The following tips are some popular ways to manage your cash and reduce your expenses to help tackle debt problems. 

Prepare a Budget
The majority of people with debt problems do NOT have a budget. Only by knowing what you spend and where you spend it, can you have a chance of cutting back. Download a budget tool (Westpac's tool is the most comprehensive currently online in New Zealand); the idea of a budget tool is to keep your finances healthy by identifying what you spend money on and reduce it at a per-item level.

Get help paying the mortgage
If making mortgage payments is a struggle, consider making an application for Financial Hardship, as outlined in detail in the section below. This can give you some breathing space to focus on more problematic (and expensive) debts.

KiwiSaver Hardship Application
If you can provide evidence that you're suffering significant financial hardship, you may be able to withdraw some of your KiwiSaver balance. This includes instances of being unable to meet minimum living expenses, unable to meet mortgage repayments on the home you live in and a number of other situations. Applications are assessed by the KiwiSaver provider you are with, not the government - with more details outlined here. If approved, you can withdraw as little or as much of your KiwiSaver balance (not including the $1,000 government kickstart and contributions).

You’re probably paying too much right now on your current debt. The best way to manage debt is to have the lowest interest rate, as your debt is immediately cheaper and easier to repay. Loan consolidation deals are common, but we suggest only considering them if the interest rate they offer is lower than your current interest rate. 

Use Balance Transfer Credit Cards
If you are struggling to pay off your bill every month, the interest bill will likely be a significant portion of the debt you owe. Many banks offer low fee credit card balance transfer deals which can last up to 12 months and then fix at 5-7% for the life of the balance. If you have a $10,000 debt, switching to a new card could save you up to $2,000 a year. It’s essential to cancel the old credit card to prevent more debt building up. Our guide to balance transfer deals includes bank offers that also include the likes of Q Card and GEM Visa balances.

Cheap Personal Loans
A personal loan is suitable if your current debt costs are higher than the interest rates offered by personal loans. Best of all, personal loans require regular repayment which means you have a set timeframe for repaying the debt. This is different from credit cards which have no fixed time for repayment. The better your credit score, the lower the interest rate. We have a guide to personal loans and the best deals currently available. But, if the banks are not willing to lend to you, it might be an option to look at a credit union or finance company. They may be slightly more expensive than a personal loan from a bank, but are significantly cheaper than payday loans. ​

Don’t Sit on Cash, Repay Your Debt
Any spare cash you have won’t earn much interest, but it will make a dint on your debt and interest costs. If you have spare money in your bank account, log in to internet banking and transfer it to your credit card or loan balance. Even $50 and $100 payments can make a difference. 

Be aware of credit card minimum repayments
Credit cards are designed to keep you indebted for years. If you only make the minimum repayment every month, it will take you decades to repay a $4,000 balance. In fact, an account holder with a $4,000 balance, consistently making monthly minimum payments of $120 (3%) will pay $1,000 of interest over one year and still be left with around $3,400 to pay. And that’s without considering standard account fees and any additional penalties or extra interest that is charged if a payment is missed. Paying off as much as possible on a credit card makes it much easier to reduce long-term debts. 

Check your credit score
You may have incorrect information on your credit history which is preventing access to cheaper finance. Our credit score guide outlines tips to get your credit history in order.

​If you have been through your debts and can't cut the cost, or have cut the cost and are still struggling to make repayments, it's time to look at some more severe measures.

​Talk to your lender(s)
Letting your lender know about your situation is important, especially if you are going to be unable to make a payment. They can provide guidance on what they can do on their end. 

Check your eligibility for assistance from Work and Income New Zealand (WINZ)
If you are earning under $40,000 and have children for example, you might be eligible for help. WINZ offers benefits and loans on a case-by-case basis. Look at Working for Families and other entitlements. Asset limits apply, and are usually around $1,000 - although the limit does not include what you need for day-to-day living, eg your home or your car. See the WINZ section below for more details.

Microfinance loans and advances
A limited number of charitable ventures operate in New Zealand, offering interest-free loans for specific purposes, as well as debt relief. They can help you pay for essential items for your home or other things that you cannot pay for in a lump sum, such as clothes and furnishings.

