 
It is interesting to talk about the no-asset procedure because it is actually designed for a one-off situation for people who are down on their luck. They have been made redundant they have got sick or they have had a marriage separation and all of a sudden they are carrying a lot of debt which they cannot pay back on a single income. It is for just that one-off situation that people get into. 
Some statistics were given to the Commerce Committee when we asked about the types of people who face these procedures. New Zealand holds statistics but they are based on self-assessment. When we look at New Zealand’s statistics and the United Kingdom’s statistics—the UK has exactly the same type of no-asset procedure but it is based on insolvency services filling out the forms—we see quite a variance in the two categories. The statistics indicate that the way the UK classifies and records the insolvencies or the no-asset procedures is more realistic. 
I will tell members how people get into this situation. Forty-eight percent were cases of individuals living beyond their financial means. These were people who ran up credit and got things on hire purchase but had no way of paying the money back. They ran up credit card debt and knew they could not pay it back. They were living beyond their financial means. There were also one-off situations where people got sick had to take leave without pay and could not pay back their debts. Fourteen percent of cases involved loss of individual or household income 8 percent involved accidents 6 percent involved business failure 5 percent involved failure to deal with tax affairs 4 percent involved relationship breakdowns and 3 percent involved guaranteeing liabilities. The statistics are quite important; we can get an idea and a picture of the sort of person whom this procedure applies to. 
The committee has adjusted this legislation to make it more relevant and to fill in some of the loopholes. This legislation changes four key areas. The first one is that a person cannot gift away any money before he or she goes into the procedure. People were gifting money then going into the no-asset procedure and saying that they had no means and no assets with which to pay the money back. This was a loophole that people were getting through so we have closed it up. 
Also there was a loophole in regard to fraud. People who committed an offence when bankrupt would still stay in the no-asset procedure. They could do illegal activities and still stay in the no-asset procedure. But that has changed under this new legislation. People cannot conceal any fraud and if they are found to have fraudulent means then they are taken out of the no-asset procedure. It is quite important to have these loopholes fixed. 
The other loophole is the discharge of joint debtors. This is where a spouse has a joint debt on a credit card or a business partner has a joint debt on a cheque account or there are co-trustees or joint debtors on something. When someone goes into the no-asset procedure the whole debt does not go in with that person. Only that person’s portion of the debt can go in with him or her. That was another loophole that we found and we have now changed it as well. 
One of the most contentious areas that the committee discussed was the public register in terms of how long someone should be on it and what is fair. We had a great debate on this in the select committee with our officials. We asked for information on what is happening internationally. It is different everywhere we looked so it is hard to tell. We had to draw a line and say that we believed that this was how long someone should be on the register. That was really important. The term was 1 year for the no-asset procedure and we have changed it to 5 years. We picked 5 years because we think it is important to have a balance. The debtors have to be able to come off the register. They are in a no-asset procedure. It is meant to be a one-off. It is meant to be for someone who is down on his or her luck and has hit hard times. It is not meant to be a big big stick. At the same time the people to whom they owe the money—the people whom they borrowed from—such as the finance companies and the credit card companies need to get a good picture of the credit rating and the credit history of people who have been in the no-asset procedure. Taking people off the register after 1 year is most probably a bit too quick; after 1 year they are able to get another credit card or run up some more debt with GE Finance. It is important that people are on the register long enough for the moneylenders to get a feel for their credit history. 
The other concern was multiple insolvencies. A person can be in the no-asset procedure only once. If there are repeat problems with credit in that someone cannot pay it back that person then becomes bankrupt. We changed the term for those people from 7 years to indefinitely. That makes sure that if someone has multiple insolvencies and has gone into bankruptcy a number of times a red flag will go up to indicate that that person is a bad credit risk. That person will be on the public register for a very long time. It was important that we were fair and balanced the debtors and the creditors. 
I spoke to one of my constituents the other day. She most probably needed budgeting advice rather than anything else. It would be interesting to see her case come through the no-asset procedure and I am sure it will. She went to Harvey Norman and basically refitted her house on finance. She has a beautiful plasma television on the wall an LCD television in her bedroom a nicer sofa than I have and a beautiful coffee table. The kitchen is just amazing. It has all the new appliances courtesy of Harvey Norman. She went on a scheme that offered no repayments for 3 years interest-free. The first payment is now due and she has no money. She has absolutely no way of paying it back. She said to me that she could go in the no-asset procedure. I said that actually she most probably could not. She will most probably have to sell some of her assets before she can go on to that procedure. 
The no-asset procedure is not about giving people an out for bad spending; that is not what it is about. When we started looking at it I was really concerned that it would be abused by people who have run up credit deliberately. They knew what they were doing and knew that they would not have the money to pay it back. That is something we will be watching very closely moving forward. 
Thank you Mr Deputy Speaker. It has been my pleasure to support this bill tonight.