Bankruptcy in Singapore
"I declare bankruptcy!" - Michael Scott
Whenever an individual becomes unable to pay his/her debts, his/her creditors may choose to file for bankruptcy against him/her. According to Section 61 of the Singapore Bankruptcy Act of 1995, if anyone owes someone may it be an individual or even a company more than 15,000 Singaporean Dollars, owns property in Singapore, has lived / carried on business in Singapore within one year of the suit of bankruptcy & is unable to pay off their debts, the suing party ( creditor) or the bankrupt person him/herself may file for bankruptcy and may begin the application for the same. The Court would then impose a bankruptcy decree, and an Official Assignee will be appointed to handle the bankrupt person's assets.
The bankrupt individual's property is overseen by the Official Assignee. They investigate the bankrupt individual's finances and retrieve the individual's properties so that they can be transferred to their lenders. The Official Assignee also supports the bankrupt client in securing a bankruptcy discharge.
Bankruptcy has various consequences in certain aspects of a person's life:
- The declaration of bankruptcy will be made public knowledge.
Once declared bankrupt, the person's name would be inserted into Singapore's bankruptcy registry, which everyone, including prospective employers, lenders, customers, and the general public, can freely browse.
- A reported bankrupt may continue to work, but not in positions of high authority.
Despite popular belief, individuals in bankruptcy may continue to work. However, a portion of their pay will be reduced and repaid to their bankruptcy dues. Bankrupt individuals are not permitted to be included in managing a company or serve as a director of a firm until a prior approval has been given by the Official Assignee or by the Court.
- Credit rating would suffer greatly.
Bankruptcy will lower the credit ratings, and credit bureaus will continue to record loan defaults for three years after the settlement date & bankruptcy reports for five years after the date of discharge. This would have a negative impact on the ability of the individual to qualify for mortgages, credit cards & loans in the prospective future.
What happens in Bankruptcy?
- Exempt from Repayment Demands & Suits
Prevailing creditors are prohibited from taking court action to recover debts against the bankrupt individual until they are declared bankrupt. Furthermore, the person is not required to comply with any repayment requests made by the creditors. Instead, repayment plans for bankrupts are customized to the financial capacities of the individuals by an Official Assignee, hence, relieving of creditors demands. This is as per section 21 of the Act
- Payments on a monthly basis
To be liable for discharge during bankruptcy, the individual must make a minimum amount of monthly payments also known as target contributions. Each donation is intended to be a fair sum calculated by the Official Assignee based on a number of criteria, including: For example, the salary and qualifications, as well as that of the partner (if applicable), the expected household bills & the current economic conditions as per section 86A (2) of the Act.
- Disposal of Assets
The Official Assignee would also liquidate the assets and transfer the proceeds to the current creditors. This could include almost every valuable item one possesses, including potential overseas assets. The bankrupt individuals may face felony charges if they hide, dispose of, or flee with those properties or falsify similar documents.
The Official Assignee, on the other hand, would not sell “protected assets.” “Protected assets” are assets that are essential for business or personal needs, such as Central Provident Fund savings or Housing Development Board flats as given in the case AVM v AWH . Both are held to protect the bankrupt from being paralyzed by the bankruptcy and to keep you capable of managing your upkeep. Unfortunately, these assets are always in scarce supply.
- Limitations On Conduct Imposed
The Bankruptcy Act, 1995 also places significant limits on a bankrupt's day-to-day behavior. Bankrupts, for example, can face penalties and incarceration if they bet or receive credit of at least 1,000 Singaporean Dollars without declaring their bankruptcy status. Participating in the running of a company (the "business restriction") and commuting (the "travel restriction") would both necessitate the permit by the Official Assignee.
Even if the bankrupt disagrees with the official assignee's unwillingness to give approval, it is preferable to petition the court to reconsider the official assignee's decision (as per section 31 of the Act) rather than disregarding the restrictions entirely. This is because a breach of the Bankruptcy Act's restrictions could result in criminal charges make & further clearance more difficult to achieve.
- Procuring Discharge
The restraints and sufferings of bankruptcy, nevertheless, would mostly be released upon discharge. While bankrupts will also be required to work with the Official Assignee to settle any unpaid debt after discharge, they are usually free of the constraints mentioned in the Bankruptcy Act 1995. As such aside, discharge is often misunderstood to be permanent at the three-year period of bankruptcy. In fact, it would only be issued by the Official Assignee or the High Court (as per Section 124 of the Bankruptcy Act of 1995) if certain requirements have been met, namely –
- Discharge By Official Assignee’s Approval
A first-time bankrupt with recorded debts of less than 500,000 Singaporean Dollars may be released by the Official Assignee three to seven years after declaring bankruptcy. A serial debtor, on the other hand, needs at least five to nine years. Under this range, bankrupt individuals who have fully recovered their target contributions will be released sooner, i.e. three to five years for the first timers& five to seven years for serial bankrupts. This is given under section 125(2)(a) & section 125(2)(b) of the Bankruptcy Act of 1995.
As a result, regular payment of the target payments/contributions would greatly accelerate an individual's discharge from bankruptcy.
- Discharge Through an Order by the High Court
Optionally, a bankrupt with recorded debts in excess of 500,000 Singaporean Dollars can petition the High Court for an Order of Discharge. The High Court would then make a judgement by considering both the bankrupt's and her/his creditors' rights & interests. In this respect, in addition, the court would be hesitant to release bankrupts that have breached restrictions imposed by the Bankruptcy Act, because these bankrupt individuals would fail to collaborate with the Official Assignee& cease payment efforts after discharge. However, due to problems of maintaining repayment at their age, the court can sympathize and hence discharge older bankrupt individuals.
Concerns Post - Bankruptcy
But if discharge is given, it cannot be unconditional. For example, if there is still unpaid debt after the release, the court can order the bankrupt to vest recently purchased assets with the Official Assignee for further redistribution to creditors. This ensures that the Official Assignee retains leverage of the newly bought assets and will sell them to pay off the debts of the bankrupt.
If the bankrupt individual disagrees with those terms, they should first meet with the Official Assignee before proceeding to court to determine the feasibility of the concern. This will undoubtedly reduce time & expense for the those involved.
Unfortunately, even after discharge, the burden of bankruptcy can last for a long period of time. Discharged bankrupt individuals who have completely paid off their target contributions will have the bankruptcy history deleted for five years post discharge. Alternatively, these accounts are irreversible for other discharged bankrupts’ individuals who have not settled their target contributions. This is given in Section 163(1C) of the Bankruptcy Act 1995. This publicly available documents can pose a problem for prospective employers and borrowers alike, hence being a social stigma.
The worries of bankruptcy can appear interminable. Bankruptcy would undoubtedly be a debilitating time for the bankrupt, from the number of restrictions regulating daily behavior to the exhausting necessity of monthly payments. Furthermore, the unforeseen consequences of bankruptcy after discharge may contribute to the individual’s concerns.
That being said, there is always hope for a better future. Given the statute's rehabilitative objective, the Official Assignee & the High Court will weigh a variety of factors affecting the individuals' financial skills and & needs in their actions in order to help facilitate financial rehabilitation.
Furthermore, constructive conduct, such as adhering to statutory conditions and continuing payment efforts, could lead the individual to additional allowances. This may involve running a company, traveling, or even hastening discharge from bankruptcy. Therefore, while bankruptcy is difficult, it is not survivable.