Process of Filing for Bankruptcy in Singapore & What’s next?
- How Does Bankruptcy Work?
- Why File for Bankruptcy?
- Requirements to File for Bankruptcy
- How to File for Bankruptcy
- Costs of Filing for Bankruptcy
- What Happens After I Have Been Declared Bankrupt?
- Responsibilities of and Restrictions on a Bankrupt
- What Happens to My Assets and Debts Should I Pass Away?
- How Do I Get Out of Bankruptcy?
- What are Some Alternatives to Filing For Bankruptcy?
How Does Bankruptcy Work?
A debtor can voluntarily file for bankruptcy in Singapore if they owe and cannot repay debts of at least S$15,000. Alternatively, the debtor’s creditors can also file to make the debtor bankrupt if they don’t think the debtor can repay the debts owed to them.
If the debtor is declared bankrupt, their assets will be sold and the proceeds put into a bankruptcy estate. This excludes any assets that are protected from bankruptcy, such as HDB flats.
The bankruptcy estate is typically managed by the Official Assignee (OA). The OA is an officer assigned by the court to administer the debtor’s assets and distribute them as fairly as possible among the creditors (more on the role of an OA below). Alternatively, the 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. 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.
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Swipe 👉 to learn more about bankruptcy in Singapore! When a person is declared a bankrupt, their assets (i.e. most property belonging to them – read on for some exceptions) be put into a bankruptcy estate which will be sold to pay off their debts to creditors. If the bankrupt is gainfully employed, they will also be required to make monthly contributions to the bankruptcy estate to fulfil a target contribution that has been set for them. 💰💰 (The proceeds from selling the bankrupt’s assets cannot be used to pay off the target contribution.) – As a bankrupt, your assets in the bankruptcy estate will usually be controlled and managed by an Official Assignee (OA). However, some assets, such as your HDB flat (if at least one owner is a Singaporean), items required for use in your employment and equipment and furniture that your family needs, are considered protected assets and will not form part of the bankruptcy estate to be distributed to creditors. – Paying off your target contribution is one way of getting discharged from bankruptcy, provided that at least 3 years have passed since the date you were declared a bankrupt (for first-time bankrupts). 🤧 Even if you fail to pay off the target contribution, it’s possible to have your bankruptcy discharged after 7 years, though your name will permanently remain on the public bankruptcy records. 😶 On that note, if you require advice on bankruptcy proceedings and other related matters, remember that legal advice is just one click away (via the link in our bio)! #SingaporeLegalAdvice
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
- 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.
Should you file for bankruptcy yourself or wait for a creditor to do so?
It may be preferable for you to self-declare bankruptcy yourself instead of waiting for a creditor to sue you. This is because as you wait, the interest on your debts may continue snowballing in the meantime.
Furthermore, no matter who files for bankruptcy, the cost of the bankruptcy application deposit will likely be borne by you as the debtor. More information on the costs of filing for bankruptcy can be found below.
Requirements to File for Bankruptcy
A creditor (or the debtor themselves) can file to have the debtor declared bankrupt if the debtor falls within one of the following situations:
- Is domiciled in Singapore
- Has property in Singapore
- Has been ordinarily resident in Singapore for at least 1 year
- Has had a place of residence in Singapore for at least 1 year
- Has carried on business in Singapore for at least 1 year
The debtor must also owe at least $15,000, where the debt is payable immediately and enforceable in Singapore, but the debtor is unable to pay the debt.
If it is a creditor that has made the bankruptcy application, the debtor will be regarded as being unable to pay the debt if one of the following is satisfied:
- The debtor has failed to comply with a statutory demand to pay the debt for at least 21 days
- The debtor failed to comply with a court issued execution to pay the debt
- The debtor has fled the country to avoid repayment
- The OA certifies that the debtor is unable to pay the debt
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.
Costs of Filing for Bankruptcy
For successful bankruptcy applications filed by a creditor, that creditor can recover the full amount of the deposit if there are enough funds in the bankrupt’s estate. For successful bankruptcy applications filed by the debtor however, the deposit of $1,850 will not be returned.
For bankruptcy applications that have been dismissed or withdrawn, the OA will refund $1,800 to the applicant (be it the creditor or the debtor) while the remaining $50 is retained as preliminary administration costs.
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 your assets?
Once you are declared a bankrupt, your assets will form part of your bankruptcy estate and be controlled and managed by the OA. Creditors who have provided proof of their debts can then receive dividends from your bankruptcy estate.
