Can a Bankrupt’s HDB be Seized? HDB FAQs for Bankrupts

Filing for bankruptcy often seems like a terrifying proposition, with many imagining the worst and believing that, once declared bankrupt, they will lose all rights and privileges.

However, this cannot be further from the truth, for there still remains laws in place to protect bankrupts from being exploited or completely left to fend for themselves.

One of the most pressing concerns individuals typically have is whether they will still be able to have a roof over their heads after filing for bankruptcy. This article thus seeks to clarify some of the doubts you may have regarding this issue and, hopefully, bring you greater peace of mind over your present situation.

Can a Bankrupt’s HDB Flat be Seized and Sold to Repay Creditors?

As long as at least 1 owner of a Housing and Development Board (HDB) flat is a Singapore Citizen, the flat is protected from creditors by law and cannot be sold or taken over by the Official Assignee (OA).

The OA manages the affairs and estates of bankrupts, and has a duty to raise money or make advances for the purposes of the estate in order to fund repayments to creditors, among others.

However, if all the owners of your HDB flat are not Singaporean Citizens, you will need to surrender your flat to the OA. The OA has the right to forcefully seize possession of your HDB flat should you refuse to cooperate.

Do Bankrupts Still Need to Repay Their Existing Bank/HDB Housing Loans?

All individuals will still be required to continue servicing their bank/HDB housing loans after being declared bankrupt regardless of whether they are Singapore Citizens.

Therefore, even if your HDB flat will not be seized immediately upon you being declared bankrupt (because at least 1 owner of the HDB flat is a Singapore Citizen), the possibility remains open that you could still lose your home if you are unable to repay your mortgage loans.

This is because typically, HDB or the bank has a first charge on your property which allows them to sell your home if you default on your home loan payments. The sales proceeds will then be used to pay off the amount of loan owed.

For example, if you have taken an HDB housing loan, HDB is entitled to compulsorily acquire your flat if any part of your mortgage owing to the HDB has remained unpaid for 3 months after it is due, and HDB has sent you a notice of demand on the late payments.

That said, it is unlikely that HDB will forcefully seize your flat as its first course of action. In previous cases, individuals have been given the option to either sell their flats on the open market to repay mortgage payments owed, or to voluntarily surrender their flats to HDB.

Separately, should you fall behind in paying the interest under your mortgage for a month, either HDB or the bank – depending on who you have taken a loan from – will also have the power to sell your flat.

What if a bankrupt has insufficient funds to repay his bank/HDB housing loans?

HDB has in place several financial assistance measures that can allow you to reduce your monthly instalment amount or to temporarily defer your loan instalments.

You can also consider tapping on your Central Provident Fund (Ordinary Account) savings to pay for your HDB loan if you have not already done so. But because most of these measures are short-term solutions, you may wish to consider selling your existing flat and downsizing to a smaller flat should your financial difficulties persist.

If you have already taken out a bank loan to refinance your HDB loan, you would have to approach the bank and negotiate for other viable repayment arrangements. However, such arrangements usually come with additional terms and conditions. In the long-term, downsizing to a smaller flat may still be the most advisable option.

Adding a Bankrupt as an Owner or Occupier of a Flat

An occupier is a family member who forms a family nucleus with the applicant to qualify for a flat from HDB. This can be a spouse, child, parent or sibling. However, he or she does not have any share in the flat, and hence has no legal right to it.

In contrast, an owner or co-owner has full rights to the flat, regardless of whether he or she had paid any money towards its purchase price.

Can a bankrupt be added as an owner of a flat?

There is no rule preventing bankrupts from being added as owners of HDB flats, as long as they are immediate family members of the existing owners, and meet the requirements under any of HDB’s eligibility schemes.

One criterion that must be met across all the eligibility schemes is that you must not be an existing owner or be listed as the occupier of another HDB flat.

Moreover, you cannot have contravened any HDB rules or policies, implying that you should repay any overdue loan payments to HDB before sending in your application for the transfer of ownership. Should this be beyond your means, you are advised to negotiate with HDB for a less onerous paying arrangement that would suit your needs.

Furthermore, because being made an owner is equivalent to being granted a legal share in the flat, the same rules apply as those for a bankrupt intending to buy a flat. See the next section for more information on whether bankrupts can buy HDB flats.

Can a bankrupt be added as an occupier of a flat?

