Debt write-off

Joint Ministers have delegated to MSD’s Chief Executive the authority to write-off Crown assets in certain circumstances, including debts under a certain value.

This debt write-off delegation encompasses several categories of debt write-off, together with conditions. It includes debt that cannot be recovered as MSD made the payment (or payments) in error.

This category used to be known as ‘estoppel’, as set out in section 94B of the Judicature Act 1908. This Act was repealed in March 2017.

The provision became section 74B of the Property Law Act 2007, and therefore only relates to property as defined in that Act.

Deciding whether MSD made any payment in error involves the use of discretion.

The reasons and circumstances that led to any payments being made, including why the student was not entitled to them, need to be confirmed.

A debt for any payments made in error can be written-off when the following criteria are met:

• the payment(s) resulted wholly or partly from a mistake or error by MSD in relation to the law and/or the facts of the case
• the student received the payment(s) in good faith
  Did they reasonably believe when they received them that they were entitled to them?
• the student changed their position believing they were entitled to the payment(s)
  Did they make different decisions to those they would have otherwise made, because they believed they were entitled to the payment(s)?
• considering all the circumstances, including the student's financial situation and any implications for any other persons, it would be inequitable to recover the debt

When the value of the debt is $5000 or more, legal advice is required to confirm that the above criteria have been met.

This requirement only applies to any recommendation to write-off debt for any payments made in error.

The other categories of debt write-off that may need to be considered are listed below. Some of them also involve the use of discretion.

The debtor is insolvent

The debt cannot be recovered because:

• the debtor has been adjudicated bankrupt and
• the debtor has been automatically discharged from bankruptcy after 3 years, or has been granted a discharge from bankruptcy by the High Court, and that discharge has not been reversed and
• the Official Assignee has confirmed that the debtor's bankruptcy has been discharged and that discharge has not been reversed

The debt cannot be recovered because:

• the debtor has been admitted to the No Asset Procedure under section 363 of the Insolvency Act 2006 and
• the debtor has been discharged from the No Asset Procedure under section 377 of the Insolvency Act 2006 and
• the Official Assignee has confirmed the debtor has been discharged from the No Asset Procedure

These provisions do not apply to any debt established due to fraud, apart from fraud balances included in the No Asset Procedure before 10 March 2009.

Agent insolvent

An agent of the Crown was paid the funds to be used for repayment of the debt, but has since become insolvent.

Debtor is deceased

The debtor is deceased and the debt cannot be recovered, or it is uneconomic to recover.

The debt or the identity of the debtor cannot be proven

Insufficient information exists to accurately establish the amount of the debt, and legal advice is received that MSD would be unable to prove the amount of the debt to the satisfaction of a court.

Insufficient information exists to identify the debtor or legal advice has been received that confirms the alleged debtor cannot be lawfully identified with the debt.

The debt cannot be proved to the Court's satisfaction

• civil proceedings have been issued and
• the Court finds that the full amount of the debt is not proven and
• legal advice has been received that confirms the balance of the debt must be written off

Foreign exchange balances

The debt arises from the conversion of a foreign currency and it does not exceed $1000.

The debt has become statute barred

• the debt has been established for more than 6 years and
• there has been no acknowledgement of the debt from the debtor for more than 6 years and
• the debtor has never agreed in writing, to owing the debt or entered into any repayment arrangement, or made any repayments during the preceding 6 years and
• there is no possibility of a deduction notice being issued in respect of the debt, including a deduction from benefit or allowance payment

The debtor is a participant in a Witness Protection or Relocation programme.

Advice is received from Data Integrity that the debtor is a participant in a witness protection or relocation programme, and debt recovery should not take place.

All economic avenues of collection have been exhausted and the debt is less than $20,000

1. Debt $50 or less - automatic write-off after 70 calendar days when:

The debtor owes between $0.01 and $50.00 (in total) and there have been no repayments during the previous 70 calendar days.

2. Debt less than $200

The debtor owes between $50.01 and $199.99 (in total), and there have been no repayments during the previous 6 months for innocent debts, or during the previous 12 months for fraudulent debts.

3. Debt less than $1000

The debtor owes between $200.00 and $999.99 (in total) and there have been no repayments during the previous 12 months for innocent debts, or during the previous 2 years for fraudulent debts.

4. Debt less than $2000

• the debtor owes less than $2000 and there have been no repayments during the preceding 2 years for innocent debts, or during the previous 4 years for fraudulent debts and
• it is established that the debtor does not reside at the last known address or no longer works at the last known place of employment and
• current debtor records do not appear on any MSD databases and
• current debtor records do not appear on any public databases e.g. credit reference checks, internet searches and
• current debtor records do not appear in any information matching exercises with other government agencies e.g. IRD, ACC, Customs and
• exhaustive searches are completed with utility companies e.g. power companies, electronic white pages and banks

5. Innocent breach debt of $2000 or more

• there has been no ability to gain repayment or communicate with the debtor for at least 6 years and
• current debtor records do not appear on any MSD databases and
• current debtor records do not appear on any public databases e.g. credit reference checks, internet search and
• current debtor records do not appear in any information matching exercises with other government agencies e.g. IRD, ACC, Customs and
• exhaustive searches are completed with utility companies e.g. power companies, electronic white pages and banks

6. Fraudulent breach debt of $2000 or more and less than $20,000

• there has been no ability to gain repayment or communicate with the debtor for at least 10 years and
• current debtor records do not appear on any MSD databases and
• current debtor records do not appear on any public databases e.g. credit reference checks, internet search and
• current debtor records do not appear in any information matching exercises with other government agencies e.g. IRD, ACC, Customs and
• exhaustive searches are completed with utility companies e.g. power companies, electronic white pages and banks

• the debtors assets have been seized under the Proceeds of Crime Act 1991 or the Criminal Proceeds (Recovery) Act 2009 and
• the net amount realised through sale of the seized assets, after deductions required under section 82 of the Criminal Proceeds (Recovery) Act have been made, is equal to or greater than the debt that will be written-off

For the operational processes that must be followed for all categories of debt write-off refer to Knowledge Base.