Bankruptcy 

Who is a bankrupt?

1.       A person may be declared bankrupt by the High Court if he owes the creditor(s) more than $10,000, which is payable immediately but he is unable to pay.

Bankruptcy Applications

2.         There are two types of bankruptcy applications:-

(a)           debtor’s bankruptcy application; and

(b)          creditor’s bankruptcy application.

3.         A debtor’s bankruptcy application is when the debtor himself applies for bankruptcy.

4.       A creditor’s bankruptcy application is when the creditor/s apply to court to make a person a bankrupt.

Procedure

Debtor’s Bankruptcy Application

5.         For a debtor’s bankruptcy application, the debtor will have to file the following documents:-

            (a)           Originating Summons (Debtor’s Bankruptcy Application);

 (b)          Supporting Affidavit (Bankruptcy)

             (c)           Statement of Affairs;

             (d)          Affidavit verifying the Statement of Affairs; and

 (e)         Supporting Affidavit (Bankruptcy – Debt Repayment Scheme applies or does not          apply, whichever affidavit is applicable)

 6.    The Court will also consider the debtor’s eligibility for the Debt Repayment Scheme (see paragraphs 16 to 25 below).  

Creditor’s Bankruptcy Application

7.       To commence a creditor’s bankruptcy application, the creditor has to first issue a Statutory Demand to demand payment from the debtor.

8.         Once the Debtor is served with the Statutory Demand, he has two options:-

(a)           pay the debt within 21 days;

(b)          apply to court to set aside the Statutory Demand within 14 days.

 

Setting aside a Statutory Demand and opposing a creditor’s bankruptcy application

9.         If a debtor wishes to set aside the Statutory Demand served on him, the debtor must file the following documents:-

            (a)          Originating Summons (Bankruptcy – To set aside Statutory Demand); and

            (b)          Supporting Affidavit.

10.       In the Supporting Affidavit, the debtor can:-

            (a)          state the reasons for not admitting the debt’;

            (b)          admit the debt but state reasons why the debt was not immediately payable;

            (c)           admit the debt and offer to secure or compound it to the creditor’s satisfaction;

(d)          inform the court that the debt is a secured debt and provide details of the security      and its value;

            (e)          present a counterclaim or cross demand;

(f)          if the debt is a judgment debt, prove that the execution on the judgment debt has     been stayed;

(g)         state reasons why the statutory demand does not comply with the Bankruptcy Rules   and/or

(h)       state personal grounds or other reasons why the statutory demand should be set    aside.

11.       During the hearing the Court will decide whether the Statutory Demand should be set aide.  If the Statutory Demand is set aside, the proceedings end there. If the Statutory Demand is not set aside, the creditor can proceed to file a Bankruptcy Application.

12.       Once the Bankruptcy Application is filed in Court, the Court will fix the matter for hearing. The creditor should also file a Proof of Debt along with the Bankruptcy Application. 

13.     At the hearing the Court will first consider if the debtor is eligible for the Debt Repayment Scheme (see paragraphs 16 to 25 below).      

            a)      If payment is still not made by the hearing date and the debtor is not eligible for the               Debt Repayment Scheme, the High Court may make a Bankruptcy Order and declare              the debtor bankrupt. 

            b)     If the debtor is eligible for the Debt Repayment Scheme, the hearing will be adjourned             for about six (6) months for the Official Assignee to interview the debtor and assess the           suitability of the debtor for the Debt Repayment Scheme.

14.      If a debtor has been served with his creditor’s bankruptcy application, he can approach the creditor’s solicitor to negotiate a settlement and persuade the creditor to withdraw the creditor’s bankruptcy application.

15.       Alternatively, if a debtor wishes to oppose to a creditor’s bankruptcy application, he may do so by filing a Notice of Objections. In his Notice of Objections, the debtor has to state his reasons for objecting.

Debt Repayment Scheme (DRS)

16.       Under the DRS, the debtor can enter into a Debt Repayment Plan (DRP) with the creditors                 which will allow a debtor to avoid bankruptcy.

17.        The debtor will have five (5) years to repay his debt. Thereafter if the debtor has paid his debt  in full, the Defendant will be discharged from bankruptcy.

18.      The Official Assignee will assess and determine the debtor’s eligibility and suitability for the  DRS. It is not possible to apply or sign up for the DRS.

19.       To be eligible for the DRS, the debtor has to meet the following criteria:-

(a)        does not have debts exceeding $100,000, or the aggregate of his unsecured debts in  respect of which the bankruptcy application was made does not exceed $100,000;

            (b)         the debtor is not an undischarged bankrupt;

(c)       the debtor was not adjudged a bankrupt in the five (5) years preceding the date of  the application;

            (d)         the debtor is not presently subject to a voluntary arrangement;

(e)        the debtor has not been subject to a voluntary arrangement in the five (5) years      preceding the date of the application;

            (f)          the debtor is not presently subject to a debt repayment scheme

(g)       the debtor has not been subject to a debt repayment scheme in the five (5) years  preceding the date of the application;

            (h)         the debtor is not a sole proprietor;

            (i)          the debtor is not a partner in a firm.

The DRS does not apply to the debtor is he fails to satisfy any of the above conditions.  The debtor must also be gainfully employed and earning a regular income;

20.      The debtor will have to submit the following documents for the OA to assess his suitability for the DRS:-

                (a)          Statement of Affairs;

                (b)          Income and Expenditure Statement;

                (c)           Debt Repayment Plan; and

                (d)          Supporting documents.

