Debt sends more bankrupt

Increasing numbers of Rotorua people are being forced into bankruptcy as a way out of debt.

More people are reaching crisis point with their finances because it's too easy to get credit and borrow money, Pearl Pavitt of the Rotorua Budget Advisory Service says.

Debt and changing family circumstances are leaving some with no choice but to declare themselves bankrupt as a way to regain control of their finances, she says.

In the financial year to June, 165 people from Rotorua, Eastern Bay of Plenty and Taupo were declared bankrupt by the High Court at Rotorua.

That's an increase of 41 people on the previous financial year.

Rotorua had the second largest increase after Whangarei where there were 132 people - up 50 on the previous year.

Nationally, 3593 went bankrupt an increase of 506.

"When I started 11 or 12 years ago the word bankruptcy would be mentioned once a year or once every two years," Mrs Pavitt said. "Now it has become more common. It might be one or two times a month."

While people she saw did not choose to go bankrupt, it was the only way out for those who owed so much money they would never be able to repay it.


Midland region official assignee Les Currie said the number of people going bankrupt in the Rotorua district in the last year was similar to the 2004/05 year when there were 166.

He said the 2005/06 dip may have been due to more money coming into the region and more work being available.

Nationally, unemployment or loss of income and excessive use of credit cards were the main reasons behind bankruptcy and it was no different in Rotorua, Mr Currie said. Some owed more than $20,000 after booking up credit on three to five credit cards from banks and stores.

Almost half of those going broke were blue collar workers like cleaners, caretakers, pest controllers, couriers and delivery personnel, hotel porters and labourers, he said. Self-employed people accounted for 139 of the 3579 people declared bankrupt nationally.

About 80 per cent of people were voluntarily applying to the High Court to go into bankruptcy while the rest were forced to do so by creditors.

Mrs Pavitt said there was no particular type of person going bankrupt and levels of debt varied.

"You can have someone like Suzanne Paul who owed well in excess of $1 million or someone on a very low income who owes proportionately less. It becomes a problem when someone has totally over-committed and has no way of paying the debt or their income improving."

Many people were also buying items on "buy now, pay later" hire purchase deals and could not afford to pay up when the interest free period ran out.

Businesses were lending money over short periods so people could pay for food and power. "The amount they have to repay a week puts them in a situation worse off than what they were before," Mrs Pavitt said.

A Rotorua man, who did not want to be named, said he owned a business for about 18 years before he ended up bankrupt by a creditor he owed more than $50,000. Getting to the stage of being made bankrupt and then having to "start from scratch" again was difficult and embarrassing. He said he was now working for someone else and would never own a business again.