Filing for Bankruptcy in Singapore and What Happens After That
How Does Bankruptcy Work?
In Singapore, bankruptcy applications can be made by either the debtor or the creditor if the debtor is unable to pay his debts of at least S$15,000. Thus, you should refrain from ignoring creditors’ letters or court documents requesting for payment as you may still be made a bankrupt even if you do not respond to these documents.
If the debtor is declared bankrupt, all their assets (excluding protected assets – more below) will be sold and the proceeds put into a bankruptcy estate that will be managed by the Official Assignee (OA). The OA is an officer assigned by the court to administer the debtor’s assets and pay off their debts (more on the role of an OA below). Alternatively, their bankruptcy estate can be managed by a private trustee, who can be an accountant or lawyer.
Bankrupts who are gainfully employed will have to make a monthly contribution that is paid into their bankruptcy estate. The monthly contributions go towards fulfilling a target contribution that is decided by the Official Assignee (OA). The property in the bankruptcy estate cannot be used to pay off the target contribution.
If the target contribution is paid off, the bankrupt can be discharged from bankruptcy.
Why File for Bankruptcy?
The short answer is: you should file for bankruptcy when there is a low likelihood of paying your debts in full, and when it is not possible to make alternative private arrangements with the creditors, to repay the debt.
In such scenarios, bankruptcy may be a preferable option as:
1. Your debt stops accumulating
After the making of the Bankruptcy Order (an order issued by the High Court declaring your status as a bankrupt), the creditor cannot charge interest for the principal sum owed.
Thus, the debt is “frozen” at a certain amount.
2. Your monthly repayments are lower
Previously, your creditors may have been chasing you for monthly repayments that were way out of your means. If you are declared a bankrupt, the OA will decide a suitable amount of monthly contribution that you will have to make after taking into account what you need for yourself and your family.
This would mean that the monthly contribution amount will likely be more reasonable and within your means compared to the previous sums that your creditors were hounding you for every month.
3. Creditors cannot sue you for debts
Creditors are barred from commencing legal proceedings against you to recover debts incurred before bankruptcy, after the making of the Bankruptcy Order.
How to File for Bankruptcy
There are 6 key steps to file for bankruptcy in Singapore.
|Step 1||You have to obtain and complete the relevant forms for the:
|Step 2||Proceed to the Insolvency Office managed by the Ministry of Law to place a bankruptcy deposit of $1,850 with the OA. A receipt will be issued to you (do keep this receipt). The Insolvency Office is located at 45 Maxwell Road #07-11 The URA Centre (East Wing) Singapore 069118.|
|Step 3||Bring the completed documents (from Step 1) and the receipt (from Step 2) to the Supreme Court’s Legal Registry located at Level 2 of the Supreme Court and then proceed to make your payment of the prescribed stamp/Commissioner for Oaths fees.|
|Step 4||Proceed to affirm the Affidavit Verifying Statement of Affairs and the Affidavit in Support of Debtor’s Bankruptcy Application before a Commissioner for Oaths (located at Level 3M of the Supreme Court). The Commissioner for Oaths will sign and stamp on the documents.|
|Step 5||Proceed to the LawNet Service Bureau (located at Level 1 of the Supreme Court) to file all documents through eLitigation after paying the prescribed fees. The LawNet Service Bureau will inform the date to collect your documents and upon which, the date and time for the bankruptcy hearing will be printed on your application.|
|Step 6||You must attend the hearing on the appointed date and time. Otherwise, you must write in to the Registrar of the Supreme Court to request for a later hearing date stating the reasons for your request.|
Note: Except for the Statement of Affairs (which can be handwritten), all forms have to be typed. Do not sign on both the Affidavit in Support of Debtor’s Bankruptcy Application and the Affidavit Verifying Statement of Affairs (see Step 4).
A creditor can only file a bankruptcy application against you if you do not comply with a Statutory Demand (that has been served on you to demand for payment). But regardless of whether it was you or the creditor who filed the bankruptcy application, the Bankruptcy Order will be made to you, by the High Court, if the application succeeds.
What Happens After I have been Declared Bankrupt?
Within 21 days of the Bankruptcy Order, you will be required to head down to the OA’s office to be briefed on your responsibilities as a bankrupt, as well as to submit a Statement of Affairs recording your assets and liabilities to the OA.
After which, you will begin discussing your monthly contribution plan with the officers from the OA.
Role of an OA
In essence, the OA’s role is largely three-fold:
- To oversee the bankruptcy estate. For example, by planning the monthly contributions to be paid, by selling your liquid assets to pay off the creditors and importantly, to determine what the target contribution is (as mentioned above).
- To manage your affairs. For example, by assessing your applications to travel overseas or to defend or commence a court action.
- To assist you in obtaining a discharge from bankruptcy. The OA can recommend an earlier discharge from bankruptcy if he is satisfied that you have displayed satisfactory conduct and adhere to the monthly contributions to be paid.
What happens to my assets?
Once you are declared a bankrupt, your assets will form part of your bankruptcy estate and be controlled and managed by the OA.
Such assets can include:
- Anything of value belonging to you at the date or after of the making of the Bankruptcy Order; and
- Gifts given to you prior to your discharge from bankruptcy.
Any proceeds obtained from the sale of your assets, excluding the value of the secured debt, will also be remitted to the bankruptcy estate.
