Tips for creditorís 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 donít 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 ó If you find a path with no obstacles, it probably doesn't lead anywhere. Obviously he didnít know that in civil cases obstacles can rise like a steep wall 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 canít be traced.
The consequence 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. Bad tenants know loopholes and by changing† the address of residence frequently the bailiff comes back with not results. In such cases the creditor has to find and provide a new address of service, file an application at court and replay the game, again, and again...
Debt recovery options
The options below only work if you are able to track debtorís movements. Make sure you file peopleís identity and background checks before signing up anybody.† Take legal advice before launching an application as procedures change all times and there is no refund for any fees you pay upfront. Take it as frame work for 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 need to 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 debtorís employer or Ministry of Social Development to pay a certain portion of the wages or benefits owed by the debtor directly to the creditor.
However, payments are not guaranteed - be aware of loopholes; e.g. the debtor changes his employment, work status or income. For instance getting paid as freelancer, working for the same company as contractor, etc ó such income 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.† Well, is that a relief for your loss?
Even if the court system works for you, still the debtor can and will outrun the system. By changing the address of residence frequently a registered address of service is in fact useless.† It is creditorís job to provide debtorís new address. That works very well in countries where residential addresses are registered by law but not so in NZ.
Fraudulent† and stolen identities are something to consider in this computer age. Cross-checks and online profiles are helpful. If someone tries to hide the identity or prefers cash instead of bank-to-bank transaction, think twice about possible consequences.
Paying or receiving money has† implications from taxation point of view. That is one reason more to file all transaction and not to be taken by surprise or debtorís tricks.
Debt collection services
Start online with nzblacklist.com, vedaadvantage.com and similaró but most debt collection services donít deal with tenancy orders. Debt collection costs thousands of Dollars in addition to the loss, those expenses can be passed on to the debtor, but if so why 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 residential address register. The instead used driver license as ID is a failure and opens doors for fraudulent activities. In all our applications the court failed to release debtorís details, a toothless law on the back of hard working and robbed people.
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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