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Loans for bankrupts

Bankruptcy doesn’t have to be the end of the road. Here are some personal loan options for bankrupt borrowers.

Filing for bankruptcy is not an easy step for anyone to take. However, typically, the most challenging part is trying to rebuild your finances, your credit and your life. During bankruptcy or after you are discharged you may find yourself in need of a loan, but are there lenders willing to consider you?

⚠️ Warning: be cautious with short-term loans

If you're experiencing financial hardship and would like to speak to someone for free financial counselling, you can call the MoneyTalks helpline operated by FinCap on 0800 345 123. It is open from 8:00am to 5pm, Monday to Friday and 10am to 2pm Saturday. When comparing short term loans, ensure you take into consideration any fees, charges and rates you may be charged.

Alternatives to short-term loans

Consider these alternatives before applying for a payday loan:

  • Use online Government resources. The Commerce Commission New Zealand website explains how loans works and what to be aware of when borrowing from a lender.
  • Payment plans. Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan or receive an extension on your due date if you’re behind on payments.
  • Contact your creditors. Speak with creditors about extending the due date of your payment, or working out a new payment plan that works for both of you. Seek personal loans elsewhere. Consider a small personal loan from a bank or a credit union. You may qualify for a loan with much lower interest rates than those offered by payday loan companies.
  • Pay with credit card. Consider paying with your credit card to cover your emergency bills or payments. This is not a long term solution, as you’ll need to pay off the balance as soon as possible, but it’s an alternative to a short term loan with high – and immediate – interest rates.

Please note: If you are suffering financial problems related to the coronavirus pandemic you may be eligible for additional support.

Can I get a loan if I’m bankrupt?

Yes, you can get a loan if you are a discharged bankrupt, or even if you are currently bankrupt. You are more limited in your choice of lender, and the fees and rates are considerably higher on a bankrupt loan. The loan provider may require you to attach an asset as security or apply with the help of a guarantor. Have a look at your loan options below and see which loans you might be eligible for.

Things to consider before applying for a loan while bankrupt

  • Bankruptcy may affect your assets and income, so deciding whether you can afford the loan repayments is an essential consideration. What will they be and how will it work with your budget?
  • Applying for a loan when you’re in a challenging financial situation isn’t a decision you should take lightly, which is especially true when you are bankrupt. Consider why you are taking out the loan and if there is another way you can pay for what you need.
  • Speaking to a free financial counsellor might be an option to consider before you apply for any financial product. Contact the Citizens Advice Bureau on 0800 367 222, and they can point you in the right direction. Its website also has the numbers for local offices throughout New Zealand.

What kind of bankrupt loans may be available?

If you need finance and are currently bankrupt or have a bankruptcy listed on your credit file, the following loan options could possibly be suitable:

  • Payday loan. This is a short-term loan up to $2,000 with a repayment term between two days and one year. However, you can find loans up to $5,000 or even $10,000. Lenders have more flexible lending criteria, and while they won’t all consider bankrupt applicants, some will.
  • Personal overdraft. Your current bank may be willing to approve you for a small personal overdraft if you have a good history with them.
  • Personal loan. Bad credit personal loans are available from lenders, some for large amounts.
  • Business loans. If you’re bankrupt, you still may be able to apply for a business loan. These loans are for more significant amounts than a personal loan and finance a range of business purposes.
  • Car loan. You may receive approval for a secure loan more easily, as they are less of a risk to a lender. You can consider a bad credit car loan and attach your new vehicle to the loan as security.

How can I receive approval for a bankrupt loan?

While there are lenders who consider applicants who are or who have previously been bankrupt, filling out the application is not all it takes to receive approval. Here are some of the criteria you need to meet when the provider considers you for a bankrupt loan:

  • Work and Income. While the lender may still consider you for a loan if you receive Work and Income payments, lenders may apply a restriction as to what proportion of your benefit can make up your income.

Here’s how to get a home loan if you’re a discharged bankrupt

  • Income. How much do you earn? Lenders often have minimum income requirements in place. They may allow your income to be from employment and Work and Income, or it may need to be solely from regular work, but it usually needs to be over a specific amount per week or month.
  • Assets. For bankrupt loans, the lender may require you to secure an asset as a guarantee, in case you default.
  • Ability to manage your repayments. Your ability to repay is the primary requirement lenders have when considering you for a loan. Does your income allow you to easily manage your repayments after taking into account your liabilities and debt? If your repayments are manageable and you meet the lender’s other criteria, you can apply.
  • Guarantor. If you don’t meet the lender’s criteria, you may be able to apply with a guarantor to increase your chance of approval.

What options for I have for a loan while bankrupt?

BrandDoes it accept bankrupt applicants?Criteria
CashburstNoYou cannot apply.
Cash ReliefNoYou cannot apply.
Cash Till PaydayNoYou cannot apply.
MoolaNoYou cannot apply.
Pretty Penny LoansYesYou need to be able to demonstrate a regular income and be able to repay the loan. Considers those receiving government assistance.
Save My BaconNoYou cannot apply.
SmartcashYesYou must have been in permanent, continuous employment for 3 months. You also need to earn at least $400 a week and it needs to be paid into a bank account.
Swoosh FinanceYesYou need to be in permanent employment. The amount Swoosh lends is dependent on your income.
The Little Loan ShopNoYou cannot apply.

What you need to know about bankruptcy, Debt Repayment Order (DRO) and No Asset Procedures (NAP)

If you are bankrupt, under a Debt Repayment Order or NAP, then understanding your options and the differences are essential.

How long it lasts. Bankruptcy lasts for a minimum of three years after you are declared bankrupt. With a No Assets Procedure you are usually discharged after one year, while with a DRO, you have to complete its terms before you are discharged (the timeline for this may vary, according to your situation).

Your credit file. Bankruptcy will show on your credit file for four years after the date you were discharged.

Your name on the Insolvency Register. Bankruptcy lasts for three years but your name remains on the Insolvency Register for another four years. Under a NAP, your name is listed on the Insolvency Register for another four years after you have completed it; those with a DRO are recorded until the time they are discharged.

Eligibility. Bankruptcy is for those that owe over $50,000 but have no way to meet their debt obligations. A DRO is an option if you owe under $50,000 (in unsecured debt). You must be unable to pay the debt immediately but be able to do so in the future, usually over a fixed period of three years. With a NAP, you need to owe less than $50,000, have no assets and no way to pay the money back.

Employment and income restrictions. If you are insolvent, you may find employers will not take you on as they may feel you will risk their business.

Other restrictions. If you’re bankrupt, you may have other limitations, such as not being able to travel overseas without consent. Check out the New Zealand Insolvency and Trustee Service website for more information on this and other issues.

Understanding bankruptcy: readers questions

Here at Finder NZ, we frequently get questions from readers about bankruptcy. We’ve brought together the answers to some of the most common issues to help shed light on a complicated financial process.

More guides on Finder

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