Shanks Katrina: Insolvency Amendment Bill — First Reading 
Shanks Katrina: Insolvency Amendment Bill — First Reading 
[Volume:653;Page:2018] 
KATRINA SHANKS (National) 
: 
 I rise today to contribute to the debate on the Insolvency Amendment Bill. Let me say first how pleased I am that I have been given the opportunity today to speak to this bill which I am enthusiastically supporting. This is an important bill and I am glad it is before the House. I would like to give some background on what the no-asset procedure is for all those people who are listening; we are very good at using these terms that nobody really understands. The no-asset procedure has been described as a soft bankruptcy procedure. It applies only to debtors who have not previously gone through the no-asset procedure or who have not been declared bankrupt and it remains in place for 12 months only. After 12 months the debtor is discharged from the debt owed at the start of the period. It applies to debts between $1000 and $40000. Entry into the no-asset procedure can be refused by the official assignee. The procedure provides a one-off opportunity for financially distressed individuals to avoid the stigma of bankruptcy and enables them to rebuild their lives and that is really really important in the times we are in now when many people are facing financial stress. Many people require this procedure so that if they go into bad times which are no fault of their own but are due to the economic times we are in and they lose their jobs and cannot meet their commitments they will not have bankruptcy hanging round their necks for a very long time. 
This bill amends the Insolvency Act 2006 to address a small number of issues that have arisen since enactment. The Insolvency Act 2006 was enacted as a result of a major reform of New Zealand’s personal and corporate insolvency laws which came into effect in December 2007. The Ministry of Economic Development proposes that the Act be amended to maintain the integrity of the personal insolvency processes and further to enable better access to the respective public registers regarding a debtor’s previous insolvency. The status quo is not working and it is creating many problems. 
Currently the no-asset procedure allows debts that have been incurred fraudulently to be discharged under that process. The bankruptcy laws which the no-asset procedure is a subset of and an alternative to prohibit fraudulent debts that have been written off. This gap in the law contradicts the overriding public policy objectives of the personal insolvency laws which are designed to grant a debtor discharge from all pecuniary liabilities arising contractually while not writing off debts that have their origin in fraud. The law currently provides that all people admitted to the no-asset procedure must be discharged 12 months after entering the no-asset procedure. Unlike bankruptcy the official assignee does not have the ability to extend the period of discharge to properly investigate any late information relating to a debtor’s termination from the no-asset procedure including objections that are received from creditors and other interested parties. This prevents the official assignee from undertaking a thorough investigation thereby undermining the natural justice process that the official assignee is required to adhere to under the Act. That is why extending the period of discharge under a no-asset procedure is a good thing. 
The insolvent gift provisions in the Act allow gifts that have been made by the debtor donor prior to adjudication of bankruptcy to be clawed back by the official assignee for distribution to all the creditors. The insolvent transaction provisions in the Act were amended as part of the overall insolvency reform in 2006 to promote consistency with the voidable transaction provisions in the Companies Act 1993 and further to reflect a modern and simple drafting style. The Act currently provides that any gifts made in the 2-year period prior to the adjudication of the debtor are presumed to be void but this presumption is rebuttable if it is proven that the debtor was solvent at the time of making the gift. The law also provides that any gifts made by the debtor in the 2 to 5-year period prior to the adjudication can be made void but the official assignee has to prove that the debtor was insolvent at the time of making that gift. Basically that is saying that if someone has gifted money and should not have then it can be clawed back. 
The amendments may have inadvertently weakened the voidable gifts provision under the Act and imposed an administrative burden on the official assignee. These have a negative impact on the returns to the creditors. The public register provisions in the Act record details of persons who have entered into no-asset procedures or bankruptcy for 1 year and 7 years respectively. The problem with these specified periods is that they do not allow future lenders or credit-rating agencies access to information beyond these time frames in order for them to undertake a proper assessment of the creditworthiness of an individual. 
This bill preserves the integrity of the no-asset procedure by preventing the discharge of fraudulent debts and bankruptcy by restoring to the official assignee the ability to recover gifts made by the person prior to bankruptcy. This bill also amends the public register provisions to better enable creditors to make informed lending decisions by ensuring that a public record of people who have been discharged from the no-asset procedure is available for an appropriate period and providing for permanent public records where a person has had multiple insolvency events. 
This bill is much needed and I congratulate the Hon Simon Power on all the hard work he has been putting into getting the bill here today. It is all about getting things done which is precisely what National is doing. The public are amazed by the speed at which this Government is making positive changes after 9 years of inaction by the previous Government. I look forward to participating in the Commerce Committee as we examine this bill and as we hear submissions on it. I commend this bill to the House as others before me have done. I am quite pleased to be standing here to support this bill. I am looking forward to seeing it come to the select committee. I am also looking forward to hearing from the submitters who will come forward to the select committee—creditors those who have been put into insolvency those who have been put into bankruptcy victims and the people who have abused the system. I think we should have a good range of submitters coming forward to give evidence to the select committee so we can make an informed decision so as to ensure that there are no loopholes moving forward. Thank you Mr Assistant Speaker.