Tips for creditor’s debt collection for unpaid bills, compensation for damage and reimbursements, read about debt recovery procedure and debt collection services
Are unpaid bills or debt recovery a problem?
Dealing with the adversity of getting the money for unpaid rents, compensation for damage and reimbursement for cleaning up the mess tenants left behind are good reasons for obtaining an order at the Tenancy Court. But don’t be surprised when the order does not cover the loss. Possibly you already know that adjudicators are not bound by other tenancy precedents and are rather soft to tenants on default.
In a cautionary tale a couple vacated a rental property after the eviction hearing for unpaid rent by vandalizing the house and leaving piles of rubbish behind.
As you see under those circumstances getting the order is the easiest step but executing the debt collection procedure is a quite different story. Frank A. Clark wrote somewhere — If you find a path with no obstacles, it probably doesn't lead anywhere. Obviously he didn’t know that in civil cases obstacles can rise like a wall steeply and the effort to get over it is beyond expected results. If interested, check out stories on the forum Property Talk.
Enforcing an order from the District or Tenancy Court is often where creditors fail because it is very common that the debtor is not responsive or simply can’t be traced.
The specific is that it is very difficult to enforce orders with previous tenants as debtors. In contrast the owner of a property is registered and can be prosecuted if in default. Knowing the loopholes and changing addresses of residence frequently are common and the reason that the bailiff comes back with not results. The bailiff normally tries once to serve documents. If that fails the creditor has to provide a new address of service and apply, again, again and...
Debt recovery options
This summary is based on practical experiences. If in need take legal advice as rules change all the time without taking notice. Take it as frame work to start your own investigation;
Going to the District Court and pay for a Distress Warrant. In all our cases it has failed because the authorized bailiffs were not able to make demands or could not contact the debtors.
Order of Examination
Filing for each debtor an application for an Order of Examination. This requires the debtor to appear before a deputy registrar and the chance to obtain an order for weekly payments. That is the most effective method also for lump sum payments.
In cases I have seen, the debtors stopped paying by changing jobs after few payments. At this point you can start the entire procedure again.
At the examination hearing you can apply for an attachment order against salary, wages or benefits. This order requires the debtor’s employer or Ministry of Social Development to pay a certain portion of the wages or benefits owed to the debtor directly to the creditor.
But still a payment is not guaranteed - be aware of loopholes; e.g. a truck driver ended his employment and worked as contractor for the same company. Contractor payments are – taboo for you!
Application to the District Court
Returning to the District Court with outstanding debts - the creditor can apply for the debtor to be held in contempt. In this hearing before the District Court judge the debtor can be sentenced to community work. Still no money for you.
What are debtor’s tricks?
Even if the court system works for you the debtor can outrun the system for instance by changing the address of residence frequently. The authorized bailiff goes only once to each address. It is your job to provide debtor’s new address.
Debt collection services
Start online with nzblacklist.com, vedaadvantage.com and similar— but most debt collection services don’t deal with tenancy orders. For private debt collection it costs thousands of Dollars in addition to the loss. Sure recovery costs can be passed on to the debtor, but why then do you have the problem in the first place?
The end is called NAP
NAP (no asset procedure) is a procedure for a fresh start leaving the creditor in an unfair position as debts are written off.
It is an alternative to bankruptcy, a chance for people with no assets to write off up to $40,000 in debt and emerge one year later with no records of insolvency. It looks quite unfair in contrast to creditors who struggle for years to recover from loss.
What to take from here?
Civil law enforcement is very difficult in countries like NZ without social ID and missing law to be registered with the address of residence. In our cases applications for address release at the court were unsuccessful.
Changes to the Tenancy Act in October 2010 have improved the enforceability of debt collection costs. That sounds good but does it make any difference to failing procedures illustrated above?
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