An Evaluation of the No Asset Procedure as a Fresh Start for Insolvent Consumer Debtors in Aotearoa New Zealand

• Pages: 83–120
• Date: 01 January 2025
• Published date: 01 January 2025
• Author: Lynne Taylor
• Subject Matter: Derecho Público y Administrativo

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* Lynne Taylor, Pr ofessor of Law, Universi ty of Canterbu ry.

Iain Ra msay “Towar ds an Inter national Pa radigm of Pe rsonal Ins olvency Law? A Critic al View”

(2017) 17(1) QUT La w Review 15 at 22.

AN EVALUATION OF THE NO ASSET

PROCEDURE AS A FRESH START FOR

INSOLVENT CONSUMER DEBTORS IN

AOTEA ROA NEW ZEAL AND



Abstract

e No Ass et Procedure (NAP) i s the most rec ent addition t o the range of collective,

personal ins olvency procedures avai lable to insolvent in dividuals in Aotearoa New

Zealand und er the Insolvency Act 2006.  e NAP has ser ved as a templat e for personal

insolvency law reform in Englan d and Wales, Scotland , Ireland and Aust ralia. e NAP

is aimed at inso lvent consumer debtors wit h no assets and no means to rep ay their debts.

Notwithstanding that the NAP has been available sinc e December 2007 and has prompted

a proliferation of similar procedures in other jurisdicti ons, there is a lack of recent

analysis in Aotearoa New Zealand and internationa lly as to whether it (or the schem es

for whic h it ha s served as a template) meets the objecti ves it/they was/were enacted to

achieve: the p rovision of a simpl e and low cost (in adm inistrative terms) proced ure with

appropriate safeguards aga inst abuse under which insolvent con sumer debtors with no

means to pay their debts receive a fresh start. ese objectives are largely reected in the

NAP statuto ry scheme, although there is scope for some “tweaks” or improvement s. e

available evide nce of NAP use in Aotearoa New Zealand sug gests that it is achieving some

of its objectives, but that gaps or a lack of evidence with respect to others mean that, at this

point, a denit ive conclusion on its eec tiveness and/or utility is not pos sible.

84 [Vol 32, 2025]

I. Introduction

Readers may be s urprised to le arn that one of the c ollective, person al insolvency

procedures in t he Insolvency Act 20 06, the No Asset Procedure (NAP), has served

as a template for t he enactment of sim ilar proced ures in other ju risdiction s.1 The

NAP was tra nsplanted to En gland and Wales under a dierent na me, the Debt Relief

Order.2 The Debt Relief Order has been modied for adoption as the Minimal Asset

Procedure in Scotland,3 and as t he Debt Relief Notice in Irel and.4 The NAP ha s been

mooted recent ly as a model for adoption by Austr alia.5

The NAP is the mo st recent addition t o the Aotearo a New Zealand per sonal

insolvency fr amework.6 It was en acted in 2006 a nd has been an option for debtors

since 3 Decemb er 2007. The NAP’s “ta rget market” is consumer de btors who have

total de bts of not more than $5 0,000,7 no assets, and no me ans to repay their debt s.

The NAP is debtor -initiated , but it is the Assig nee who decides whether the de btor is

eligible t o be admitted t o the procedure.8 Onc e admitted, a NA P debtor is subject to

restric tions on obtai ning credit , and enforcement act ion by their credit ors is mostly

halted . The NAP lasts for one yea r, and on exiting t he procedure a debtor’s debt s are

mostly di scharged. A pu blic record of NAP debt ors is kept, and a debt or’s name is

kept on this rec ord for four years after t heir exit from the pro cedure.9

Notwit hstandi ng the prolifer ation of NAP-like pr ocedures, “[l]i ttle syst ematic

research ex ists on … [thei r] success”.10 In Aotearo a New Zealand , the Minis try of

Economic Development u ndertook a subst antive evaluation of t he NAP in 2011, but

the short t ime period between t he introduction of t he procedure and the ev aluation

resulte d in an acknowled gement that its fu ll impact could not be deter mined, and

1 I ain Rams ay “Towards an I nternation al Paradi gm of Personal I nsolvency Law? A Crit ical View”

(2017) 17(1) QUT La w Review 15 at 22

2 Iain Ramsay “The n ew poor person’s ban kruptcy : Comparative P erspectives” (2020) 29(S1)

Interna tional Inso lvency Review S4 a t S7; and Insolve ncy Act 1986 (UK ), Pt 7A.

