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Debt In New Zealand

Debt Settlement

Debt settlement, also known as debt arbitration, debt negotiation or credit settlement, is an approach to debt reduction in which the debtor and creditor agree on a reduced balance that will be regarded as payment in full (source wikipedia)

Process

An offer is made by the debtor (or an agent so empowered by the debtor) to the creditor at a figure that may be capable by the creditor to accept.
The creditor may reply an acceptance or may counter offer with a higher number.

The creditor may add information such as payment information to the initial offer, however this is not a counter offer it is merely information to facilitate payment.

The Counter Offer.

If the creditor makes a counter offer (replies to the initial offer with either a higher amount, or conditions which are a structural part of the agreement), this is considered to be a counter offer.
When a counter offer is made, it is the same as the initial offer being refused, and once refused the offer cannot be 're-activated' without one of the parties making the offer again.

The offer - counter offer situation can become very confusing, when there are a number of offers and counter offers, or additional terms imposed by either party.
What the parties need to bear in mind, is that the last offer, or counter offer is the only active offer.

Dealing with agents

When dealing with an agent in an offer - counter offer situation, the parties must be aware of the authority of the agent.
This is extremely important, when dealing with a debt collection agent, as there is little or no documentation provided to a consumer (debtor) that validates the authority an agent has to contract on behalf of the creditor.

Before any settlement offer can be made all parties must understand the relationship of all involved.

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Put it in writing

If you are going to make an offer to a creditor, put that offer in writing, to ensure you have an accurate reflection of what you are saying and what you are wanting.
KEEP IT SIMPLE there are some basic elements you need, however they are fundamental.

Example offer...
I (your name) offer you (the name of the creditor) $XX.XX without prejudice in full and final settlement of my debt.
should this offer be acceptable, payment will be made within XXX days to your nominated bank account.

Signed
(your name)
Dated ____/_____/______

Law of Contract

In New Zealand, as around the world, the law recognises discounted settlements under the law of contract.

There are a number of cases which relate to the offer to settle a debt in full, however we do not have access to the New Zealand Case law to provide specific quotes.
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Warning!

It has come to the attention of us at NZDEBT.NET that there are terms which have been imposed by some banks in New Zealand which seem to be outside both the Credit Contracts and Consumer Finance Act and also outside the limitations act, as well as the entire concept of 'Full and Final'.

The situation has occured where a bank is offered a full and final settlement, in satisfaction of a debt, and the bank says someting akin to 'if you receive a discount, than, if you want to bank with us ever again in the future, the amount will be payable'.

The bank may consider the debt to be 'written off' however, to keep an account as payable for any reason seems to fall outside the limitation period (6 years), and the bank would have you believe that the limitation longstop period does not comply (15 years).

Where this becomes an issue, is, in a country as small as New Zealand, banks get acquired or merged into other banks (eg, postbank - purchased by ANZ Bank, and National Bank (NZ) being taken over by ANZ ).
in the example (previous) if an account was settled with a debtors previous bank, and that bank gets acquired by the organisation they currently bank with, the debt would then become due.

. If that debt (in the example above) was settled with a 'remainer clause', and the bank was acquired after the 6 year limitation period, or even after the 15 year longstop period, it would seem that clause would be in a breach of the Limitation Act 2010.