Hutchison Paul: Insolvency Amendment Bill — First Reading 
Hutchison Paul: Insolvency Amendment Bill — First Reading 
[Volume:653;Page:2022] 
Dr PAUL HUTCHISON (National—Hunua) 
: 
 Thank you Mr Assistant Speaker Roy for the opportunity to speak on the Insolvency Amendment Bill. I absolutely concur with my colleague Katrina Shanks who mentioned that the Hon Simon Power has once again put in very practical and reasonable legislation that will be useful for diminishing the regulatory regime and also addresses a small number of issues that have arisen since the enactment of the Insolvency Act 2006. 
As many colleagues have commented the no-asset procedure can be described as a soft bankruptcy procedure. As we all know in the United States the stigma associated with bankruptcy is quite different from what it is here in New Zealand. Bankruptcy is known as chapter 11 and quite a large number of people go through this difficult time but over there people are able to get back into business much sooner than people here in New Zealand are. The balance I think has gone a bit hard here. But this bill helps—in a small way—to redress some of the difficulties that people get themselves into for no reason other than minor carelessness or misfortune. 
It is important to point out that the bill applies only to debtors who have not previously gone through the no-asset procedure or been declared bankrupt. Of course the provision remains in place for only 12 months although an amendment allows that period to be extended for 25 days in certain circumstances. The bill applies to debts between $1000 and $40000 so there are indeed restrictions associated with it. The procedure provides a one-off opportunity for financially distressed individuals to avoid the stigma of bankruptcy and to rebuild their financial lives. As I pointed out earlier I see numerous examples day to day at my constituency clinics where for reasons of carelessness maybe but more often for reasons of misfortune individuals find themselves in very invidious positions. This provision is a practical way of helping them and allows them to be in a much less onerous situation than bankruptcy which of course has a 7-year period. 
The bill amends the Insolvency Act. It makes two amendments to the existing no-asset procedure and one amendment to the current bankruptcy procedure. A further amendment applies to both procedures and concerns the availability of information about people who have been through the no-asset procedure or who have been declared bankrupt. The changes to the no-asset procedure are significant in that they close a current loophole around fraudulent debt and that indeed is one of the very strong points about this amendment bill. It also allows further investigation of a person who is undergoing the no-asset procedure and of course that is very important in case fraud is involved. 
There are four amendments to the Insolvency Act. The first prevents fraudulent debts under the no-asset procedure from being cancelled when a person is discharged from the no-asset procedure. The current Act does not explicitly exclude fraudulent debt under the no-asset procedure as it does for bankruptcy. An example of fraudulent debt would be where a benefit has been obtained from the Ministry of Social Development on false grounds such as declaring false details giving an alternative identity etc. I think everybody in Parliament would be most concerned when that happens and would applaud a mechanism to bring in any individual who tries to diddle the Ministry of Social Development and the taxpayer out of funds. 
The second amendment reverts to the provisions in the Insolvency Act 1967 around gifts made in the 5 years prior to the debtor becoming bankrupt. Those provisions put the onus of proving that the debtor was solvent at the time of the gift on the recipient rather than on the official assignee. That is in line with a longstanding presumption that debtors are technically insolvent for a period of time before they file for formal insolvency and that gifts during that time are given for the purpose of avoiding payments to creditors. 
The third amendment relates to allowing the official assignee to extend the period of time that a debtor is under the no-asset procedure by a maximum of 25 working days. It is important to have a degree of flexibility around legislation like this. It allows for the investigation of any late objections or information received about the termination of a debtor’s entry to the no-asset procedure. 
The fourth amendment extends the period of time that a debtor’s name remains on the no-asset procedure and bankruptcy public registers. There may be a slight downside here to that because it means that an accurate credit history cannot be compiled and it increases the business risk once debtors’ names come off the registers. Some of that risk will be carried by the economy and some may be paid for by other clients of the lenders. That is one of the realities that have to be contended with when we introduce legislation like this. It is indeed the balance we have to reach and this provision seems to be very reasonable and practical. 
There is no doubt that these amendments are required to maintain the integrity of the personal insolvency process. They also promote confidence in the official assignee’s ability to administer these processes effectively and efficiently to maximise the return to the creditors. One of the very useful aspects of this bill is that no agencies are created under it. That is very much in line with the excellent National Government’s commitment to minimising any bureaucratic activity. The amendments will be operated within the existing bodies. 
The bill certainly extends the length of time that debtors remain on the register. It complies with the Privacy Act. In extending the length of time for debtors to be on the register it reduces the risk to future creditors. It is also consistent with the overriding policy objectives of the personal insolvency legislation. 
All in all this is an excellent bill that has been brought forward by an excellent Minister the Hon Simon Power. I am very pleased with National to support the bill in its first reading in the House. 
Bill read a first time.