What is bankruptcy?


Bankruptcy is a legal status for people who cannot repay their debts as they become due. If a person is declared Bankrupt it means that ordinarily the Bankrupt person’s creditors are unable to collect debts from the Bankrupt person once the Bankrupt person has been discharged. However, there are some debts that bankruptcy does not cover.

Fraudulent debt
There are some debts that a bankrupt is not released from in the bankruptcy process. If your debt was incurred fraudulently you will remain liable to repay the debt after your discharge.

If a person obtained a:
• debt or liability by fraud or fraudulent breach of trust (e.g. obtained a benefit from Work and Income that they knew they were not entitled to); or
• a debt is payable by way of a Maintenance Order or Child Support;

The Bankrupt person will remain liable to pay the debt and it will not be discharged by the insolvency procedure.

There are debts that a Bankrupt Person must continue to pay during bankruptcy, such as:

• Child support and maintenance;
• Court fines and reparation;
• Debt incurred after bankruptcy;
• Secured creditors & debt.

Debts incurred by means of fraud are not extinguished or wiped upon discharge from insolvency.

What is Bankruptcy LawyerIf you are unsure if a debt you owe is fraudulent or you would like some advice in relation to debt collection, bankrupcy or insolvency, please contact Wendy Alexander on (09) 837 6844 or by email on wendy.alexander@smithpartners.co.nz.

You may also be interested in reading:

Alternatives to Bankruptcy

Motivating Debtors to Pay: Understanding The Bankruptcy Process