Debt fugitives owe $250m

Most of those owing money headed to Australia. Photo / Thinkstock

Hundreds who flee NZ and then file for bankruptcy can't be forced to pay up

Hundreds of New Zealanders facing financial ruin have fled the country, leaving a quarter of a billion dollars in unpaid bills behind them - and they can't be forced to pay the money.

According to the Ministry of Business, Innovation and Employment, 833 people left New Zealand over the past decade for all points of the globe, where they filed for bankruptcy to dodge compulsory repayments. One such owed $7.5 million.

Figures released under the Official Information Act show that since 2003, $225m debt has been racked up, with just $308,700, or 0.13 per cent, repaid to unsecured creditors.

Labour commerce spokesman Clayton Cosgrove says the magnitude of debt is serious, and is calling on the Government to forge reciprocal deals with countries to claw back money owed and help average Kiwis who have been "done over".

The amount of overseas bankruptcy debt has gone from $19m in 2008 to $40m last year.

Insolvency and Trustee Service national manager Robyn Cox said most of those owing money headed to Australia; 696 people filed for bankruptcy from across the Tasman in the past decade.

The second-largest group of expat Kiwis in financial strife headed to Great Britain, followed by the United States and Japan. Others filed for bankruptcy from countries including Qatar, Zimbabwe, Bulgaria, Finland and the Ivory Coast.

After they file for bankruptcy, very little money flows back to New Zealand. The Insolvency Act has no jurisdiction outside New Zealand and authorities rely on the individual choosing to pay back any debt.

Records reveal that in 2007, no money was repaid and in 2003, just $184.36 was returned to creditors' bank accounts. The most paid in any one year was $86,185.65, in 2008.

In comparison, the 26,634 people who filed for bankruptcy in New Zealand over the past decade were subject to strict rules governing personal finances in order to repay their debt. These included getting permission to leave the country.

Cosgrove said there was a role for the state to attempt reciprocal enforcement, starting with Commonwealth countries.

"Surely there is a role for the Government to use its muscle to go to the Aussies and see if they can't help in a reciprocal deal to pursue these guys, who are basically doing a runner."

An arrangement for "dead-beat parents" dodging child support payments existed between the countries and this model could be used to get money from bankrupts, he said.