The debtor has to complete the online submission and submit the documents online within 14 days, failure of which, the case will be referred to Court for the bankruptcy proceedings to be heard again.

21.      A meeting of the creditors will be held at the OA’s office for further assessment of his  suitability for the DRS and the debtor’s attendance is compulsory. The issues discussed at the creditor’s meeting includes the debtor’s monthly instalment as well as the terms and conditions of the DRP. If the debtor does not attend the meeting without a valid reason, he will be deemed unsuitable for the DRS.

22.       If a debtor is assessed by the OA to be suitable for the DRS, the DRS administrator will devise a DRP for the debtor. Once the debtor has made the first payment, the OA will inform the debtor, the Court and the creditor of the outcome of the assessment of the DRS and the commencement of the DRP. If a bankruptcy application was made against the debtor, the application will be deemed as withdrawn.

23.       Once a debtor is assessed to be suitable for the DRS, he will have to pay $300.00 being the  first annual fee and the approved first monthly instalment.

24.       If a creditor disagrees with the DRP, he may file a Notice of Appeal within 14 days from the date of notice of the OA’s decision on the approved DRP or Notice of Commencement of DRP.

25.      If the debtor fails to comply with the terms of the DRP, the OA may issue a Certificate of  Failure and the debtor’s creditor may initiate fresh bankruptcy proceedings.

Consequences of bankruptcy

26.       Once a person is made a bankrupt, his assets will vest in the Official Assignee for the benefit  of the creditors.

27.       Once the Bankruptcy Order is made, the bankrupt is required to attend the OA’s office to be briefed on his responsibilities as a bankrupt. The bankrupt is also required to submit his Statement of Affairs to the OA within 21 days from the date of the Bankruptcy Order. If the bankrupt fails to submit his Statement of Affairs without reasonable excuse, or submits a Statement of Affairs which is false, misleading or fails to disclose material information, be may be guilty of an office punishable with a fine not exceeding $10,000.00 or be imprisoned to a term not exceeding 2 years.  

 

28.      If the Bankrupt is employed, he must make a monthly contribution which will be accumulated in the bankruptcy estate. The amount of monthly contribution he has to make will be determined by the OA after taking into account the Bankrupt’s reasonable expenses for him and his family.

29.      A bankrupt is not allowed to travel overseas without the OA’s permission. If he attempts to travel overseas without the OA’s permission, he may be stopped from leaving Singapore and his passport may be detained by the Immigration and Checkpoints Authority.  It is an offence to travel overseas without the OA’s permission and if found guilty, the bankrupt may be liable to a fine not exceeding $10,000.00 or to imprisonment for a term not exceeding 2 years or both.

30.       If a bankrupt wants to manage a business or corporation and/or act as a director or take part in the management of any corporation, he needs to obtain permission from the High Court or the OA. His application will be considered on its own merits; it may be refused by the OA or be subject to certain conditions imposed by the OA. (section 131 of the Act)

31.      A bankrupt will not be able to commence or continue any lawsuits other than an action for damages or compensation in respect of personal injuries. If he wishes to commence or continue any court action other than those listed above, he will need the consent of the OA (section 131). If the OA’s permission is not obtained, the bankrupt may be guilty of an offence and be liable to a fine not exceeding $10,000.00 or to imprisonment for a term not exceeding 2 years or both.

32.       A bankrupt may be able to obtain further credit. However if he wants to loan more than $500, he must disclose his bankruptcy status to the lender.

Assets

33.      Asset are anything of value which belongs to the bankrupt at the date of the Bankruptcy Order. Any gifts given to him before he is discharged from bankruptcy is also considered as an asset.

34.       A bankrupt will be allowed to keep certain possessions which are necessary for his everyday life and are not too extravagant.

35.        Bankrupts will be able to retain the following assets:-

             (a)          private property which he holds on trust for another;

             (b)          his HDB flat(s) provided at least one of the owners is a Singaporean;

             (c)           money in his CPF accounts

             (d)          his life insurance policies where the beneficiaries are his spouse or children;

             (e)          any other property which is excluded by law from the reach of his creditors; and

 (f)           compensation awarded to him in legal action in relation to personal injuries or             wrongful acts done against him.

36.       The bankrupt’s secured creditors will have the right to sell the secured asset(s) or goods if he defaults on your payments to them. If the proceeds of sale exceeds the value of the secured debt, the OA will require that the remaining proceeds be remitted to the bankruptcy estate for the benefit of his other creditors.

37.      A bankrupt can open a bank account; the OA will assist him with it. The bankrupt must pay his monthly contributions towards the bankruptcy estate through this bank account via GIRO. He must also furnish all information relating to the account as required by the OA. The OA reserves the power to close the account.

 

Discharge from bankruptcy

38.       One may be discharged as a bankrupt through the following ways:-

(a)           annulment of the Bankruptcy Order by settling your debt(s) in full or through an        Offer of Composition or a Scheme of Arrangement;

            (b)          discharge by the High Court;

            (c)           discharge by Certificate of the Official Assignee.

39.    Upon discharge from bankruptcy, the accumulated contributions will be distributed to the Bankrupt’s creditors.

 

Caution to Debtors

40.      If you receive Letters of Demand from your creditors, Statutory Demands or Writs of Summons from the court, do not ignore them. Seek legal advice if you do not understand the contents. Even if you refuse to respond to your creditors or refuse to accept service of their documents, you can still be made a bankrupt.

 

Sources: adopted from:

-          Ministry of Law website 

-          Bankruptcy Act

-          Supreme Court website

-          Insolvency and Public Trustee Office 

As at 21 April 2016