The number of bankruptcies recorded against debt managed by collection agency Baycorp has fallen sharply since the introduction of the no assets procedure (NAP) last year.
At the same time, the amount of legal action pursued by Baycorp in an effort to recover money owed to creditors has risen.
The agency today said nearly 1300 bankruptcies were recorded against debt it managed in the first half of this year. Last year there were 6000.
The NAP option was for debtors unable to pay their debts, and was designed to provide those experiencing financial difficulty with an alternative to bankruptcy, Baycorp said.
But unlike bankruptcy, which stayed on a creditor's record for up to seven years, the NAP was wiped after four years and those involved could typically apply for credit again after only one year. When a debtor entered a NAP, the debt was frozen on the date of entry and wiped on discharge.
Baycorp chief executive Geoff Harper said businesses needed to be more alert to the fact there were many more consumers now who in previous years could have been made bankrupt.
In the first half of this year, Baycorp had pursued legal action in almost as many cases as it did in 2009.
Clients had been a lot less averse to taking legal action to collect what they were owed, Mr Harper said.
"The recession has played a big part in creditors taking firmer action to prevent debtors defaulting in the first place."
That included such things as tightening credit policies and working the debt harder themselves before calling Baycorp in.
"Often by the time the debt arrives on our desks there is a need for stronger action and I suspect that's the primary reason for the increase in legal action," Mr Harper said.
Baycorp said its figures showed Wellington had 43 percent of bankruptcies so far this year, with nearly 20 percent in Palmerston North and 15 percent in Auckland.
Gisborne led the country in the number of cases in which legal action had been used to recover debt so far this year, followed by Auckland and Rotorua.
During the past year there had been a large increase in the average dollar value of accounts referred to Baycorp by creditors in finance to $9175, health to $1786, retail to $4649, and media to $1240.
The highest debt collection rates -- the ratio of funds collected to those owing -- were in insurance at 42 percent, education at 43 percent, and media at 43 percent. Finance at 12 percent and health at 17 percent had the lowest.