A ''fresh start'' government scheme which allows people to write off up to $47,000 in debt has come under scrutiny by budget experts, who say some participants had gone on and ''racked up the same amount of debt over again''.

The No Asset Procedure limit, which was an alternative to bankruptcy "is crazy", Family Focus Rotorua Financial Capability Services team leader Michelle Nahu said.

Figures from the Ministry of Business Innovation and Employment show the option was popular with debt-laden Rotorua people and the number of those on it had jumped from 16 in 2016 to 28 so far this year.

A further seven applications were declined compared to five in 2016.

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An Insolvency and Trustee Services spokesperson said the No Asset Procedure (NAP) "is designed to give people a fresh start, which is crucial to counteracting the significant impact of unmanageable debt on people both socially and economically".

To enter into an NAP agreement a person's total debt must be under $47,000, excluding student loan debt, as well has having no means to repay any that debt, she said.

All creditors were advised and in the 2016/17 financial year, 23 per cent had debts of more than $30,000.

Data also reveals that the main reasons given by Rotorua people granted a NAP were excessive use of credit, unemployment or loss of income.

"Creditors have an important part to play in ensuring that significant debt is not incurred by a NAP debtor by undertaking due diligence, such as checking the insolvency register, before loaning money."

But Nahu said the "once-in-a-lifetime chance an NAP offered" had a flipside, despite being created to help those under significant financial stress.

"After doing a NAP, two years down the track I've had the same couple come in and say 'I'm going to file for bankruptcy'. In some aspects the coin flips the other way and rather than learn, they go and get into more debt and bigger trouble."

Unfortunately a bankruptcy that had stronger consequences and lasted three years was deemed "favourable" by some, she said.

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Commission for Financial Capability retirement commissioner Diane Maxwell agreed and said the risk with NAP was the borrower may not have learnt lessons along the way.

"Sometimes within a year of a NAP the person has racked up the same amount of debt over again, only this time the consequences are greater. We know through our work with young New Zealanders that debt is seen as a normal part of life.

"You borrow to get what you want and there's a view that 'everybody is doing it'."

Commission for Financial Capability was also working hard to get financial capability into the curriculum in schools, she said.

"If we can get that right then our young people will leave school with some money smarts, they will know how to read a contract and they will understand how much debt costs."

A Consumer NZ spokeswoman said the Responsible Lending Code, which came in two years ago, should soon start to have an effect.

Lenders had to undertake their due diligence as there was positive and negative credit reporting they could access, she said.

No Asset Procedure

- Alternative to bankruptcy for people who have no assets and meet certain other criteria.
- A person's total debts must be under $47,000, excluding student loan debt.
- Have no means to repay any of the debt.
- The debtor cannot incur credit without disclosing they are in a NAP
- A NAP lasts 12 months and then the debtor is released from the obligation to pay the debts included in the NAP.
- You can only do an NAP once.
- The free www.insolvency.govt.nz shows whether a person is currently in a NAP or if they have been in one in the last four years.