People as young as 18 are filing for bankruptcy in New Zealand, ruining their financial future to get out of paying debts as small as $1000.
The number of under-25-year-olds going bankrupt has nearly doubled in the past five years, with finance companies saying young people rack up debts and go bankrupt without caring about the consequences.
Statistics from the Ministry of Economic Development show nearly 1 in 7 people, or 13.2 per cent, adjudged bankrupt last year were in the under-25 age bracket.
In 2000, 181 under-25-year-olds filed for bankruptcy, but last year that number had grown to 355.
Young people were not realising the financial implications of going bankrupt, said Western Bay Finance executive chairman Jim Smylie.
He said 16-year-olds were borrowing money to buy cellphones, and by 18 could be filing for bankruptcy.
Basecorp Finance Hamilton general manager Warren Mayall said a 22-year-old the company had given a loan to had debts of $20,000 and filed for bankruptcy. His father was a guarantor of the loan and was now paying back his son's loan.
Bob Wadley, managing director of International Credit Services and a private investigator, said credit was too easy for young people to get and the checks on their financial ability were not stringent enough.
Statistics showed the average debt of under-25s filing for bankruptcy was $21,992 and Mr Wadley said the debt was normally for cars or hire purchases. Among the youngest adjudged bankrupt was an 18-year-old who owed $15,976.
A 23-year-old was adjudged bankrupt in April 2000 owing just $1145.
People remain in bankruptcy for three years, which means they cannot be pursued for debts.
Once released, the debts are written off, although their bankruptcy stays on their credit record for seven years.
A 24-year-old adjudged bankrupt in February last year owed $184,508.
Broadlands Finance Rotorua branch manager Matthew Heke said some of the blame had to fall on finance companies.
He said if 18-year-olds were assessed as being able to afford the loan, it was approved.
He said the stigma once attached to going bankrupt was gone.
"It's an easy way out."
Bad debts
Most owed: A 24-year-old adjudged bankrupt on February 25 last year owing $184,508.
Least owed: A 23-year-old adjudged bankrupt on April 14, 2000, owing $1145.
Youngest: A 18-year-old adjudged bankrupt on July 1, 2002 owing $15,976.
The average debt declared by under-25s filing for bankruptcy since 2000 is $21,992.
New Zealand