Assets that can form part of your bankruptcy estate can include:
- Anything of value belonging to you at the date of or after the making of the Bankruptcy Order (including overseas assets like property); 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.
Your name will go into the bankruptcy register
The names of bankrupts are listed in Singapore’s bankruptcy register. This register can be freely searched not just by current and future employers, but also by the general public, with the payment of a fee. However, depending on how you get out of bankruptcy, it is possible to have your name removed from the bankruptcy register after a certain period of time.
Will your family have to help repay your debts?
Your family will only be liable for your debts if they are co-borrowers of the debt with you. For example, this can happen if:
- You took out a home mortgage in both you and your spouse’s names
- You took out a hire-purchase loan for a car in both you and your sibling’s names
- You borrowed money using a supplementary credit card that is tied to your parent’s name
Family members who are guarantors for your loan can also be made bankrupt if they are unable to repay it.
If you and your spouse live in an HDB flat, you should inform HDB about your financial situation so that HDB will not take legal action against you for any outstanding payments to them. HDB can also help draw up a temporary payment plan with reduced instalments to ease your current financial burden.
Will you be able to work?
Yes, you will be able to work as per normal even after being declared a bankrupt.
Are you able to undergo divorce proceedings?
Yes, even if you are a bankrupt, you can still file for divorce. Your spouse can also still file for divorce against you. For more information, read our article on how bankruptcy affects divorce proceedings.
Responsibilities of and Restrictions on a Bankrupt
Once you are declared as a bankrupt, 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
There will also 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.
For more information, please read our article on what a bankrupt can or cannot do, in Singapore.
Green Zone and Red Zone: Categorisation of bankrupts and the associated privileges (or lack thereof)
Despite the restrictions placed on bankrupts, they may be afforded or withheld certain further privileges depending on whether they have been categorised to be in the Green Zone or Red Zone.
Bankrupts who display satisfactory conduct during bankruptcy are generally placed in the Green Zone. They also get more privileges such as:
- Being granted a travel permit of more than a month to any country
- Being assessed for suitability for discharge from bankruptcy after 5 years in bankruptcy
On the other hand, bankrupts who display unsatisfactory conduct during bankruptcy are generally placed in the Red Zone. They may have certain privileges withheld, such as:
- Not being allowed to travel
- Not being given permission to manage a business or act as a director
- Being assessed for suitability for discharge from bankruptcy after more than 5 years in bankruptcy
The following table shows some factors that the OA may take into account when deciding whether to place a bankrupt in the Green Zone or Red Zone:
|Green Zone||Red Zone|
|Statement of Affairs was filed on time||Statement of Affairs was not filed on time|
|Bankrupt is gainfully employed||Bankrupt is unemployed and has no good reason for being unemployed|
|Instalment payments are regularly made||Instalment payments are irregular or not made at all|
|Full disclosure of local and overseas assets||Non-disclosure of local and overseas assets|
|Cooperative with OA||Uncooperative with OA|
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 your 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 or discharge 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)
Depending on which method is used, it is also possible to have your name removed from the bankruptcy register after that.
For more information on these 4 methods, please refer to our article on getting out of bankruptcy.
What are Some Alternatives to Filing For Bankruptcy?
Debt Repayment Scheme (DRS)
Nonetheless, filing for bankruptcy may not be the be-all and end-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, another 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.
Debt Consolidation Plan (DCP)
If you owe separate debts to multiple financial institutions, you may find it worthwhile to undergo a Debt Consolidation Plan (DCP).
Under the DCP, all your unsecured debt across all financial institutions will be combined into a single debt with a single financial institution. This way, you have to liaise with only one financial institution, which may make tracking and paying off your outstanding debt more manageable.
Learn more about the Debt Conslidation Plan in our other article.
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.
You also 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 you require advice on bankruptcy proceedings or related matters, it is recommended that you seek legal advice from a bankruptcy lawyer.
- Process of Filing for Bankruptcy in Singapore & What's next?
- Bankruptcy/Insolvency Searches for Singapore Individuals & Companies
- Guide to the Debt Repayment Scheme in Singapore
- Debt Consolidation Plan: Things to Know Before Signing Up
- What a Bankrupt Cannot Do and Must Do in Singapore
- 4 Methods: Getting Yourself Out of Bankruptcy in Singapore
- Can a Bankrupt’s HDB be Seized? HDB FAQs for Bankrupts
- Can a Bankrupt Get a Divorce? How are Assets Divided & More