SINGAPORE: Applications for bankruptcy rose in the first half of 2024, as did the number of people declared eventually bankrupt.
Recent Law Ministry (MinLaw) data showed that 2,334 people filed for bankruptcy in the six months to June 30, up 25% on the same period in 2023, while 594 were later declared bankrupt, an increase of 11%.
It also noted that there were 9,903 undischarged bankrupts as at June 30, 2.4% more than the 9,669 as at Jan 31.
Filing for bankruptcy can be distressing, given the stigma that surrounds it, one that brands applicants as failures or over-spenders.
There are also more serious repercussions, as bankrupts are restricted from taking on certain roles and may even lose their jobs.
That is why bankruptcy should be regarded only as a last resort, particularly when it starts to put a strain on a debtor’s mental health or on the family.
Avoiding it essentially boils down to being financially prudent and ensuring you do not overspend and end up in a cycle of never-ending and ever-ballooning debt.
An individual can apply for bankruptcy in the High Court or his creditors can do so if the person has unpaid debts of at least S$15,000.
The case will be assessed to determine if the person is suitable for the Debt Repayment Scheme (DRS), a programme administered by MinLaw that aims to help a borrower avoid bankruptcy.
An individual is considered for the DRS only if a bankruptcy application has been filed against him; debtors cannot apply directly to join.
There is no certainty he will get onto the DRS as he must meet certain criteria, including a total debt size of not more than S$150,000, and most importantly, he must be employed.
Those who qualify for the DRS must still repay their debts in monthly instalments for a fixed period of not more than five years, said Tan Huey Min, general manager of Credit Counselling Singapore.
Tan added that the amount the borrower needs to repay is generally less than the actual amount owed, and once the person meets his financial obligations under the DRS, he can start afresh.
While a borrower does not have to repay the full amount owed, MinLaw noted that there is no guarantee he will get a huge discount off the debt.
A discount of up to 70% would be considered a huge discount, it said.
In spite of a lighter debt burden, some debtors under the DRS will still fail to complete their repayment plans.
If this happens, creditors can pursue the individual for any money owed them, including filing another bankruptcy application, Tan said.
There will also be borrowers deemed unsuitable for the DRS and they will be declared bankrupt.
Yuen Law associate director Tris Xavier noted that Singapore’s bankruptcy regime previously did not provide clear timelines for discharge from bankruptcy, with individuals sometimes remaining in that state for up to 20 to 30 years.
However, reforms enacted in 2016 provided clearer milestones for individual debtors to achieve, while taking into consideration a debtor’s personal circumstances.
“Our bankruptcy regime is moving towards more rehabilitation, with the amendments making the regime somewhat more focused on the debtor rather than the creditor,” Xavier added.
First-time bankrupts can now get out of bankruptcy in three to seven years if they pay their target contribution in full.
The target contribution is the total amount a bankrupt needs to pay during his time in bankruptcy. The amount is calculated with reference to a bankrupt’s individual circumstances, and not the total debt size he owes.
It is typically equivalent to 52 monthly contributions for a first-time bankrupt.
Similarly, repeat bankrupts can be discharged within five to nine years if they pay their target contribution – 76 monthly payments – in full.
Bankrupts who pay their target contribution in full will have their names removed from public records after five years from the date of their discharge, while those who fail to do so will have their names on public records permanently. — The Straits Times/ANN