Again, there is no rule that a bankrupt cannot be added as an occupier of an HDB flat. The key requirement remains that the proposed occupier must be an immediate family member of the existing owner. The proposed occupier’s financial situation does not matter.

Prior consent from the OA to become an occupier of the flat is also unnecessary.

Buying an HDB flat (new or resale)

Just as bankrupts are not barred from being added as owners of HDB flats, neither are they prohibited from buying HDB flats. Both are bound by the same restriction – that the OA’s prior consent will only be required if the flat:

• Is bigger than a 5-room flat (such as an executive condominium or a maisonette) or a 3Gen-flat; or
• Has a net purchase price of $500,000 or above, after taking into account any HDB subsidies or levy.

To purchase any flat larger than a 5-room flat, you will need to submit an application form to the OA. In it, you will be asked to describe how the flat is to be paid, as well as to explain why you are not purchasing a smaller flat.

How can a Bankrupt Finance His HDB Flat Purchase? 

Once you have cleared all the preceding hurdles, your next step should be to personally assess your own financial situation before applying to be an owner of a flat (whether through buying a flat, or being added as the owner of one). This is because as a flat owner, you will need to have sufficient finances to:

• Discharge any existing mortgage loan;
• Refund CPF monies (including accrued interest) to any existing owners withdrawing their ownership from the flat; and
• Pay the fees involved in the transaction to transfer ownership of the flat to you.

If you need to obtain an HDB loan to complete the transfer of ownership, there is nothing that closes off this option to bankrupts.

However, you may experience difficulties doing so if you have been unemployed for more than 3 months, or foresee that you’ll continue to be unemployed in the upcoming months. This is because for HDB loans, all applicants must be employed at the month of the loan application and remain gainfully employed before the loan is disbursed.

Additional restrictions for an HDB loan include, but are not restricted to, the following:

• You must not have previously taken 2 or more housing loans from HDB;
• You must not own or have disposed of any private residential property in the 30 months before the date of your loan application; and
• You cannot own more than 1 market/hawker stall or commercial/industrial property.

In relation to a bank loan, while convincing the bank to grant you a loan may not be impossible, it might be an uphill task.

If you have been declared bankrupt, it is unlikely that you will have a good credit rating given your difficulty in paying off existing debts. Therefore, the bank may have little incentive to provide you with an additional loan.

Can a Bankrupt Sell an HDB Flat?

As long as any of the owners of your flat is a Singapore Citizen, you will not be required to seek the consent of the OA to sell it. The OA’s consent will only be necessary if none of the existing owners are Singapore Citizens.

Can a Bankrupt Hold an HDB Flat on Trust for Someone Else?

Unfortunately, you will neither be able to be appointed nor act as a trustee for any trust, estate or settlement unless you have been granted permission by the High Court.

Therefore, you cannot accept a request from someone else to hold their HDB flats on trust for them from the moment your bankruptcy application is approved.

Nonetheless, HDB flats and other properties which you currently hold on trust are protected by law against creditors and hence cannot be seized by the OA.

Do the Same Rules/Restrictions for HDB Flats Apply to Private Property? 

Private property you hold, such as condominiums or landed properties, can be seized by creditors for the repayment of your debts.

Further, if you have taken out a bank loan to purchase your private property, the bank has a first charge on your property that allows it to sell your home if you default on the loan payments, as is also the case for HDB flats. The bank will then use the sale proceeds to pay off your debts.

Hence, the question is not so much whether your private property can be sold to repay your debts, but how much of your debts you will be able to clear from the sale of your property. In fact, should you intentionally fail to declare your property, for example, by concealing or removing part of your property, this will constitute a chargeable offence.

On the buying of private property by a bankrupt, there is no law explicitly prohibiting this. However, it is unlikely that you will be able to obtain a bank loan to complete your purchase, for the same reason the bank is unlikely to finance your HDB flat purchase as explained earlier.

You will also not be allowed to use your CPF savings to buy private property. However, if you are already an owner of a private property, you can continue to use your CPF savings to pay off your housing loan if the CPF charge on your property was created before you were declared bankrupt.

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In summary, bankruptcy can be a difficult ordeal, but measures exist that could potentially make your burden significantly lighter, and will generally prevent you from being stripped of a place to call home if you own an HDB flat.

You are encouraged to speak to a bankruptcy lawyer if you need additional legal advice on your individual situation.