Bankruptcy is usually considered a last resort option. You should only file for bankruptcy in Singapore after careful consideration of your options. If it is the best way to deal with your financial problems, filing for bankruptcy may be for you.
Filing for bankruptcy however cannot solve all financial problems. This article cannot explain every aspect of the bankruptcy process. If you still have questions after reading it, you should speak with a bankruptcy lawyer.
What Is Bankruptcy?
Bankruptcy occurs when a person is unable to pay off debts of more than S$15,000 and formal legal proceedings are initiated against/by him pursuant to the Bankruptcy Act.
Filing may be voluntary i.e. a debtor files for bankruptcy themselves or involuntary wherein a debtor’s creditors seek to file a bankruptcy application to make a debtor bankrupt if the debtor is unable to repay debts owed.
2 – Jurisdiction Of The Court In Bankruptcy
A bankruptcy application can only be made by a creditor to the court if the debtor;
- Is domiciled in Singapore;
- Owns property in Singapore;
- Carried out business in Singapore for at least a year;
- Has had a residential address in Singapore for at least a year;
- Is ordinarily resident in Singapore for at least a year;
3 – Grounds Of Filing A Bankruptcy Application
To file a bankruptcy application, the debtor must :
- Have debt of more than $15,000;
- The debt must be for a liquidated sum payable to the applicant immediately;
- The debtor must be unable to pay his debts.
To show that the debtor is “unable to pay his debts”, the creditor can file a statutory demand to a debtor. A presumption of the debtor’s inability to pay his debts will arise if the debtor fails to make payment within 21 days receipt of the statutory demand.
The statutory demand must be served in Form 1 of the Bankruptcy Act and must include:-
- The actual amount accrued as at the date of the demand;
- Including interests, penalties, charges, or any pecuniary consideration in lieu of interest;
- The manner by which the debt arose;
- The purpose of the statutory demand and consequences if it is not complied with;
- The time within which the demand must be complied with;
- The available methods of compliance;
- The debtor’s right to apply to court to set aside the statutory demand.
In addition to the necessary content, the creditor must take all reasonable steps to bring the debtor’s attention and make reasonable attempts to effect personal service.
However, the court has discretion to decide whether to set aside the statutory demand if it was defective in relation to the statutory requirements.
Therefore, if your statutory demand is missing any of those things stated above, you may apply to the court to have the statutory demand set aside.
4 – Advantages For A Voluntary Bankruptcy Application
Individuals may choose to file for bankruptcy if they feel it is unlikely they will be able to pay off their debts or if they are unable to make alternative arrangements with creditors to repay said debts. Filing for bankruptcy in this scenario is beneficial as it will:
- Stop interest from accruing on debts thereby making it easier on individuals to make payments
- Make monthly contributions more manageable as the Official Assignee (OA) will determine a suitable monthly contribution for individuals to make taking into account one’s monthly income and necessary expenditure
- Creditors are barred from commencing legal proceedings to recover debts incurred before bankruptcy
5 – Bankruptcy Process And Order
Creditor has 4 months from the date of the statutory demand to file the application. Every bankruptcy application shall be accompanied by an affidavit which has the particulars of the debtor, the debt, the statutory demand and proof of service of the statutory demand. The bankruptcy application shall not be heard until the expiration of 7 clear days of the bankruptcy application.
The commencement of the bankruptcy is the date that the bankruptcy order is made against the debtor and continues until it is discharged.
6 – Duties Of A Bankrupt
The Bankruptcy Act sets out a comprehensive list of duties and disabilities a declared bankrupt will have. The most significant of which is that a bankrupt will not be able to leave Singapore without the Official Assignee’s (“OA”) permission.
A bankrupt will also not be able to be appointed as a Trustee or personal representative of any trust or estate subject to the OA’s approval, or participate in the management of a business or be appointed as a director of a company, amongst others.
7 – Alternatives To Bankruptcy In Singapore
Debt Repayment Scheme (DRS)
Court may, instead of making a bankruptcy order, adjourn the application for a period of 6 months or such other period and refer the matter to the OA to assess whether the debtor is suitable for a DRS if:-
- the aggregate of the debts specified in the application does not exceed $100,000 or as specified by the Minister;
- debtor is not an undischarged bankrupt and has not been a bankrupt at any time within the period of 5 years immediately preceding the date on which the bankruptcy application is made;
- a voluntary arrangement in respect of the debtor is not in effect ands was not in effect at any time within the period of 5 years immediately preceding the date on which the bankruptcy application is made;
- debtor is not subject to any DRS and has not been subject to any such DRS within 5 years immediately preceding the bankruptcy application;
- debtor is not a sole proprietor, partner of a firm or limited liability partnership;
OA will take steps to determine suitability of the debtor based on the submission of relevant forms and supporting documents and will administer and supervise the debtor’s affairs till the conclusion and/or termination of the Debt Repayment Scheme.
8 – Individual Voluntary Arrangement
This scheme allows debts to enter into binding, voluntary arrangements with creditors in respect of debt repayment, thus avoiding bankruptcy. This will be either in the form of a scheme of arrangement or composition in satisfaction of his debts.
9 – How Do I Get Out Of Bankruptcy?
There are two ways in which an individual can get out of bankruptcy in Singapore – Annulment or Discharge from bankruptcy.
Annulment means that it will be as if an individual has never been declared bankrupt, on the date of the annulment the individual’s name will be immediately removed from the bankruptcy register.
Discharge from bankruptcy will mean that the individual retains their status as a previous bankrupt and their name will only be removed from the bankruptcy register after some time.
10 – Four Ways To Be Annulled Or Discharged As A Bankrupt
Pay Off All Existing Debts
This is the quickest and most efficient way out of bankruptcy. Once an individual pays off all debts and costs incurred in the bankruptcy the OA will issue a Certificate of Annulment.
Making A Debt Repayment Proposal To Creditors
If 50% of more of the individual’s creditors accepts the debt repayment proposal, the OA will issue a Certificate of Discharge so that the individual can be discharged from bankruptcy.
However, the debtor’s name will be on the bankruptcy’s register for 5 years after the date of discharge and will be removed only when the debt has been fully repaid.
Furthermore, if the debt has not been fully repaid within the duration of 5 years, the individual’s name will be registered permanently on the bankruptcy registry.
If all of the individual’s creditors unanimously approve of the debt repayment proposal, the OA will issue a Certificate of Annulment wherein the individual’s name will be immediately removed from the bankruptcy register on the date of annulment.
Apply To Court For An Order Of Discharge
An individual may apply to the court for an order of discharge. This application for discharge must be accompanied with an affidavit stating (a) if the individual has filed their statement of affairs (b) the number of creditors and whether they have proven their debts (c) whether all assets have been disclosed to the OA and if such assets have been realised (d) if dividends have been declared and the amounts of such dividends (e) the reasons for the application
The application and the copy of the affidavit must be also served on the OA managing their affairs.
Following which the court will evaluate whether to grant the order of discharge or otherwise. If the court grants the order for discharge the individual will be discharged from bankruptcy.
Discharge By Certificate Of The Official Assignee
This certificate cannot be applied on and will only be granted upon the meeting of the following 2 requirement:
- That the individual has fully paid their target contribution or have proven unable to do so due to extenuating circumstances
- A certain validity period must have passed from the date of satisfactory submission of the individual’s Statement of Affairs.
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