Guide to the Debt Repayment Scheme in Singapore
Having sleepless nights and dreading your next bill payment? Perhaps you or someone you might know is facing spiraling credit card debt.
If so, this article will introduce the Debt Repayment Scheme, which might help you to take control of your finances and plan towards resolving your outstanding debts.
What is the Debt Repayment Scheme (DRS)?
Most people are familiar with filing for bankruptcy as a last resort to unpayable debt. However, not many are aware that a declared bankrupt is still required to repay his creditors.
The Debt Repayment Scheme (DRS) is an available alternative to declaring bankrupt.
The High Court will appoint an officer of the court from the Ministry of Law’s Insolvency Office, otherwise known as the Official Assignee (OA), to administer the debtor’s affairs.
The OA is in charge of investigating the conduct of the debtor and helping to recover the debtor’s assets for distribution to creditors.
Why Should I Apply for the Debt Repayment Scheme?
The DRS prevents unsecured creditors from proceeding with any legal action against the debtor unless given permission by the court. Unsecured creditors are creditors who have no claim or security, over a debtor’s property or goods, for their financing.
By working out a suitable repayment schedule with the assistance of the OA, the debtor then repays his debts owed to these unsecured creditors over a fixed period of time.
How Do I Apply for the Debt Repayment Scheme?
In order to apply for the DRS, you are first required to file a bankruptcy application with the court. Or, if your creditors have already taken out bankruptcy proceedings against you, the court will refer you to the Insolvency Office for the OA to assess your eligibility to enter the DRS.
What is the Eligibility Criteria for the Debt Repayment Scheme?
You are eligible for the DRS if:
- Your total debts do not exceed S$150,000
- You are gainfully employed and earn a regular income
- You have not been a bankrupt any time during the last 5 years
- You have not have been on the DRS in the last 5 years
- You are not a sole proprietor or a partner in a partnership
You must also not:
- Submit or furnish any information or document to be false or misleading to the OA in relation to your financial affairs;
- Fail to disclose any information relating to your financial affairs that is required by the OA;
- Fail to disclose your property or any disposal of your property to the OA;
- Feign losses and expenses to account for your property when reporting to the OA;
- Enter into any undervalue transaction with another party 3 years before the day on which the bankruptcy application is made against you until the second last day of completing the DRS; or
- Give any unfair preference to:
- An associate 2 years before the day on which the bankruptcy application is made against you until the second last day of completing the DRS; or
- Any other person 1 year before the day on which the bankruptcy application is made against you until the second last day of completing the DRS
What Happens If I Meet the Eligibility Criteria for the DRS?
If you meet the eligibility criteria for DRS, the OA will assist in devising a Debt Repayment Plan (DRP).
The OA will require you to submit a statement of your financial affairs online together with your proposed debt repayment plan via the Ministry of Law’s Insolvency Office E-Services portal. The fees payable for submission of your documents is $350.
You must file your statements in the following order:
- Statement of Affairs
- Income & Expenditure Statement
- Debt Repayment Plan
- Supporting Documents as per Annex B (Debtor’s List of Supporting Documents)
Once the documents have been received, the DRS administrator will review them to determine if they are appropriate. A meeting with the creditors and the OA to discuss your monthly instalment will also be convened, where your attendance is mandatory.
The OA may also modify terms in your proposed repayment plan before meeting with your creditors to finalise the details and approve the DRP.
Once the OA has approved your DRP, you will begin making your repayments to the OA. The OA will then declare and distribute the dividends to the creditors whose debts are included in the DRP.
Do take note that if you are deemed eligible for the DRS by the OA, your DRS status will be part of your public record and visible to everyone.
What If I Do Not Meet the Eligibility Criteria for the Debt Repayment Scheme?
In the event the OA determines that you are ineligible for the DRS, he/she will inform the court of this. The court will then continue to hear your bankruptcy application.
What are My Duties as a Debtor under the Debt Repayment Scheme?
Beyond fulfilling the obligation of repaying your debts according to your DRP, you are also required to adhere to the following:
- Disclose to the OA your property;
- Disclose to the OA any disposal of your property within the 5 years before the start of the bankruptcy proceedings against you before the completion date of the DRS;
- Attend any meetings with your creditors as and when arranged by the OA (unless you are prevented by an illness or other sufficient cause);
- Not enter into any further debt exceeding S$1,000 without disclosing your DRS status to the lender;
- Keep the OA informed of your place of residence and any other contact details required by the OA at all times;
- Provide all information truthfully as and when required by the OA with respect to the DRS;
- Ensure that the proof of debts filed by your creditors are accurate and correct; and
- Comply with the instructions of the OA in matters relating to the DRS as and when required
What Happens If I Successfully Complete the Debt Repayment Scheme?
Once you have successfully repaid your debts in accordance with the terms of your DRP, the OA will issue you a Certificate of Completion.
The Certificate of Completion will release you from all debts provable under the DRS except for debts:
- Which you had not disclosed to the OA; or
- Where a corresponding proof was not filed by the creditor.
If the OA has reason to believe that you either failed to disclose information that was required as part of the DRS or made false representations that led to approval of the DRS, the OA reserves the right to issue a Revocation of your Certificate of Completion.
You will then be liable for all debts that you had previously been released from.
What Happens If I Fail to Comply with My Obligations Under the Debt Repayment Scheme?
If you fail to repay your debts according to the terms of your DRP, or fail to comply with your duties (as mentioned above), the DRS will end and the OA may issue you a Certificate of Failure.
This will allow your creditors to initiate fresh bankruptcy proceedings against you.
Fees Chargeable by the Official Assignee for Administering Your Debt Repayment Scheme Case
Do note that the OA may charge you a fee for administering your DRS case. Some of the fees required include:
- $300 as the first annual fee (for the first 2 years, and $350 for subsequent 3 years)
- $250 for the meeting of creditors
- 1.5% of total amount collected (as a collection fee to the OA)
- 3% of amount distributed (as a fee to the OA for distributing dividends to creditors)
For those who are contemplating filing for bankruptcy, applying for the DRS instead may allow you to continue paying off your debts in a structured and affordable manner, without over-straining your current finances and living expenses.
If you need legal advice on whether to file for bankruptcy or apply for the DRS, feel free to consult one of our bankruptcy lawyers.
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