Free help first
- MoneyTalks: a free, confidential helpline on 0800 345 123. It can give you advice straight away, or connect you with a local financial mentor.
- Financial mentors: free budgeting and debt help from community organisations. A mentor can go through your budget with you, contact your lenders, help with hardship applications and help you apply for support.
- Work and Income: may help with essential costs, such as food or an urgent bill, or with an advance on your benefit. Some help is available if you’re working on a low income too.
Find more on our free money help page.
Pay the right bills first
When there isn’t enough for everything, some debts matter more than others:
- 1 Your home and essentials Rent or mortgage, power, food, and the car if you need it for work. Falling behind can cost you your home, your power or your way to earn.
- 2 Debts with strong collection powers Court fines, and Inland Revenue debts such as tax, overdue student loan repayments and child support. These can be taken straight from your wages, benefit or bank account, and unpaid fines can stop you travelling overseas.
- 3 Everything else Credit cards, personal loans, buy now pay later and overdue phone or broadband bills. Still important: tell these lenders what you can afford, and ask for a hardship change.
A financial mentor can contact your lenders for you and help you agree payments you can afford.
Ask your lenders for a hardship change
Under the credit contracts law (the CCCFA), you can ask a lender to change your loan if you can’t keep up because of illness, injury, losing your job, a relationship ending or another reasonable cause. You can ask for lower payments, a longer term or a pause.
- Ask as soon as you think you’ll miss a payment. Explain what’s changed and what you can afford.
- Put it in writing, and keep a note of who you spoke to and what was agreed.
- If the lender says no, you can complain to its dispute resolution scheme, which is free.
Power, phone and broadband companies also have payment plans and hardship help: tell them early.
The formal options
If you can’t repay your debts, the Insolvency and Trustee Service runs three formal options. Each is recorded publicly and on your credit report.
| Option | What it is | Good to know |
|---|---|---|
| Summary Instalment Order | An order to repay your debts in instalments you can afford, over up to 3 years (up to 5 in some cases) | Debts up to $50,000. A supervisor manages it, and the creditors in it can’t take action while it’s in place |
| No Asset Procedure | Clears debts if you have no realistic way to repay and no assets of value | Debts of $1,000 to $50,000. Lasts 12 months, and can only be used once |
| Bankruptcy | Clears most debts, but you can lose assets | Usually lasts 3 years. You can’t travel overseas without permission or run a company while bankrupt |
Some debts, such as court fines and child support, aren’t wiped by a No Asset Procedure or bankruptcy. A financial mentor or the Insolvency and Trustee Service can tell you which option, if any, fits you.
You may also be able to withdraw from KiwiSaver for significant financial hardship. You apply to your provider with evidence of your situation.
Watch out
- Firms that charge fees for things a free financial mentor does. Free advisers look at your whole situation and tell you every option, not just the one they sell.
- High-cost loans, such as payday loans. The law caps what they can charge, but borrowing to repay other debts usually makes things worse.
- Lenders that aren’t registered. Check a lender is on the Financial Service Providers Register before you borrow.
Working through it yourself? See how to pay off debt.