4 Methods: Getting Yourself Out of Bankruptcy in Singapore
If you have been declared bankrupt, or are considering filing for bankruptcy, you may be wondering how you can get yourself out of bankruptcy in Singapore.
There are 4 methods for doing so:
- Paying off all outstanding debts
- Making a proposal to creditors for repaying your debts
- Applying to the court for an order of discharge
- Discharge by certificate of the Official Assignee
These methods can result in either an annulment of or discharge from bankruptcy. The difference between the two is that:
- For annulment, you will be treated as if you had never been declared bankrupt. Your name also will be immediately removed from the bankruptcy register from the date of annulment. (The bankruptcy register refers to the publicly searchable records of the bankruptcy status of individuals.)
- For discharge from bankruptcy, you will retain your status as a previous bankrupt. However, your name can be removed from the bankruptcy register after a certain time period has passed. This duration of this time period depends on the method you use to discharge yourself from bankruptcy. Read on for more information.
Method 1: Paying Off All Outstanding Debts
The quickest way out of bankruptcy is to simply pay off all debts and costs incurred in the bankruptcy.
When this is done, the court or the Official Assignee (a civil servant assigned to oversee and administer your affairs in bankruptcy) can issue a Certificate of Annulment.
Method 2: Making a Proposal to Creditors for Repaying Your Debts
You can make a proposal to repay your debts at the Insolvent Person’s Portal of the Ministry of Law website.
The proposal must be accepted by at least 50% in number of the bankrupt’s creditors, who hold at least 75% in value of the debt, at a general meeting.
If this threshold is met, the Official Assignee will issue a Certificate of Discharge to discharge you from bankruptcy. However, your name will only be removed from the bankruptcy register 5 years after the date of discharge and if you have fully repaid your debts. If you haven’t fully repaid your debts by then, your name will remain on the bankruptcy register permanently.
If however all creditors unanimously approve of the proposal, the Official Assignee will issue a Certificate of Annulment. This will allow your name to be immediately removed from the bankruptcy register on the date of annulment.
However, getting either certificate is not the end of the story. You still have to make sure to repay your debts according to your proposal afterwards. Otherwise, either the Official Assignee or any creditor can apply to revoke your discharge/annulment from bankruptcy.
Method 3: Applying to the Court for an Order of Discharge
Making the application
You may also apply to the court for an order of discharge. Your application for discharge must be accompanied by an affidavit stating the following:
- Whether you have filed your statement of affairs;
- The number of creditors and whether they have proven their debts;
- Whether you have disclosed all your assets to the Official Assignee/trustee managing your affairs, and whether such assets have been realised;
- Whether dividends have been declared and if so, their amounts; and
- The reasons for the application.
You must also serve your application, and a copy of the affidavit, on the Official Assignee or the private trustee managing your affairs.
Court evaluation of the application
When deciding whether to grant the order of discharge, the court will consider factors such as:
- The amount of your debt;
- The cause of bankruptcy and how much you were at fault for incurring the debt;
- Your domestic, social and financial circumstances;
- Your conduct;
- Your contributions;
- Your interests in getting discharged, and the interests of creditors in obtaining repayment; and
- Whether there have been any objections to your application for discharge.
If the court grants the order for discharge, you will be discharged from bankruptcy. Your name will be removed from the bankruptcy register 5 years after the date of discharge and where your debts have been fully repaid. If your debts haven’t been fully repaid by then, your name will remain on the bankruptcy register permanently.
If your case has “special facts”
Things are more complicated if your case has “special facts”.
Your case will have “special facts” if you have committed any bankruptcy offences or offences relating to fraudulent property distributions under the Penal Code.
The following are also considered “special facts” (see section 394(5) of the Insolvency, Restructuring and Dissolution Act for the full list):
- Having been previously adjudged a bankrupt (whether in Singapore or elsewhere);
- Failing to keep accounts that would sufficiently disclose your business transactions and financial position within the 3 years immediately preceding your bankruptcy;
- Taking on additional debt with no reasonable expectation of being able to repay the debt;
- Having contributed to your bankruptcy by living extravagantly, making rash speculations, or failing to pay reasonable attention to your business and affairs; and
- Unduly preferring some creditors over another within the 3 months before the date of the bankruptcy order.