However, some assets are considered protected assets and will be excluded from the bankruptcy estate (and hence protected from distribution to creditors). These include:
- Property held by you as a trustee for someone else;
- Your HDB flat (if at least one flat owner is a Singapore citizen);
- Monies in your CPF account;
- Life insurance policies held in express trust for your spouse or children;
- Any items/equipment required for the personal use in your employment, business or vocation;
- Equipment/furniture required for your family’s needs;
- The remainder of your monthly income after deduction of the monthly contribution; and
- Any annual bonus or annual wage supplement paid as part of your income
Assets that were previously used to secure your loans to creditors, and that do not belong to the category of protected assets above, can be sold by the creditors if you default on your monthly contributions.
Responsibilities of and Restrictions on a Bankrupt
Once you are declared as a bankrupt, there will be several restrictions imposed on you that you will have to comply with.
Importantly, a bankrupt cannot:
- Be appointed as a trustee or personal representative in respect of any trust or estate, unless the court approves;
- Commence legal action against another person, except on the grounds of personal injury suffered by yourself or divorce, unless the OA gives permission;
- Leave Singapore without the OA’s permission;
- Borrow more than $500 without informing the lender that you are a bankrupt;
- Participate in the management of a business or acts as the director of a company without the permission of the OA or the High Court.
Your responsibilities will include:
- Disclosing to the OA all your assets
- Disclosing to the OA all of the property that you disposed of prior to the bankruptcy or property disposed of by way of a gift or settlement within the 5 years preceding this bankruptcy
- Making monthly contributions to the bankruptcy estate
- Keep the OA informed of your place of residence and contact details.
- Attend any meeting of your creditors unless prevented by sickness or other sufficient cause
For more information, please read our article on what a bankrupt can or cannot do, in Singapore.
What Happens to My Assets and Debts Should I Pass Away?
Should you pass away, your estate (different from the bankruptcy estate – your assets money, property, etc. – distributed to persons who will inherit them) will be administered in the following manner:
- Subject to the funeral, testamentary and administration expenses having priority
- The OA will continue managing the bankruptcy estate to pay off the debts to the creditors. In other words, your death does not mean that your debt will be automatically discharged.
For more information, please refer to our article on what happens to your debts when you die.
How Do I Get Out of Bankruptcy?
Generally, there are 4 methods to get out of bankruptcy:
- Annulment of the Bankruptcy Order by full repayment of debt: By paying off all outstanding debts;
- Annulment of the Bankruptcy Order by settlement offer: Making a proposal to creditors to repay your debts;
- Discharge by the High Court: Applying to the court for an order of discharge;
- Discharge by the OA: By fully paying off your target contribution (or being unable to do so due to certain extenuating circumstances)
If you are a first-time bankrupt, the following discharge framework will apply to you:
|Paid your target contribution in full||Have not paid your target contribution in full|
|If either at least half of the number of creditors or creditors whose debts exceed 25% of the total debts owed do not object to the discharge||If the court rejects creditors’ objections to the discharge||If at least half of the number of creditors or creditors whose debts exceed 25% of the total debts owed object to the discharge|
|Duration (from the date of satisfactory submission of Statement of Affairs)|
|3 – 5 years||5 – 7 years||After 7 years|
|Your name will be removed from public records (the online database that allows the public to ascertain the bankruptcy status of individuals) after 5 years from the date of discharge||Your name remains on the record permanently – this may potentially affect your creditworthiness should you wish to apply for a credit card or a loan in the future.|
For example, if you are a first-time bankrupt and have paid your target contribution in full, you can be discharged from bankruptcy between 3 to 5 years from the date you submitted your Statement of Affairs satisfactorily, if none of your creditors object to the discharge.
Note that if you are a repeat bankrupt, the timeline will be extended by 2 years for each duration.
For more information on these 4 methods, please refer to our article on getting out of bankruptcy.
What are the Alternatives to Filing For Bankruptcy?
Debt Repayment Scheme (DRS)
Nonetheless, filing for bankruptcy may not be the end-all be-all.
If you have a regular income and owe debts not exceeding S$100,000 (subject to other conditions as well), the court may refer you to the Debt Repayment Scheme (DRS) upon the bankruptcy application.
The DRS is a pre-bankruptcy alternative that allows you to avoid declaring bankrupt and repay your debts.
Voluntary Arrangement (VA)
Apart from the DRS, the other alternative is to arrange for a Voluntary Arrangement (VA).
A VA is essentially a formal arrangement between you and your creditors to repay the debt, with the supervision by a nominee.
The nominee must be a:
- Registered public accountant;
- A lawyer; or
- A person gazetted by the Minister who has consented to being appointed.
On this note, the main reason why a VA is more advantageous than filing for bankruptcy is that it does not come with the restrictions that a bankruptcy order would impose on you. For example, the restrictions on overseas travel.
If you intend to pursue VA as an alternative, you may apply for an interim order to the court to suspend all bankruptcy proceedings against you.
After the interim order is granted by the court, you must disclose all assets and liabilities and make a proposal on how you intend to settle the debts with the creditors.
If the VA is accepted by the creditors during the creditors’ meeting, the VA will be successfully implemented and you will be able to begin repaying the debts as per the approved proposal.
All in all, notwithstanding the disadvantages of bankruptcy, commitment towards repayment of the debt will go a long way.
Learning more about bankruptcy proceedings is important as you will better understand how to manage your options in financially difficult times, as opposed to dealing with unknowns and uncertainties.
In this regard, if you require advice on bankruptcy proceedings or related matters, it is recommended that you seek legal advice from a bankruptcy lawyer.