Bankruptcy and Insolvency in New Zealand 2026 — Your Options Explained

When debt becomes unmanageable and there’s no realistic path to repayment, New Zealand’s insolvency system provides formal pathways to resolution. These are serious processes with lasting consequences — but for some people, they’re the right option.

When to Consider Insolvency

Insolvency options are for people who genuinely cannot repay what they owe — not people who are struggling but managing. Consider insolvency if:

• You cannot meet minimum repayments on basic living income
• Creditors are pursuing legal action or obtaining judgments against you
• Your debt is growing faster than you can repay it
• There is no realistic way to clear the debt within a reasonable period (3–5 years)

Before insolvency: explore debt consolidation, negotiating with creditors, and the MoneyTalks helpline (0800 345 123).

Option 1: No Asset Procedure (NAP)

Best for: Small unsecured debts with no assets and limited income.

Eligibility

• Total debts: $1,000–$50,000 (unsecured)
• No realisable assets (home, significant car, savings above a threshold)
• Not in full-time employment earning enough to repay debts
• No previous NAP or bankruptcy in the last 7 years
• No fraud or reckless spending leading to the debt

How it works

1. Apply through Insolvency NZ (insolvency.govt.nz)
2. If accepted, a 12-month moratorium begins
3. During the 12 months: creditors cannot take collection action
4. After 12 months: eligible debts are written off

Excluded debts (these survive the NAP)

• Student loans
• Court fines and reparation orders
• Child support
• Secured debts (e.g., car loans secured against the vehicle)
• Debts incurred by fraud

Consequences during NAP

• Must notify NAP status to creditors
• Cannot obtain credit above $1,000 without disclosing NAP status
• Cannot act as a company director
• Recorded on the Insolvency Register (publicly searchable)

→ Full guide: No Asset Procedure NZ

Option 2: Summary Instalment Order (SIO)

Best for: People with income who can repay debts over time but need a structured, protected repayment plan.

Eligibility

• Total debts must be $50,000 or less
• Must have income or assets sufficient to make instalments
• Must not be able to repay in full immediately

How it works

1. Apply through Insolvency NZ
2. A repayment schedule is set (typically 3 years)
3. Single monthly payment distributed among creditors
4. Creditors cannot take further action while the order is in effect

Consequences

• Recorded on the Insolvency Register
• Cannot obtain credit above $1,000 without disclosure
• Cannot be a company director during the order
• If you fail to meet instalments, the order can be revoked

Option 3: Subpart 4 — Creditor Proposal

Best for: People with more complex situations who want to negotiate directly with creditors.

How it works

A formal proposal is made to creditors through Insolvency NZ. If creditors holding a majority of the debt (by value) accept, the proposal is binding on all creditors.

This is more flexible than an SIO — payment terms and amounts are negotiated. A licensed insolvency practitioner typically assists.

Eligibility

• Available to any individual debtor
• Creditors must vote to accept (not guaranteed)

Option 4: Adjudication — Full Bankruptcy

Best for: People with debts above $50,000 who cannot repay, or whose creditors force the issue.

Adjudication is the most serious form of personal insolvency in NZ. It can be initiated by:

• You (voluntary adjudication)
• A creditor owed $1,000+ who has obtained a judgment

Duration

• Typically discharged after 3 years
• Can be extended to 8 years if the Official Assignee (government insolvency officer) determines misconduct or non-cooperation

What happens during adjudication

• Your non-exempt assets are realised (sold) by the Official Assignee
• Proceeds distributed to creditors
• Exempt assets: basic household goods, tools of trade up to $5,000, primary vehicle up to $5,000
• Income above a contribution threshold goes to creditors
• Cannot travel overseas without Official Assignee’s permission
• Cannot be a company director
• Certain jobs may be affected (financial sector, some licensed professions)

Consequences after discharge

• Credit report shows bankruptcy for 5 years after discharge (so up to ~8 years from adjudication)
• Some professional licensing restrictions
• Debts incurred by fraud or recklessness survive discharge
• Student loans survive discharge

What debts are written off

Most unsecured debts are discharged. Student loans, child support, court reparation orders, and fraudulent debts survive.

Comparison Table

Key Resources

• Insolvency NZ (insolvency.govt.nz) — government service to apply for NAP, SIO, and adjudication
• Citizens Advice Bureau — free initial advice on your options
• MoneyTalks (0800 345 123) — free financial helpline, can refer to insolvency advisers
• Community Law Centres — free legal advice across NZ

Important Warnings

• Insolvency appears on the public Insolvency Register indefinitely in some cases
• Deliberately running up debts before applying for insolvency is fraud — do not do this
• Hiding assets during insolvency proceedings is a criminal offence
• Some insolvency consequences cannot be reversed — get independent advice first

Next Steps

1. Get a full picture of what you owe — all debts, balances, and whether they’re secured or unsecured
2. Call MoneyTalks (0800 345 123) for free guidance on which option suits your situation
3. Contact Citizens Advice Bureau for free legal context
4. Visit insolvency.govt.nz to understand the application process before proceeding

→ Related: No Asset Procedure NZ | Negotiate with Creditors NZ | Debt Management Hub