New bankruptcy rules kick in from August
New rules under Singapore's bankruptcy framework to create a
more "rehabilitative environment" for bankrupts will come into force
from August, the Ministry of Law (MinLaw) said on Wednesday.
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Jamie Lee
28 July 2016
New rules under Singapore's bankruptcy framework to create a more "rehabilitative environment" for bankrupts will come into force from August, the Ministry of Law (MinLaw) said on Wednesday.
The minimum debt amount that needs to be owed before a person may be made bankrupt will be increased to S$15,000, from S$10,000. This accounts for inflation since 2000.
Under the new framework, a timeline has been provided such that most first-time bankrupts should be eligible for discharge after five years - once they make, in full, a target contribution to creditors based on the individual's earning potential during the bankruptcy period.
After the seventh year, a first-time bankrupt should be discharged, even if he does not meet the target contribution. Repeat bankrupts will generally be eligible for discharge within 7-9 years.
Before this, no timeline was set for bankrupts and no target contribution was declared to creditors. The change is meant to give bankrupts clear time frames, and the incentive to seek "gainful employment", MinLaw said.
Institutional creditors will also be required to nominate private trustees to administer the bankruptcy estate when applying to make a debtor bankrupt. Such trustees will include accountants and lawyers.
Currently, most bankruptcies in Singapore are administered by the Official Assignee under the government's Insolvency and Public Trustee's Office, and at a low cost.
Much of the public feedback during the public consultation last year focused on the cost of trustees, which could run into hundreds of thousands of dollars for huge debt recovery proceedings. MinLaw said involving a public trustee would result in lower distribution to creditors, but this would ensure all repayment options are exhausted before bankruptcy proceedings are considered.
MinLaw added then that institutional creditors have sufficient expertise and resources to conduct credit assessments before extending credit, and have sufficient resources to bear the costs of debt recovery.
"Government resources and taxpayer dollars should not be used to subsidise the costs for the recovery of such debts," it added then. It said on Wednesday that the new rules are designed to ensure creditors are careful when extending credit.
MinLaw has also made it quicker for creditors to apply for bankruptcy application. After a demand for payment has been issued to a debtor, the creditor will no longer have to wait for a 21-day period to lapse before filing a bankruptcy application.
But the creditor must show a serious possibility that the debtor's property or its value will be "significantly diminished" before 21 days are up.