KEY POINTS:
The number of people filing for bankruptcy and the recently introduced alternative, the No Asset Procedure (NAP), has risen 20 per cent in 2008, says the country's largest credit information provider.
A total of 4751 individuals have filed for either bankruptcy or NAPs this year, up from 3949 in 2007, said Veda Advantage country director John Roberts.
Bankruptcy was a drastic measure where often there were mitigating circumstances beyond the individual's control, he said.
"Given the state of the economy, and the trends we have also witnessed with default rises this year, it is no surprise that there has been such a marked increase in the number of people who have filed for bankruptcy or NAP."
The NAP, introduced in December last year, has more lenient terms and fewer restrictions than bankruptcy.
However, there is still a considerable impact to a consumer's credit-worthiness.
"The credit reporting system needs to be more focused on rehabilitation than persecution, which is why we advocate a move to a comprehensive credit reporting regime," said Roberts.
"While adverse information like a bankruptcy remains on your credit file for seven years and a NAP for five years, you would at least be able to show a full payment history for any credit you have taken out, which is not possible under the current regime."
Veda Advantage's credit bureau also revealed that credit applications for the month of November, traditionally a busy time for lenders in the lead-up to Christmas, were down 26 per cent on 2007, and were the lowest applications have been in six years.
However, the average amount of a default loaded on the bureau had almost doubled when compared to this time last year - further evidence of New Zealanders' financial struggles, said Roberts.
"Consumers are obviously exercising a little more caution this year. While the Government has taken measures to try and kick-start spending over the festive period with the cuts to the cash rate, the figures from our bureau do not bode well for the retail sector."
- NZPA
