Many individuals ask, “What happens if I declare bankruptcy?” While the process can seem overwhelming, understanding the implications and benefits can empower you to take control of your financial future.
In Singapore, bankruptcy is a legal avenue designed to help individuals unable to meet their debt obligations regain their footing. This article will guide you through the essential aspects of declaring bankruptcy, including the steps involved, the impact on your assets, and the potential for financial recovery.
By understanding the process, we aim to provide clarity and hope for those facing financial difficulties, allowing you to make informed decisions about your next steps.
What Does “Bankruptcy” Mean?
Most people understand bankruptcy loosely, but not many people have a firm grasp of what it actually means—especially amidst the uncertainty of a pandemic. Essentially, bankruptcy occurs when an individual or a business owes more money than they can pay. The party concerned can file for bankruptcy themselves, or a creditor who is owed money may file on their behalf if a debt is not being paid.
What Happens When You Declare Bankruptcy In Singapore?
Declaring bankruptcy in Singapore can significantly impact your financial situation and future. It’s crucial to understand the process and its implications. When you file for bankruptcy, several steps are triggered under Singapore law, particularly the Insolvency, Restructuring and Dissolution Act 2018.
1. Legal Restrictions
- Travel Limitations: Once you declare bankruptcy, you cannot leave Singapore without obtaining permission from the Official Assignee (OA) or the Private Trustee in Bankruptcy (PTIB). This restriction can be inconvenient and affect planned trips or relocation opportunities.
- Professional Limitations: Your ability to hold certain positions will be restricted. You cannot serve in public office or become a company director without the OA’s approval. Additionally, while you can continue to work, you may be barred from high-ranking positions that require trust and financial responsibility.
- Litigation Restrictions: You cannot initiate lawsuits against any party without the OA’s or PTIB’s consent, except in personal injury or matrimonial proceedings. This limitation can hinder your ability to seek legal recourse in various situations.
2. Financial Consequences
- Impact on Credit Rating: Your bankruptcy will be recorded on Singapore’s bankruptcy register, accessible to the public, which can severely damage your credit score. This record remains for up to five years, making it hard to get loans, credit cards, or mortgages in the future. Lenders may assume you as a high-risk borrower, providing higher interest rates or outright denials.
- Asset Liquidation: The OA will assess your assets and determine which can be liquidated to repay your debts. While some essential items may be exempt, valuable properties, vehicles, and other assets may be at risk.
3. Path To Recovery
Despite the challenges, bankruptcy can also offer a chance for a fresh start. The legal framework in Singapore provides a path to financial recovery. Once discharged, you can rebuild your creditworthiness and establish new financial habits.
What Are The Alternatives To Bankruptcy In Singapore?
For individuals facing financial difficulties, several alternatives to bankruptcy in Singapore can provide relief while allowing them to retain control over their assets and finances. The main alternatives include:
1. Private Arrangements
Private arrangements involve negotiating directly with creditors to set up a repayment plan that suits both parties. This informal approach allows debtors to propose terms such as reduced payments or extended repayment periods without involving the Court. Successful negotiations for both parties can lead to a mutually beneficial agreement, helping individuals avoid bankruptcy.
2. Voluntary Arrangement (VA)
A Voluntary Arrangement (VA) is a formal agreement between a debtor and their creditors to repay debts over a specified duration, typically three to five years. Once approved by the Court, this arrangement is legally binding. It allows individuals to retain their assets while making manageable payments. It is an effective option for those who wish to avoid the severe consequences of bankruptcy.
3. Debt Repayment Scheme (DRS)
The Debt Repayment Scheme (DRS) is a government-supported program for individuals with unsecured debts exceeding SGD 15,000. Under the Debt Repayment Scheme in Singapore, debtors propose a structured repayment plan to the Official Assignee (OA). Once approved, this scheme protects from creditors and allows individuals to work towards becoming debt-free without declaring bankruptcy.
Requirements To File For Bankruptcy In Singapore
In Singapore, bankruptcy proceedings can be initiated by a creditor or the debtor, provided certain criteria are met. A debtor may be declared bankrupt under the following conditions:
- Domicile in Singapore: The debtor must be legally domiciled in Singapore.
- Property Ownership: The debtor must own property situated in Singapore.
- Ordinary Residence: The debtor must have been ordinarily resident in Singapore for at least one year.
- Residence Duration: The debtor must have maintained a residence in Singapore for at least one year.
- Business Operations: The debtor must have operated a business in Singapore for at least one year.
Additionally, the debtor must have outstanding debts of at least SGD 15,000 that are due and enforceable in Singapore but for which they are unable to make payment.
Creditor’s Application For Bankruptcy
If a creditor files for the bankruptcy of a debtor, the following conditions indicate that the debtor is considered unable to repay the owed amount:
- Non-Compliance with Statutory Demand: The debtor has not complied with a statutory demand for payment for a period of at least 21 days.
- Failure to Adhere to Court Orders: The debtor has failed to comply with a court-issued execution order to pay the debt.
- Avoidance of Repayment: The debtor has left the country to evade repayment obligations.
- Certification by Official Assignee: The Official Assignee (OA) certifies that the debtor cannot pay the debt.
Conclusion About Filing A Bankruptcy In Singapore
Understanding what happens when you file for bankruptcy is important, as it can affect your assets, credit rating, and overall financial standing. While it may provide a fresh start for those overwhelmed by debt, it also comes with restrictions and responsibilities.
Tembusu Law can help make filing for bankruptcy as painless as possible. If you need assistance with family law matters, such as seeking a divorce lawyer in Singapore, or require expert advice from a criminal lawyer in Singapore, our experienced team is ready to assist.
Chat with our experienced corporate lawyers in Singapore to find out how we can guide you through the process.
Frequently Asked Questions About Filing A Bankruptcy In Singapore
Who Is Eligible To File For Bankruptcy In Singapore?
To be eligible for bankruptcy in Singapore, you must owe at least SGD 15,000 in unsecured debts and cannot pay them as they become due. You must also meet certain residency criteria, such as being domiciled in Singapore or having lived or conducted business here for a specified period.
How Does Filing For Bankruptcy Affect The Assets?
Filing for bankruptcy can lead to the liquidation of your non-exempt assets. This means that properties, vehicles, and other valuable possessions may be sold by the Official Assignee to repay creditors. However, essential items, such as basic household goods and tools needed for your profession, are generally exempt from liquidation.
What Happens If I Don’t Comply With The Bankruptcy Process?
If you fail to comply with the bankruptcy process, such as not following the repayment plan set by the OA or failing to provide the required information, you may face legal consequences. This could include further restrictions on your financial activities or even the possibility of being prosecuted for non-complianc\
Can I Restore My Credit Standing After Filing For Bankruptcy?
While your bankruptcy status will impact your credit score for several years, you can improve your financial health by paying bills on time, applying for secured credit cards, and monitoring your credit report. Understanding what happens when you file for bankruptcy is crucial to navigating the recovery process effectively.
