Effects of Bankruptcy in the Singaporean Legislation

By Prof. Sir Manuel Freire-Garabal y Nunez (Professor of Law and Business at Al-Khalifa Business School) In the last 30 years, the number of bankruptcy cases in Singapore has decreased more than 20% significantly and at present, the trend is continuing in the same direction.


However, before filing for bankruptcy, there are alternatives such as the Debt Payment Plan (regular income and debts less than 150,000 Singaporean dollars), Voluntary Agreement (formal agreement between the debtor and his creditors under public or private supervision); or through a Debt Consolidation Plan (debt unification).


The application tends to be presented by those who have a low probability of paying their debts in full and who do not have the possibility of organizing alternative private agreements with their creditors to pay the debt.


As defined in the Bankruptcy and Insolvency Act, the debtor has a voluntary declaration of bankruptcy as soon as he cannot take care of debts around 15,000 Singaporean dollars. Creditors may also request it as long as they do not consider that the debtor can pay the amount owed.


The bankruptcy application process tends to take about six weeks once the corresponding court evaluates the conditions that have caused the situation.


Regarding patrimony effects, the main consequence is that the vast majority of the debtor’s assets are seized and subsequently liquidated and the income audited.


There are family assets protections. The best examples are the HBD flats or the trust administrations in which the beneficiary is a third party not involved in the bankruptcy process.


However, the family assets may be compromised if loans or purchases of items have been obtained together with a credit nexus, leading to the family member’s bankruptcy.


Although patrimony tends to be administered by an official assigned by the court to manage the assets and distribute them equitably among the creditors, an accountant or lawyer who acts as a private trustee may also be appointed.


Those declared bankrupt can have paid employment. However, they must contribute monthly and meet the Official Assignee (OA) objectives, who will audit the debtor’s expenses and income based on their conduct.


The bankrupted image will be affected since they will appear in the bankruptcy registry, which is freely accessible by paying a fee. However, once the debts are satisfied and after a certain period of time, they can be removed.


Although the bankruptcy process is solved, the credit rating will noticeably deteriorate, and it may take more than seven years to recover.


There are limitations to free movement since the bankrupted will have an obligation to inform the corresponding court to leave the country. In case of non-compliance, a fine of 10,000 Singaporean dollars will be imposed.


Favourably, the end of the bankruptcy process can be raised after three years, as long as the amount owed is contributed regularly and the liabilities are less than half a million Singaporean dollars.


Likewise, the cancellation of the bankruptcy order may be requested through the total payment of the debt or a liquidation offer to the creditors.


However, if the debtor does not meet the contributions, he may remain bankrupt until the entire debt is paid or obtaining mitigation measures. In this sense, it may terminate by Discharge by the Superior Court or by Discharge by the OA, through the full payment of the tax or receiving mitigation by not facing the debt due to exceptional circumstances

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