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What is a "No Asset Procedure" (NAP)?

Key Takeaway

A No Asset Procedure (NAP) is a debt solution in New Zealand for individuals with unmanageable debt between $1,000 and $50,000 and no or minimal assets. It allows for discharge from most debts after one year and is administered by the Official Assignee under the Insolvency Act 2006.

Understanding the No Asset Procedure (NAP) in New Zealand

A No Asset Procedure (NAP) is a formal debt solution available in New Zealand for individuals who are unable to pay their debts and have very few assets. It is administered by the Official Assignee, a government official responsible for managing insolvency proceedings [Source: Insolvency Act 2006, s 10]. It is important to note that the No Asset Procedure is governed by the Insolvency Act 2006, not the Disputes Tribunals Act 1988. The Disputes Tribunals resolve civil disputes involving small monetary claims and do not handle insolvency or debt write-off procedures.

What is a No Asset Procedure?

A No Asset Procedure (NAP) is a debt relief mechanism designed for debtors who have minimal assets and owe a limited amount of debt. It provides an alternative to bankruptcy for individuals meeting specific criteria, allowing them to be discharged from most of their debts after a set period [Source: Insolvency Act 2006, s 361].

Eligibility Criteria

To be eligible for a No Asset Procedure, an individual must meet several conditions, including:

  • Total unsecured debts are between $1,000 and $50,000 [Source: Insolvency Act 2006, s 361(1)(a)].
  • Having no realisable assets (excluding necessary household furniture, tools of trade, and a motor vehicle up to a specified value) or assets not exceeding a prescribed value [Source: Insolvency Act 2006, s 361(1)(b)]. As of current regulations, this value for assets (excluding household items and one vehicle up to $6,500) is $1,260 [Source: Insolvency (Personal Insolvency Thresholds) Regulations 2024, s 4].
  • Not having been declared bankrupt or been subject to another No Asset Procedure within the last 10 years [Source: Insolvency Act 2006, s 361(1)(c)].
  • Being unable to pay debts when they are due [Source: Insolvency Act 2006, s 361(1)(d)].

The Application Process

An individual seeking a No Asset Procedure must apply to the Official Assignee. The application requires providing detailed financial information [Source: Insolvency Act 2006, s 362]. The Official Assignee then assesses the application against the eligibility criteria. If satisfied, the Official Assignee will approve the application, and the No Asset Procedure officially commences [Source: Insolvency Act 2006, s 363, s 364].

Jurisdiction and Administration

The No Asset Procedure falls under the jurisdiction of the Official Assignee, who is part of the Ministry of Business, Innovation & Employment (MBIE). The Official Assignee is responsible for deciding whether an individual qualifies for a NAP, administering the procedure, notifying creditors, and ultimately discharging the individual from their debts [Source: Insolvency Act 2006, ss 10, 363, 365].

Costs Associated with a No Asset Procedure

There is generally no application fee for the debtor to apply for a No Asset Procedure. The costs incurred by the Official Assignee in administering a NAP are typically covered by the Crown, given the nature of the procedure where there are no assets to realise for cost recovery [Source: Information widely available from the Official Assignee's office, though not explicitly detailed as a 'free application' section within the Act itself. The Act does not prescribe an application fee for NAPs].

What to Expect During the NAP

Once an individual enters a No Asset Procedure, the following typically occurs:

  • Duration: A NAP usually lasts for one year, starting from the date of commencement [Source: Insolvency Act 2006, s 365(1)].
  • Creditor Notification: The Official Assignee notifies all known creditors of the commencement of the NAP [Source: Insolvency Act 2006, s 364(3)].
  • Restrictions: During the NAP, individuals are subject to certain restrictions. For example, they cannot incur credit of $1,000 or more without informing the creditor of their NAP status. They are also generally restricted from acting as a company director or manager without court leave [Source: Insolvency Act 2006, s 366, referencing restrictions similar to those for bankrupts].
  • Debts Covered: Most unsecured debts are covered by the NAP. This means that once discharged, the individual is released from these debts [Source: Insolvency Act 2006, s 366(1)].
  • Debts Not Covered: Certain debts are not discharged by a NAP, including fines, reparation orders, student loan debt, child support obligations, and secured debts (unless the creditor has agreed to write off the secured portion) [Source: Insolvency Act 2006, s 366(2)].

What Happens After the NAP?

Upon successful completion of the one-year period, the individual is automatically discharged from the No Asset Procedure. This means they are released from most of the debts they owed at the time the NAP commenced [Source: Insolvency Act 2006, s 365(1)]. While a NAP provides significant debt relief, it remains on an individual's credit history for a number of years, which can affect their ability to obtain credit in the future.

Distinction from Disputes Tribunals

It is crucial to understand that the No Asset Procedure is entirely separate from the functions of the Disputes Tribunals. Disputes Tribunals provide a forum for resolving civil disputes, such as consumer issues, tenancy disputes, or property damage claims, typically involving sums up to $30,000 (or $50,000 if parties agree) [Source: Disputes Tribunals Act 1988, s 13]. They do not have the authority to grant debt relief through procedures like the NAP or bankruptcy. Insolvency matters, including NAPs, are exclusively handled by the Official Assignee under the Insolvency Act 2006.

When to Seek Independent Legal Advice

Individuals considering a No Asset Procedure, or facing significant debt, should seek independent legal or financial advice to understand all available options and implications. For free legal assistance, individuals may consult Community Law Centres throughout New Zealand, who can provide information on debt resolution and insolvency procedures. Further guidance can also be obtained from authorised financial advisors or budgeting services.

Key Resources