Lotu-Iiga Peseta Sam: Insolvency Amendment Bill — First Reading 
Lotu-Iiga Peseta Sam: Insolvency Amendment Bill — First Reading 
[Volume:652;Page:1957] 
PESETA SAM LOTU-IIGA (National—Maungakiekie) 
: 
 I rise to speak in favour of the Insolvency Amendment Bill. This bill amends the Insolvency Act 2006 as has been said earlier to address a small number of significant issues that have arisen since that legislation was passed. The bill as has been stated preserves the integrity of the no-asset procedure by preventing the discharge of fraudulent debts and of bankruptcy by restoring the official assignee’s ability to recover those gifts made by a person prior to bankruptcy. The bill also amends public register provisions to better enable creditors to make informed lending decisions by ensuring a public record of people who have been discharged from the no-asset procedure is available for an appropriate period of time. 
That period is yet to be finalised. It also provides for permanent public records where the offender has had multiple insolvency events. 
The bill makes two amendments to the existing no-asset procedure and one amendment to the current bankruptcy process. The fourth amendment is the one that may be contentious. 
The no-asset procedure has been described as the soft bankruptcy procedure. It applies to debtors who have not previously gone through the no-asset procedure or been declared bankrupt and it remains in place for only 12 months. After 12 months the debtor is discharged from the debts that were owed at the start of the period. We know that the debts are between $1 and $40000 and that entry into the no-asset procedure can be refused only by the official assignee. The procedure provides a one-off opportunity for financially distressed individuals to avoid the stigma of bankruptcy and to rebuild their financial lives as well as their personal lives. 
The changes to the no-asset procedure are significant in that they close a current loophole around fraudulent debt. We seem to have cross-party support for closing that loophole. The changes also allow for further investigation of a person who is undergoing the no-asset procedure. 
I will turn to the four amendments to the Act. The current Act does not explicitly exclude fraudulent debt under the no-asset procedure as it does for bankruptcy. An example is where someone racks up a fraudulent debt where maybe a benefit has been obtained under false pretences from a Government department. The changes stated will prevent fraudulent debtors from avoiding their legal obligations to repay a debt. That is a good thing. It is about personal responsibility accounting for one’s mistakes and putting right what has been done wrong. 
The second change I refer to is a reversion to the provisions in the Insolvency Act 1967 around gifts made in the 5 years prior to someone becoming a 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. This is in line with the 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. For example if a husband is insolvent and gifts a number of items to his spouse or children then that is deemed to be captured by the legislation. In my view this not only reduces the workload of the official assignee but also clearly puts the onus on the debtor to discharge that duty before he or she is absolved of that debt. 
The third amendment allows the official assignee to extend the period of time a debtor is under the no-asset procedure by a maximum of 25 working days. This allows for the investigation of any late objections or information received about the termination of a debtor’s entry to the no-asset procedure. In my view it is a common-sense provision. It allows the official assignee the requisite time and eases the workload so that the right decision is made in the right circumstances. 
The fourth amendment—probably the most contentious point that the former Minister of Commerce and the current chair of the Commerce Committee Lianne Dalziel pointed out in her representations before me—is around extending the period of time a debtor’s name remains on the no-asset procedure and bankruptcy public registers. Currently a debtor’s name remains on the no-asset procedure register only until the debtor is discharged from the no-asset procedure process which is up to 12 months. This prevents future investors lenders and credit-rating agencies from accessing that information once the debtor has been discharged. That information once that time period has expired cannot be accessed by lenders credit agencies and future investors. That is a very important and crucial point. 
Hon Lianne Dalziel 
: It’s a decision we made 2 years ago. 
PESETA SAM LOTU-IIGA 
: It is a decision that the former Minister made 2 years ago but that we are about to— 
Hon Lianne Dalziel 
: No Parliament. 
PESETA SAM LOTU-IIGA 
: It is a decision that we are about to debate at future select committee meetings. 
A bankrupt debtor remains on the public register for a minimum of 7 years. After a bankrupt debtor is discharged investors lenders and credit agencies cannot access that bankruptcy information. So there is a discrepancy there. 
There is a difference between bankruptcy and the no-asset procedure which we will investigate. Under the current legislation an accurate credit history cannot be compiled. As the Minister of Commerce alluded to earlier that presents in itself an increased business risk. Although I accept the argument made by the Hon Lianne Dalziel that we may have a person who acts in good faith and who becomes bankrupt during the normal course of his or her business career we also have to balance that consideration with the needs and desires of investors lenders and credit agencies. They require up-to-date and accurate information as to a person’s financial risk. 
This is a critical point and it is one we will get into serious discussions over. As the deputy chairperson of the Commerce Committee I would be happy to hear representations and to listen to the submissions of the Privacy Commissioner and other parties from the business area and from across the board even from those who may have been made bankrupt under the no-asset procedure and have experienced a revival in their fortunes. I think it is important to hear submissions from across the board. 
This bill is about delivering for businesses. It is about delivering for individuals who have made errors but it is also about delivering on the rule of law. The rule of law states that one should not profit from one’s own dishonesty fraudulent behaviour or other lack of probity in one’s business transactions. 
The amendments are required to maintain the integrity of the personal insolvency processes. They also promote confidence in the official assignee’s ability to administer these processes effectively. As I said earlier these changes will prevent fraudulent debtors from avoiding their legal obligations to repay debt. The bill also removes the potential for a dishonest person to be rewarded. In my view it is consistent with the overriding policy objectives of the personal insolvency legislation. I reiterate that I support this bill. I look forward to the vibrant discussions during the select committee process. That is my submission.