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No one likes to think about going bankrupt, but there are times when filing for bankruptcy is a sound financial option. While going bankrupt comes with a lot of stigmas, this legal status also provides debtors with a bit of a breathing room.
After filing for bankruptcy, Singapore debtors are given a chance to repay their debts in a structured manner, without fearing the possibility of facing additional legal actions initiated by their creditors.
But who can declare bankruptcy? Not everyone can declare bankruptcy in Singapore. To qualify for this option, you must first have unpaid debts that reach a minimum of SGD 15,000. Also, you need to have spent a year carrying out business, owning a place of residence, or being a resident in Singapore.
Alternatively, you must live in or have a property in the country. Note that if the amount you owe is classified as unsecured debt and is worth under SGD 100,000, you still have the option to enter a 5-year Debt Repayment Scheme instead of filing for bankruptcy.
Bankruptcy is typically reserved for those who have a low chance of repaying the full amount of their debt and those who have not been able to arrange alternative means of payment with their creditors.
Either the debtor or the creditor can file for bankruptcy, though whoever initiates the filing has to pay for the process and wait for around a month before the High Court can grant their application. If you are deep in debt, you can start the process by filling out the required forms.
If your creditors have issued a Statutory Demand and you were not able to make payments on the date they indicated, then they can also do the same and file a bankruptcy application for your failure to meet your financial obligations with them. Once the application has been approved, the debtor can expect the following to take place:
The Amount That You Owe Will Stop Ballooning
The interest your debts have incurred can significantly increase the amount that you owe your creditors. After your bankruptcy application has been approved, though, you can expect your debts to stop accumulating.
Once you’ve determined the total amount that you need to pay, you can start planning the next steps you need to take on your journey to financial recovery. There’s no need for you to worry about snowballing debt. Instead, you can focus your full attention on earning money to pay what you currently owe.
You Need to List Your Assets and Liabilities in an Official Document
After you’ve established your target amount, your next step would be to evaluate where you are right now financially. To do this, you need to list your assets, liabilities, and creditors. Now, this is not just for your personal benefit; you also need to submit these details in an official document called the Statement of Affairs.
Enumerating your assets and obligations this way can help you determine the specific steps you need to take to pay off the amount you owe within the time frame that you are given.
You Have to Give Up Your Assets to Help Pay for Your Debts
At the start of your bankruptcy, you need to surrender your assets to the Official Assignee (OA) that’s been tasked to work with you. Upon being surrendered, your assets will be liquidated and the collected amount will go towards reducing the total debt you owe. There are exceptions to the type of property that your OA can collect.
For example, you will not be asked to surrender assets that your family will need to maintain an acceptable standard of living, such as your house and essential household items. You’ll also be able to keep the tools that you need in your trade, any life insurance policies that you or your family members might have, and properties that have been entrusted to you for the benefit of another person.
You’ll Pay for Your Remaining Debt Through Monthly Contributions
Your OA will also assign you a Target Contribution, which you need to pay every month. This amount will be automatically deducted from your wage and go directly to your creditors to pay for your debt. Despite this mandatory deduction, you can still expect to receive a small amount that will allow you to cover your daily expenses.
Bankruptcy Will Limit Your Job and Business Options
The effects of bankruptcy can be felt in other areas of your life. For example, you’ll have a hard time finding a place of employment in the finance industry if you’ve filed for bankruptcy.
If you’re planning on changing careers or workplaces, take note that your prospective employer will be able to know that you’re currently bankrupt or have been recently discharged from bankruptcy. Some restrictions can also apply if you’re running a business, and you won’t be able to sell or transfer property without the approval of your OA.
Your Capability to Travel to Another Country Will Be Decided by Other People
You won’t be able to travel outside the country except for work, and even then, you need to obtain approval from a court or your OA. If you travel without approval, there’s a chance that you’ll be fined and incarcerated upon your return to Singapore.
Records of Your Bankruptcy Will Be Available to the Public
People who have filed for bankruptcy are included in a register, and their place of employment will be informed of their current status. Take note that one’s inclusion to this list is not permanent. After you’re done paying your debt, your name will be deleted from the said list. This can happen around 5 years after you’ve been discharged from bankruptcy.
If you can fulfill all your financial obligations in a timely manner, you’ll be able to put your bankruptcy behind you in just a few years. After that, you can continue building your life and pursuing new opportunities without being hounded by outstanding debts.