Rent arrears under insolvency
Question from Sue updated on 18th September 2019:
We have a tenant who is under a court order to repay us outstanding rent arrears of nearly $10,000. We obtained a court order late last year to enable us to immediately evict our tenant if she fails to pay any future rental payments and the tenant was ordered to pay off the debt at $400 per month. But our tenant has just made herself insolvent and now says the court order is null and void. How do we proceed?
Our expert Steve Watson responded:
From what you have said, the Tribunal has allowed for the eviction of the tenant should the tenant fall behind in paying their rent. Should this be the case, procedures on how to apply for an eviction warrant can be found in the ‘about civil debt’ section on the Ministry of Justice website.
Your situation regarding collection of the outstanding rent arrears is covered under insolvency law. So I have asked our colleagues in the Insolvency and Trustee Service for some guidance in responding to that part of your question. When a person enters a formal insolvency procedure, creditors must stop all proceedings to collect their debts. This includes any court orders. As a creditor you can file a claim in the person’s insolvency. This can be done online at www.insolvency.govt.nz.
Once this is done, you will be able to see any progress in the person’s insolvency through the website. The likelihood of any debt repayment will depend on which type of insolvency that is in place. As the Official Assignee realises funds from the sale of the person’s property or any contributions that the person is required to pay, the creditors will receive dividends.
Unfortunately, creditors are seldom paid in full. In the case of a No Asset Procedure, if there is no property to be sold or means to make contribution, the creditors will not receive anything. Along with filing a claim, the insolvency website has explanations of insolvency procedures (bankruptcy, no asset procedures, summary instalment orders) and what they entail. Go to www.insolvency.govt.nz for more information.
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