3 Ban kruptcy (S cotland) Act 2 016, s 2(2), sch 1.

4 Persona l Insolvency Ac t 2012 (EI), pt 3, ch 1 .

5 At torney-Gener al’s Depart ment “Mini mal Asse t Discussion Paper” (Ju ly 2024) at 2; adoption of

the NAP by South Africa has also been s uggested, see Hermie Coetzee and Mel anie R oesto

“Consumer D ebt Relief in Sou th Afric a: Should the I nsolvency Sy stem provide for N INA debtors?

Lessons fr om New Zealand” (2 013) 22(3) Inter national In solvency Revie w 188.

6 For earl ier accounts of t he NAP, see David Brow n and Thomas G W Tel fer Personal and Corporate

Insolvency Legislation (LexisNexis NZ , Wellingt on, 2007) 28; and Trish Ke eper “New Zealand’s No

Asset Pro cedure: A Fres h Start at No Cos t?” (2014) 14 (3) QU T Law Review 7 9.

7 A con sumer debtor is one w hose debt is domesti c rather than b usiness-relat ed.

8 The oce of the Assig nee or Ocia l As signee sits in the I nsolvency and Trustee Serv ice, a

divisio n of the Minis try of Busine ss, Innovation & E mployment (MBIE ).

9 Insolvenc y Act 2006, ss 44 9(1), (4A).

10 Ramsay “ Towards an I nternationa l Paradi gm of Personal I nsolvency Law?” abo ve n 1, at 22.

An Evaluation of the N o Asset Procedure as a Fresh St art for Insolvent

Consumer De btors in Aotearoa New Zealan d

85

that it was dicu lt to assess whether observable trends were attr ibutable t o the

av ail abi li ty of the pr oce dur e or ot her ev ent s, su ch as the 20 08 g loba l n anc ia l cri sis .11

This paper pres ents the story of t he NAP across the 17 yea rs it has been ava ilable,

in conjunct ion with an evalua tion, founded on publicly avai lable data, of the ext ent

to which it s objectives have been ac hieved. These object ives are, in su mmary,

the provision of a simple and low cos t (in admin istrative terms) procedure with

appropriate s afeguard s against a buse under which in solvent consumer debt ors with

no means to p ay their debts receive a f resh star t.12 Part II s ituates the NA P withi n the

wider Aotea roa New Zealand p ersonal insolvenc y framework, a nd Part III tr aces the

path to its enact ment. Part IV assesses t he impact of the NAP, and PartV reviews the

detail of its st atutory scheme in subpt 4 of Pt 5 of the Insolvency Act 2006 (Insolvency

Act). Part V I presents and evaluate s the evidence as to the extent t o which the NAP’s

objectives ar e or have been achieved a nd, where relevant, oers reform sugges tions.

Part V II concludes.

II. Aotearoa New Zealand Personal

Insolvency Framework

The NAP is one of ve colle ctive personal in solvency procedures ava ilable under

the Insolvenc y Act. Prior to t he NAP’s enactm ent, bankr uptcy was the on ly collecti ve

insolvency pro cedure avai lable to consumer de btors unable to r epay their debts.

As with t he NAP, a debtor may apply to t he Assignee t o be adjudicated ba nkrupt

(a voluntary bankruptcy).13 Unlike the NA P, bank ruptcy may also be i nvoluntar y in

the form of a Hig h Court order founded on a cre ditor’s applicat ion.14 The Assignee

admin isters all ba nkruptcies. The proc ess of bankruptc y is more complex than the

NAP as it as sumes that a bank rupt has some assets ava ilable to pay their cr editors.

Following a debt or’s adjudication, t heir property (subj ect to some exceptions,

in cl udi ng nec ess ar y fu rn it ur e an d clo th in g, a nd to ol s of t rad e) ve st s in t he As si gn ee, 15

as does al l property acquired by or p assing to the ban krupt during the t hree-year

11 Mi nistry of Econom ic Development “Evalua tion of the No Asset Pro cedure Final R eport” (July

2011) at 12; note that the Minist ry of Eco nomic Developmen t became the Min istry of Business,

Innovat ion and Employment ( MBIE) on 1 July 2012 .

12 Oce of the Min ister of Commerce “Ba nkrupt cy Adminis tration: No Asset Pr ocedure and

Insolvency Act C hanges” (2003) at [15]; these objectives were repe ated in a fu rther Di scussion

Paper relea sed in 2004 and ac companyin g a draft I nsolvency Law Refor m Bill, see Minis try

of Economic Deve lopment “Draf t Insolvency Law R eform Bill Dis cussion Docum ent” [2004]

NZAHGo vDP 2 (1 A pril 2004); and a lso see the Reg ulatory i mpact statemen t a nd business

complian ce cost state ment for the Insolvenc y Law Reform Bil l 2005 (14-1).

13 I nsolvency Act , s 12.

14 Section s 11, 13.

15 Sections 15 6(1), 101.