In the five months between January and May 2020, 1,481 bankruptcy applications were filed in Singapore, with 404 orders issued – a substantial number considering the short time frame.
In a nutshell, bankruptcy occurs when you owe more than you can afford to pay. There are also a few technicalities to consider.
Filing for bankruptcy in Singapore is not something that many people contemplate when making financial plans. People who become bankrupt rarely know what to do to get out of it or what penalties they may face because this outcome is unpredictable.
People who are considering filing for bankruptcy frequently seek guidance on how to deal with their debts. If you stumble into a situation where you need to file for bankruptcy in Singapore, here are some things you should know.
When Is It Legal To Declare Bankruptcy In Singapore?
Bankruptcy is the legal position of a person who is unable to repay debts of at least S$15,000. However, according to the COVID-19, the sum has been increased to at least S$60,000 until October 19, 2020, according to the new law on temporary measures for bankrupts to offer debtors relief from creditors. In Singapore, you can file for bankruptcy voluntarily if you meet the following criteria:
1. It’s unlikely that you’ll be able to pay off your debts in full.
2. When you have exhausted all other options for repaying your debt with your creditors.
Additionally, your creditors may file for bankruptcy if they do not believe you will be able to repay the money you owe them. It’s also worth noting that the High Court can declare you bankrupt if you refuse to comply with your creditor’s demands.
Singapore’s Bankruptcy Filing Requirements
If you fall under the following requirements, in addition to having at least S$15,000 in debt (increased to at least S$60,000 until October 2020 pursuant to COVID-19), you or your creditor can file for you to be declared bankrupt:
- You have debts that are more than your income.
- You cannot provide for basic living expenses such as food, shelter, and clothing.
- You have been a resident of Singapore for a year
- You have a business in Singapore running for a year
In addition, bankruptcy applicants must also be 18 or older with at least six months until the age of 65. They must also have resided in Singapore for at least six months before filing for bankruptcy.
If a creditor files for bankruptcy and you meet one of the following criteria, you will be considered unable to repay your debt:
- For at least 21 days, you fail to comply with a statutory demand to settle the debt.
- You disregard a court-ordered execution for payback.
- You fled the nation in order to escape paying your debts.
- The Official Assignee (OA) attests to your inability to pay the obligation.
It’s also worth noting that filing for bankruptcy has a cost. The OA requires a deposit of S$1,850 from any creditor or debtor filing for bankruptcy.
After the evaluation, the High Court can legitimately declare you bankrupt within 4 to 6 weeks of your application. Creditors will be able to collect the full amount of the deposit if the bankruptcy application is approved. If you plan to file for bankruptcy on your own, however, you will not receive your money back. The OA will repay S$1,800 to you or the creditor if your application is refused or withdrawn. The final S$50 will be used to cover administrative fees.
What Can Happen If You File For Bankruptcy in Singapore?
Bankruptcy happens to a lot of people in Singapore. In fact, an estimated one out of every 30 citizens in Singapore is facing bankruptcy. While bankruptcy isn’t a pleasant situation to be in, it isn’t the end. When you file for bankruptcy in Singapore, here’s what happens.
1. Your debt is no longer accumulating.
Interest on your debts stops snowballing when you file for bankruptcy. As a result, your debts have been “frozen” at a specific sum.
Once you’ve been declared bankrupt, the OA will determine a suitable monthly contribution amount based on your family’s requirements. Repaying your debts gets easier when you commit to a debt repayment plan.
2. Creditors can’t pursue legal action against you.
Your creditors are legally forbidden from pursuing you through the courts once you declare bankruptcy. Creditors are prohibited by law to take legal actions against you. For example, they cannot seize your assets or property because of unpaid debt. This means that they can’t attempt to collect money or assets through legal action, which immediately takes away a lot of stress.
3. You Must Contribute To Your Bankruptcy Estate every month (To Pay Your Debt)
As an undischarged bankrupt, you must also file a Statement of Affairs, which is a summary of your assets and expenses, according to the Bankruptcy Act.
To repay debtors, you must also follow the repayment schedule established by your OA. A part of your income will be paid to creditors automatically, leaving you with a small amount to cover everyday expenses.
4. Your Assets Must Be Surrendered To Your Official Assignee (OA)
When you declare bankruptcy, valuable assets, such as your automobile, must be surrendered and liquidated.
Although you will undoubtedly receive “assistance” in repaying your debts, you will first be required to forfeit your possessions. This includes everything of value to you, such as your automobile, overseas property, and gifts received previous to your bankruptcy discharge.
However, some assets cannot be taken:
- You and your family’s necessities. For instance, your HDB housing, CPF funds, and the furniture you and your family will require.
- The trade supplies or tools you’ll need to get the job done.
- Any property you hold on behalf of someone else as a trustee.
- Your family’s life insurance policies are held in express trust.
- The balance of your monthly income less your monthly contribution and any salary bonuses as part of your income
5. The Bankruptcy Register Will Include Your Name
Bankrupts’ names will appear on the bankruptcy register, and anyone looking through the data will be able to see if you’re bankrupt. Your employers will be contacted as well.
On a lighter note, depending on how you get out of bankruptcy, you may be able to have your name removed after a period of time. Those who successfully repay their goal contribution, for example, can have their names deleted five years after being discharged.
6. You’ll have a hard time finding work.
While you will be able to work, you may have trouble finding work, particularly in the banking and government sectors. It’s also doubtful that you’ll be able to advance to a management position.
This won’t be an overnight process, but you’ll soon feel the strain when your applications are rejected. For starters, your applications for jobs will be screened using an automated system that flags up bankruptcies in its search criteria.
Once again, depending on how you get out of bankruptcy, potential employers may be more open to giving you a chance. Whether you appear on the register or not depends mostly upon how long ago you became bankrupt and what kind of debt repayment track record you have.
7. You Cannot Travel Overseas Without The Approval Of The Official Assignee.
If bankrupt wishes to leave Singapore, they must notify the courts and obtain consent from the OA. This is rarely approved unless it is for reasons related to your job.
A bankrupt who travels abroad without permission will be imprisoned for up to two years when they return. A stiff fine of up to S$10,000 is also possible. Your ability to travel (as well as the length of time you can travel) is also determined by your bankruptcy status. You may have certain privileges as a bankrupt depending on whether you are in the Green Zone or the Red Zone.
In general, bankrupts with good behavior are assigned to the Green Zone, while those with bad behavior are assigned to the Red Zone. For Green Zone and Red Zone bankrupts, instances of rights and privileges withheld are shown below.
- Granting travel permission for more than a month to any country in the Green Zone or Red Zone
- After five years, you’ll be assessed to see if you’re eligible to be released from bankruptcy.
- Travel is not permitted.
- No permission to operate a business or serve on a board of directors has been granted.
- After more than five years, you’re being evaluated to see if you’re eligible to be discharged from bankruptcy.