The court is unlikely to grant a discharge order if your case is proved to have such “special facts”.
Method 4: Discharge by Certificate of the Official Assignee
You can also be discharged if the Official Assignee issues you with a Certificate of Discharge.
However, you cannot apply for this certificate. The certificate will only be granted if the Official Assignee decides to do so, after you have met the following 2 requirements:
(1) You must have either fully paid your target contribution, or are proven unable to do so due to certain extenuating circumstances
“Extenuating circumstances” refer to the following:
- Your death;
- Any of your personal circumstances (e.g. illness) which prevent you from earning a meaningful income for the rest of the bankruptcy period, up to 7 years (for first-time bankrupts) or 9 years (for repeat bankrupts) from the administration date of your bankruptcy (i.e. the date on which you submitted your statement of affairs).
(2) A certain validity period must have passed from the date of satisfactory submission of your Statement of Affairs
The applicable validity period depends on:
- Whether you are a first-time or repeat bankrupt;
- Whether you are able to fully pay the target contribution (or are proven unable to do so due to certain extenuating circumstances); and
- Whether there is sufficient creditor objection to the discharge (i.e. at least 50% in number, and/or more than 25% in value of the creditors, who have proved their debts), to have the discharge delayed.
The applicable validity time periods from the date of satisfactory submission of your Statement of Affairs, are as follows:
|Fully paid target contribution||Unable to fully pay target contribution due to extenuating circumstances||Applicable validity period from the date of satisfactory submission of your Statement of Affairs|
|First-time Bankrupt||✓||N/A||3 years (5 years if there is creditor objection)|
|✘||✓||3 years (5 years if there is creditor objection)|
|Repeat Bankrupt||✓||N/A||5 years (7 years if there is creditor objection)|
|✘||✓||5 years (7 years if there is creditor objection)|
If you are able to fully pay your target contribution, your name will be removed from the bankruptcy register 5 years after the date of discharge.
If you are unable to fully pay your target contribution, you can still be discharged from bankruptcy. However, your name will remain on the bankruptcy register permanently.
What Happens If You are Discharged from Bankruptcy?
If you are discharged from bankruptcy, you will be released from all outstanding proven debts.
This is except for certain debts, such as (see section 397 of the Insolvency, Restructuring and Dissolution Act for more information):
- Debts owed to the government;
- Debt arising out of a bail bond entered into for any person who has committed an offence;
- Debts in respect of any premium and other sums due under the Medishield Life Scheme Act 2015;
- Debts relating to liability for negligence or breach of contract;
- Debts arising under orders relating to family matters made in proceedings under the Women’s Charter;
- Debts arising due to the confiscation of proceeds of crime.
Which Method Should You Choose?
Leaving out Method 4 (i.e. obtaining a Certificate of Discharge from the Official Assignee), which is solely at the Official Assignee’s discretion and cannot be applied for, Methods 1 (i.e. paying off all outstanding debts) and 2 (i.e. making a debt settlement proposal to creditors) are preferred over Method 3 (i.e. applying to court for discharge). This is because court processes can be time-consuming and costly.
If you have the funds, Method 1 (i.e. paying off all outstanding debts) is your best bet. Your name can be immediately removed from the bankruptcy register, instead of you having to wait 5 years for that to happen.
If however you need some time to pay off your debts, you can try Method 2 (i.e. making a debt settlement proposal to creditors). This is especially if you think you will be able to get enough creditors to approve your proposal.
Fret not if all else fails, as Method 4 (i.e. obtaining a Certificate of Discharge from the Official Assignee) is always available as a last resort. By paying your monthly contributions towards your target contribution as they become due, the Official Assignee will be able to consider issuing you a Certificate of Discharge once the applicable validity period of time has passed.
There are many good reasons for wanting to be discharged from bankruptcy. Apart from the social stigma of being bankrupt, it damages your creditworthiness, which may in turn have an effect on your livelihood.
If you need legal advice on getting yourself discharged from bankruptcy in Singapore, feel free to get in touch with one of our bankruptcy lawyers. Rest assured that they will keep your matter strictly private and confidential.
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