If a debtor is unable to repay its debts and believes there is no prospect of this changing, the No Asset Procedure (“NAP”) provides an alternative to bankruptcy as a one-off opportunity to sort out the debtor’s financial affairs without a formal bankruptcy.
A successful application will give a debtor protection from creditors, similar but not identical, to that provided by bankruptcy. To be successful in the application, the debtor must satisfy the Official Assignee on reasonable grounds that:
However, a debtor must not be admitted to the NAP if the Official Assignee is satisfied on reasonable grounds that:
Once a debtor is admitted to the NAP, creditors are prevented from beginning or continuing any steps to recover a debt owed by the debtor.
However, three debts remain payable despite being under the NAP scheme. These include:
The debtor must also comply with the Official Assignee’s requests and notify the Official Assignee as soon as practicable if there is a change in their financial circumstances allowing them to repay any amounts toward the debts that would otherwise be discharged.
Further, the debtor must not obtain credit (either alone or jointly) of more than $1,000 without advising the prospective creditor they are currently under the NAP scheme.
Normally, a debtor is discharged under the NAP scheme 12 months after the date of admission.
Upon discharge from the scheme, the debts that existed on entry into the NAP are cancelled, and the debtor is no longer liable to repay any part of those debts including any penalties or interest that may have accrued. However, debts incurred by fraud are not discharged nor is any debt for which the debtor has obtained forbearance through fraud.
The NAP is a great consideration prior to the consideration of bankruptcy as the effects are not as long lasting or as onerous. NAP provides relief from financial pressures for a maximum term of a 12 months, allowing the debtor to get on top of their financial situation.
NAP is but one of the alternatives to bankruptcy. All options ought to be considered as against the facts of the debtor before any large decisions are made.
Brent is the Director of Norling Law. He has a wealth of experience in the District Court, High Court, Court of Appeal and Supreme Court. Brent is passionate about negotiating favourable outcomes for his clients and able to implement this in his daily negotiations.
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