 Sadly, demand is enormously high for these services and each charity is limited by the total money they have to lend. If you think you qualify and urgently need the help, it is a good idea to contact an organisation and apply sooner rather than later. ​

​The Government offers loans and benefits which are an alternative to getting more in debt. You don't need to be an existing beneficiary to be eligible for many of the entitlements.

Urgent Costs

• Work and Income New Zealand (WINZ) offers benefits and interest-free loans to Kiwis on low-income levels needing essential items or services that you cannot pay for in a lump sum or for which you don’t have the money due to other essential costs.
• You do not need to be currently receiving benefits to apply.
• Urgent cost assistance helps with Food, Accommodation, Home repairs and maintenance, Power, gas and water bills or heating, Dental treatment, Glasses/Optical, Whiteware (eg, fridge, freezer, washing machine), Car repairs, Bereavement and Fire or theft. You need to show assets of less than $1,000 (excluding essentials like a home or car).
• WINZ does include your bank balance and investments, or things like a caravan or a second property.

You can apply with WINZ directly – income limits apply - look at the details and see if you qualify. Best of all, any repayments are set up to be dependent on what you can afford to pay.
 
But, demand is very high for these services and WINZ may not determine your needs to be “urgent” and may decline your application. However, it’s easy to apply and worth the effort.

The Credit Contracts and Consumer Finance Act (CCCFA) allows any person with a credit contract (i.e. a debt) to apply to the lender for hardship relief when experiencing an unforeseen change in personal circumstances. This can include:

1. A hardship that couldn’t have reasonably been foreseen, such as illness or injury, loss of employment, the end of a relationship, or death of a partner or spouse.
2. And, as a result of that hardship, the borrower cannot reasonably meet their debt repayments,
3. And, the borrower believes they would be able to meet their debt repayments if the contract was changed as allowed under the CCCFA.

 
It’s law that every lender must consider an application. The contract can be changed under the Hardship provision to allow:

1. Smaller repayments and/or
2. A debt repayment holiday (i.e. taking time off from making repayments until your finances improve)

 
When can I make a financial hardship application?
It's a good idea to make an application as soon as possible if you know you will struggle to pay one or many debts. Importantly, you can’t apply for hardship if:

1. Your debt has been in default for two months or more
2. You have been in default for two weeks or more after receiving a repossession warning notice or Property Law Act notice, or
3. You have failed to make four or more consecutive debt repayments on their due dates.

 
Your make a hardship application directly with you lender, although you can only make one application every four months. If you have a number of debts, it is best to make the hardship applications all at once. Full details can be found on the Commerce Commission's website. 
​
Making an Application for Financial Hardship easily by using our Templates
To have the best chance at a successful application, we have put together two files. The first is a template letter for making an application of Financial Hardship, and the second is an Excel spreadsheet to calculate a summary of financial position (i.e. your income, debts, assets etc). You can complete BOTH in around 30 minutes to one hour, and MoneyHub readers find these immensely helpful in structuring their application and ensuring all the important pieces of information are mentioned. 

Many companies have their own financial hardship application forms available.  To find them, Google the name of the company with whom you have the debt , adding "Hardship Application", to see if they have forms. If they don't, they still MUST consider your Hardship application, and it's best to use our templates above. We have included a few hardship applications forms below to illustrate the range of options available.

• ANZ, BNZ and Westpac (Banks - Mortgages and Credit Cards etc)
• UDC (Personal Finance)
• ​Dunedin City Council (Rates Bills etc)

Has your hardship application been declined? 
Don’t panic. There is help available. Your local Community Law Centre can advise on re-applying and you can also go to the Disputes Tribunal. Our template above is New Zealand’s most comprehensive, so if you haven’t used it we recommend it for subsequent applications. ​

See the Commerce Commission's guide to a lender's obligation and your rights when making a financial hardship application. ​

The excellent Financial Capability website has affiliated debt counselling branches all over New Zealand which provide free advice and debt support services. The services they offer vary, but usually include:

• Debt Crisis Help - assistance with a debt crisis intervention plan and debt repayment plan, enabling you to regain control of your cash-flow and financial situation. The services also include communicating and negotiating with your creditors on your behalf.
• One-on-One Budgeting - developing a personalised financial plan that is tailored to your specific circumstances, giving you the most out of your money and letting you move forward in life.
• ​Ongoing Budgeting Assistance – regular appointments as well as creditor repayment plans and looking at your future cash-flow needs.

