Student-loan debtors face bankruptcy

Last updated 05:00 23/11/2012

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Fourteen Australian-based Kiwi student-loan borrowers may be bankrupted or stripped of their assets for repeatedly failing to repay their debts.

Inland Revenue is pursuing the Kiwi expats through the courts as part of its drive to collect overdue repayments from overseas borrowers.

The first legal action against student debtors overseas was prefaced by a warning letter sent out to 45 people late last year.

That was enough to galvanise most into action, but some remain recalcitrant.

"These borrowers continue to ignore their repayment obligations despite numerous contacts with them by our staff," said Inland Revenue collections manager Richard Owen.

"The others have been able to resolve their situation with our staff and have made repayments toward their student loan debt."

Mr Owen said judgment would be obtained in New Zealand, and Inland Revenue would apply to have it sealed in the Supreme Court of Australia if the borrowers continued to renege on their debts.

That judgment would then be enforced using several possible remedies, including charging orders, asset seizure and even bankruptcy.

Another option was garnishee notices, which would make the debtors' employers send a proportion of their wages directly to Inland Revenue.

Mr Owen said taking legal action was a last resort. However, borrowers living overseas needed to be aware that "they may have gone away, but their student loan has not".

Inland Revenue is also in the final stages of contracting private tracing agencies and debt collectors to act on its behalf overseas.

New Zealand Union of Students' Associations president Pete Hodkinson acknowledged that some people were taking advantage of the student loan scheme.

"If we can get those people to pay, that's fantastic - chiefly because it's their behaviour that's used to justify dropping student support," he said.

But he criticised arbitrary policy changes such as the slashing of the overseas repayment holiday from three years to one, which came into effect in April.

"We don't believe that any student overseas for longer than a year should be considered a criminal because of that shifting of goalposts."

Inland Revenue has collected $42 million in the two years since the start of the repayment drive, or about 10 per cent of the $418m owed by students living overseas that is overdue.

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