Last year, almost 400 women in Singapore received Bankruptcy Orders – 145 of whom were aged between 41 and 50. Low income or overspending were the most common reasons cited when they filed for insolvency, although some chalked it up to business failure, speculation or gambling, and unemployment or liability as a guarantor.
What is bankruptcy?
It is a legal status declared by the High Court when an individual cannot repay debts of $10,000 or more – this may be raised to $15,000 if changes proposed recently by the Ministry of Law are passed. You can file for bankruptcy or your creditor, such as your bank, may apply to the High Court to issue a Bankruptcy Order against you.
If you’ve been officially declared bankrupt, an Official Assignee will be tasked to sort out your financial affairs. The first thing you have to do is fill out a Statement of Affairs form within 21 days from the day your Bankruptcy Order was made. This includes your personal details, assets and liabilities, even your children’s income (if any). If you gave away or sold any assets within the last five years before your Bankruptcy Order was made, details on the estimated worth must also be provided.
Your Official Assignee will help you sort out how to clear your debt, which usually involves selling off your assets, registering your creditors’ claims and distributing your dividends to your creditors. Be careful not to omit any details or provide false information in your statement or you could face a fine of up to $10,000 and/or up to two years’ jail.
Will I lose all my assets?
Anything valuable that you own before the Bankruptcy Order was issued and anything you bought or that was gifted to you before you are discharged from bankruptcy must be surrendered to the Official Assignee. This includes all local and foreign properties and bank accounts, securities, beneficial interest (benefits on assets owned by another party, like if you were the beneficiary of a trust fund), vehicles, insurance policies, safe deposit box contents and even telecommunications equipment purchased under your name.
However, there are some assets that are protected from your creditors, like a private property held in trust for someone else, which means it doesn’t belong to you. Items deemed “necessary and not extravagant”, such as furniture and personal effects like clothes and shoes, can also be kept, as can trade tools that you’ll need to make a living and pay off your debt. You also get to keep your HDB flat if at least one of the owners is a Singaporean, your Central Provident Fund (CPF) accounts’ monies, and any life insurance policies where your spouse or children are named beneficiaries. Also safe are compensation for personal injury or wrongful act suits.
But any payout under the Dependants’ Protection Scheme will go towards paying off your creditors, unless you’re the one insured and the compensation is for your permanent incapacity, meaning you do not have the physical or mental capacity to be employed. Even then, CPF or the private insurer will need to seek the Official Assignee’s consent before releasing any funds to you.
If you have any secured asset – any asset put up as collateral with the bank when you take up a loan, such as your property or car – the bank gets first dibs to sell it off and recover what you owe them. Anything in excess of that goes back to the Official Assignee to pay off other creditors.
If a Bankruptcy Order has been made against me, do I still have to repay my debt?
Yes. In the Statement of Affairs form, you’ll need to declare how much you can repay every month, and any lump-sum repayments you make. If you are unemployed and can’t repay your debt, you will need to provide proof in the form of a letter of termination, your latest CPF statements and other supporting documents.
Bankrupts who are employed need to make monthly contributions to their bankruptcy estate – the amount will be assessed by your Official Assignee, after taking into account your needs and those of your family’s. That lump sum will then be distributed to your creditors once you’ve been discharged from bankruptcy.
I’m already bankrupt. Can my creditors still sue me?
They can’t sue if they lent you money before your bankruptcy. Inform them about your bankruptcy status and forward all demands for payment to your Official Assignee. However, if you are fined for breaching the law, such as for traffic offences, you will have to pay up according to its deadline. The same goes for taxes owed to the Inland Revenue Authority of Singapore.
If I have to surrender all my bank accounts, can I open a new one?
Yes, on the condition that you arrange to repay your debt in monthly instalments via Giro and you fully declare all information to your Official Assignee, who will help you open a new savings account. Otherwise, he or she can close the account. You can still make Giro deductions, cash withdrawals or use the ATM with this savings account.
Typically, banks will terminate all your current credit cards once your name appears in the list of Bankruptcy Orders. When applying for credit facilities in future, you will have to declare your past status as a bankrupt, and in most cases, your application will not be approved.
Can I buy a HDB flat if I’m bankrupt?
Yes. You can buy a five-room HDB flat or smaller without the consent of your Official Assignee. For a HDB executive or maisonette flat, you will need to seek special permission and provide proof that you can afford, and need, such a big flat.
Can I travel?
You’ll need to apply for permission from your Official Assignee at least 14 days before your trip, and furnish the reasons, destination and length of travel. Technically, if you’re bankrupt, you are not allowed to pay for holidays. If your friend is paying for the trip, you will need to provide his details. But in reality, leisure trips are rarely approved.
Work trips will have to be supported by a company letter. If your job involves frequent travel, you can make a block booking for your travel periods instead of applying for each trip. However, final approval will depend on your Official Assignee’s review of your performance.
If you attempt to leave the country and get stopped at Customs, your passport will be impounded. If you travel without permission, you can expect to be fined up to $10,000 and/or be jailed up to two years.
How else will bankruptcy affect my lifestyle?
You can’t own a car but you can still drive a vehicle that doesn’t belong to you, subject to the approval of your Official Assignee. He or she will also advise you on other dos and don’ts. For example, you must take public transport, you cannot dine at restaurants or purchase luxury goods, or even enjoy frills like subscribing to cable TV. Any gift you receive has to be declared.
You cannot be a business owner or company director unless you have the go-ahead from your Official Assignee, who must also approve any asset sale. Borrowing money? Anything more than $500 and you will have to declare your bankruptcy status to the lender.
How do I get discharged from bankruptcy?
Currently, bankrupts in Singapore are not automatically discharged from bankruptcy.
You have to settle your debts in full or make a settlement offer that is accepted by the majority of your creditors, who must represent at least 75 per cent of your total debt. If your creditors agree, you will be issued a certificate of annulment of the Bankruptcy Order. However, this only absolves you of the debts that were filed during your bankruptcy.
Another way is to apply to the High Court to seek an order of discharge; if your debts exceed $500,000, the application has to be filed by your Official Assignee. The High Court will consider factors such as your Official Assignee’s review, the amount of monthly instalment payments you’ve made to your bankruptcy estate, as well as your age, earning capacity and assets, before making a decision. Of course, being cooperative and committed to settling your debts, and not committing any offences during your bankruptcy, will also work in your favour.
You can also get your Official Assignee to give you a Certificate of Discharge if you have been bankrupt for at least three years and your debts do not exceed $500,000. Factors like your conduct and how regularly (and how much) you’ve made monthly payments to your bankruptcy estate will be taken into account. The decision will also hinge on whether your creditors agree to your discharge.
If the proposed changes to the Bankruptcy (Amendment) Bill go through, a new framework will help bankrupts get discharged more easily. They will pay a target contribution, calculated based on their earningpotential, to get them on track to clearing their debts. Even if they cannot pay off the full amount, first-time bankrupts will be discharged after seven years while repeat bankrupts will have to wait nine years.
However, under the proposed regulation, bankrupts will not be automatically removed from the public records five years after their discharge, as per the current practice. Those who do not pay their target contribution in full prior to their discharge will be listed permanently. This will help creditors decide if they are willing to offer loans to a former bankrupt.
This article was originally published in Simply Her July 2015.