Throughout New Zealand, a number of charitable organisations offer debt counselling help to individuals looking for one-on-one assistance. These not-for-profit organisations provide a lot of moral support when debts seem overwhelming. 

The places we'd suggest contacting include:

Auckland and regions

• North Harbour Budgeting Services
• Vision West Auckland Budgeting Service
• Mangere Budgeting Services Trust
• North Shore Budget Service
• Papakura Budgeting Service
• Waiheke Budgeting Services Trust
• North Harbour Budgeting Services Inc
• Matamata Household Budget Advisory Service
• Bay of Islands Budgeting Service Trust
• Whangarei Budgeting Service

Rest of New Zealand

• Hamilton Budgeting Advisory Trust
• Tauranga Budget Advisory Service
• Rotorua Budget Advisory Service Inc
• Hutt City Financial Mentor
• Wellington City Mission
• Johnsonville Budgeting
• Nelson Budget Service
• Christchurch Kingdom Resources
• Christchurch Budget Service
• ​Timaru Budget Advisory Trust
• Dunedin Budget Advisory Service​
• Invercargill Jubilee Budget Advisory Service

Avoid any debt help or loan consolidation companies that you hear on the radio or see online - they have one aim, and that is to make money out of you. This is not what you want, and definitely not what you need.

Any 'plans' they set up will involve you paying them a fee, and this means it will take longer to repay your debts. With so many free volunteer-based options (as outlined above), there is no need to agree to these types of services. 

Looking to declare bankruptcy is serious, and has long-lasting effects on your financial freedom and ability to function in society. There are two options available, depending on whether or not you owe less than $47,000 in total, or more than $47,000:

1. Debt Repayment Plan (or Summary Instalment Orders - SIO)
If you owe less than $47,000 in unsecured loans (excluding student loans, fines, penalties, and reparation orders, etc.), you will likely qualify for a Debt Repayment Plan (or Summary Instalment Orders - SIO) which gives you extra time to pay back some or all of your debt — usually 3 years, though it can be more or less than that. You will have an appointed supervisor, who works with you to help pay back the debt. However, there are consequences of taking an SIO, which we summarise below:

• Your SIO status is on public record. While it won't be advertised, anyone can search and see your SIO status.
• Your credit rating is affected, which means it may be difficult to rent a house, do banking or get credit.
• Banks can close your accounts. Utility providers (power, gas, phone, internet and insurance, etc.) have the power to cut you off or restrict what services they'll provide to you.
• Employers might think your insolvency is a risk to their business and may not want to employ you.
• Your partner – if you have joint services like banks and utilities, the provider can close the account.
• Joint debts – anyone you have joined debts with will, in most cases, be liable for the full debt

 
2. Applying for Bankruptcy

1. If you owe more than $47,000, you can apply for bankruptcy. Bankruptcy is the most severe option, and has wide-reaching consequences.
2. Bankruptcy usually lasts for three years from the date of application, and once you are declared bankrupt your creditors can't chase you for any debt, or add penalties or interest to the debt you owe.
3. If you have a student loan, this will also be cancelled. However, whatever assets you have will go towards paying debts - the Official Assignee (an officer who distributes a bankrupt's assets to the creditors and works with the bankrupt to relieve obligations to the creditors) takes significant control over your financial affairs and may look to sell anything you own (including your house or business) as it sees fit.
4. Your IRD number is cancelled, and you have limitations on overseas travel.  

 
Next Steps
Making the decision to start an SIO or declare bankruptcy should not be taken lightly, and in almost all cases, should be the last option available. ​

​One comforting fact is that when it comes to personal debt, you are not alone. Debt levels are at record highs in New Zealand and most people have their own debt issues, which might be similar to yours.

Debt stress comes at all hours. Because of the lack of online forums and communities in New Zealand, asking for help online is somewhat limited. However, resources are constantly being launched online.