New Zealand

Indebted students see bankruptcy as option

09:07 am on 2 April 2014

The Union of Students Associations says tough new student loan rules are likely to prompt more people to go bankrupt in order to avoid their debt.

From Tuesday 1 April, Inland Revenue can seek arrest warrants for people who live overseas and are badly behind with their loan repayments.

The union is referring worried debtors to accountants such as Kristina Andersen, who says bankruptcy is a realistic option for about half those who contact her.

For those whose debt is getting up beyond the "mid five figures', she says, "They're in a position where there's no realistic chance that they'll ever repay that debt in their lifetime, so even if bankruptcy has problems for them, really it's going to be better for them in the long run to bite the bullet and do that."

Ms Andersen says people with loans as low as $20,000 are also considering bankruptcy.

But Revenue Minister Todd McClay says he would be surprised if the number of bankrupt debtors increases.

The Government has written off about $10 million in student loans in each of the past three financial years because of bankruptcy.

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