Minister wants tabs on bankrupts

Commerce Minister Simon Power. Photo / Mark Mitchell

Commerce Minister Simon Power wants to change the law to keep a permanent public record of multiple bankrupts.

He's also proposing that the new and highly popular alternative to bankruptcy, the No Asset Procedure (NAP), remains on the public register for an "appropriate" period of time.

At the moment NAPs remain on the record only for as long as they are in place, which is one year.

The changes come as part of the Insolvency Act Amendment Bill, introduced to Parliament by the Minister this week.

The bill would also tighten the 2006 Insolvency Act which brought in NAPs to stop fraudulent debts being written off. This means any debt the insolvent person racked up knowing they could not pay would not be wiped as part of a NAP.

It would also restore the Official Assignee's ability to recover gifts made before bankruptcy to avoid payments to creditors.

The Herald reported late last year that the New Zealand Credit and Finance Institute, representing the debt collection and credit control industries, had written to all political parties expressing concern that under the new law bankruptcies were now expunged from the Ministry of Economic Development's register after seven years.

It does not show up if a person has been bankrupted multiple times unless the bankruptcies occurred within that timeframe.

The institute was also annoyed that NAP records lasted only a year.

National president David Young said it received little response to its pre-election plea, so it welcomed the latest move.

"That's a step forward, it's in the right direction, but it doesn't go far enough," Young said.

"I'm still very keen that with NAP they should appear for at least the same period of time as a bankruptcy appears."

The NAP regime began in December 2007 and provides an opportunity for people with no assets who owe up to $40,000 to walk away from their debts. The first people to enter the regime will now have come out the other side and had that record of their insolvency removed from the MED's register.

However, at least one private credit reporting agency, Veda Advantage, has said it will keep records of NAPs for seven years.

Young said the industry was concerned that without streamlining of public and private record-keeping it would be only a matter of time before somebody took legal action and the private agencies were forced to toe the public line.

But Ronnie Tan, managing director of commercial credit reporting agency CreditWorks, does not support a permanent record of bankruptcies.

He believed one year was not long enough for NAP records, but people had to be given the opportunity to rehabilitate.

"You can't penalise people for life. What do you achieve? Nothing."

Debtors can be turned down for NAP if it is shown they knowingly incurred debt they couldn't pay, but the proposed law change tightens a loophole.

A spokesman for the minister said the issue had been raised by the Ministry of Social Development, which was concerned that beneficiaries could obtain benefits fraudulently and then have the debts wiped under NAP.

On looking in to the matter it emerged there may be broader implications, hence the proposed change.

ON THE RECORD
* The Commerce Minister wants a permanent public record of all bankruptcies.
* He also wants records of the new No Asset Procedure available longer.
* 2947 people have used the NAP since the regime started in December 2007.