The Truth Uncovered in Simple Terms

Non Asset Procedure (NAP) or Bankrupt!

A familiar conversation piece that I have with many of my clients. Understanding the difference and the implications that arise from having the unfortunate experience with either of the above.

A No Asset Procedure (NAP) is effectively voluntary bankruptcy, it is offered as an alternative to Bankruptcy for those with debts between $1000 to $40,000. The main differences are that you retain your IRD number, you can travel overseas, you continue to run your own bank accounts and you are discharged after 1 year. Only you are responsible when entering into a NAP, no one but you can apply for a No Asset Procedure.

Bankruptcy on the other hand is slightly different, you can be declared bankrupt by your creditors if you are a business that cannot support it’s debt’s and you can also declare yourself bankrupt or liquidate your company in the event of not having funds or assets that can support your debt level.

If you are declared bankrupt, you will still be responsible for Court ordered fines or orders of compensation to your creditors by the Court. You will have restrictions over where, how and for whom you can work for. You will not be able to travel overseas without permission from the courts, and any decisions regarding your financial life are heavily scrutinized. You will get issued with a new IRD number and you will not receive your so called “Get out of jail free card” for 3 years.

Something to be said for either of these insolvency situations is “DON’T BE FOOLED”, there is no “GET OUT OF JAIL FREE” whether after 1 yr for a NAP or 3 Yrs for Bankruptcy. Credit reporting agencies will report your financial convictions for 7 years.

This will and does effect the ability to get back on your feet. Also just to note, from a lenders perspective when applying for finance, it is often viewed that going Bankrupt for a business failure is somewhat an easier pill to swallow as at least you have given productivity a try and in many cases, market conditions can affect even the most well structured, well meaning business operations.

NAP on the other hand can be viewed as incompetence in managing your financial affairs and finance companies view a NAP as wiping your DEBTS under the table.

So you see, much consideration should be given before entering into a No Asset Procedure, you are still better to get assistance at working your way through and managing your debt level rather than entering into a NAP. Regardless of what BUDGET SERVICES may argue differently.

In most situations people you owe money to will be more forgiving and compassionate toward you if you work through a re-payment structure that you can manage and clear your debts over time.

I hope these thoughts help anyone that is on the wrong side of the track reading their income and debt level. Have a great week 🙂Cheers Nicole

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