Recovering from bankruptcy in Singapore is a concern for many individuals. The good news is that it’s possible to rebuild your financial standing with careful financial management. Here’s what you need to know.
While bankruptcy may seem like the end of one’s financial journey for many Singaporeans, it’s essential to understand that it signifies a fresh start rather than a permanent setback.
Bankruptcy isn’t the ultimate endpoint; instead, it’s a legal status that can be sought by a debtor or initiated by creditors when a debtor cannot repay debts exceeding S$15,000. The decision to grant bankruptcy status is made by the High Court.
Once the bankruptcy status is confirmed, the High Court appoints an Official Assignee or trustee to oversee the process.
In a bankruptcy proceeding in Singapore, what exactly is the responsibility of the Trustee?
Significant obligations that have an effect on both the debtor and the creditors are placed on the trustee’s shoulders. First, they calculate the Target Contribution, which is the minimum amount that the debtor needs to pay in order to be discharged.
This determination is contingent on the debtor’s income, which takes into account the fundamental expenditures associated with maintaining a family as well as the day-to-day costs of labour. A vital consideration is the debtor’s capacity to make a full payment on the Target Contribution within the first 52 months (or 72 months in the case of a subsequent bankruptcy filing).
In addition, the job of the trustee is not limited to just overseeing the management of the debtor’s assets and the distribution of those assets to the creditors. In addition to this, they carry out exhaustive investigations on the debtor’s debts, financial problems, and general behaviour.
Since the beginning of the year 2016, a total of 1,827 people in Singapore have initiated the bankruptcy process. It is crucial to gain an understanding of how individuals handle life after bankruptcy, despite the fact that it is a difficult circumstance.
People in Singapore, like people everywhere else, work hard to avoid going bankrupt. However, if it turns out that going bankrupt is unavoidable, it is useful to know how to get started on the road to recovery from bankruptcy in Singapore.
What happens if you are bankrupt?
Asset Confiscation
Upon a bankruptcy order, your estate or assets will be confiscated by the High Court and placed under the management of the trustee. It’s crucial for the bankrupt individual to submit a ‘Statement of Affairs’ within 21 days following the filing of the Bankruptcy Order. This statement must contain accurate and comprehensive information, encompassing both assets and liabilities.
Thankfully, not all assets will be taken away in bankruptcy proceedings. You can retain certain essential items, including your HDB flat (unless it has been refinanced), basic necessities for your family’s survival, tools relevant to your trade if you continue working, and assets held on behalf of someone else.
Bankrupt individuals are allowed to continue working, but a portion of their income is allocated to creditors.
Bankruptcy does not necessarily result in your dismissal by your employer, although individuals with job responsibilities related to finance may face termination. It’s essential to maintain regular employment to fulfill your monthly contributions towards debt repayment. Creditors cannot claim your entire salary, as you still require a portion for basic living expenses. Given your limited financial resources, it’s crucial to communicate with your trustee if you engage in any luxury expenditures that come to their attention.
No Privacy
Bankruptcy is not a private matter. When you go bankrupt, it becomes public knowledge, and everyone, including your employer and the general public, will be notified. This revelation can significantly impact your career prospects, potentially hindering your ability to attain higher positions within a company.
Travel Restrictions
Bankrupt individuals face limitations on international travel. If you need to travel abroad for urgent reasons, you must obtain approval from your trustee. Your chances of traveling will largely depend on your ability to consistently meet your monthly contribution obligations.
Deteriorated Credit Rating
Bankruptcy takes a toll on your credit rating, making it extremely challenging to secure loans from banks or financial institutions. Therefore, it becomes imperative to embark on the journey of rebuilding your credit score.
First-Timers’ Discharge
For first-time bankrupt individuals, discharge eligibility typically occurs after seven years if they are unable to fully pay their Target Contribution during this time. The quicker you can achieve your target contribution, the sooner you can recover from bankruptcy in Singapore. However, it’s important to note that records of your bankruptcy will remain in the public domain for an additional five years after your discharge.
Legal Action Restriction
As a bankrupt individual, you are not permitted to initiate or pursue legal actions in court without obtaining prior permission from your trustee. This rule, however, does not apply to legal actions related to personal injury claims or matrimonial proceedings.
Credit Limitation
Bankrupt individuals are prohibited from obtaining credit amounts of $1,000 or more without disclosing their bankruptcy status. This can be an opportunity to gradually rebuild your credit score. For instance, you can apply for small personal loans and diligently repay them. While it may take several years, it’s possible to regain financial stability after five years of being discharged from bankruptcy.
Read also: An Easy Guide To Unsecured Loan In Singapore
Corporate Role Limitation
You are ineligible to serve as a manager or director of a company without obtaining approval from your trustee. Violating these restrictions can result in fines.
Ways to Get Back on Your Feet after Filing for Bankruptcy in Singapore
When you file for bankruptcy, it is required of you to present a statement of your financial situation that is both truthful and comprehensive. This document is necessary for determining which assets can continue to be in your ownership and which ones will be distributed among your creditors in the event of bankruptcy. Since any inconsistencies are likely to be detected, honesty is of the utmost importance. Being honest with people can help you avoid getting into additional trouble.
Achieve the Desired Amount of Contribution
The trustee will determine your “Target Contribution,” which will play a critical role in your bankruptcy case. When you complete this contribution sooner rather than later, you will be able to receive your discharge sooner, typically within three to five years, assuming that you have made regular payments for a period of fifty-two months without any objections from your creditors.
Even if you are unable to return the contributions, you may still be eligible for discharge when seven years have passed. Be aware, however, that a record of your bankruptcy will remain on file for the rest of your life. This will make it difficult for you to obtain credit for things like auto loans, mortgages, or personal loans, as well as employment possibilities, particularly in fields associated to finance.
Carry Out a Financial Self-Evaluation
Become Clearly Aware of Your Spending Habits and How You Handle Your Money. While the trustee is looking over your financial status, you should do your own assessment to get a better handle on how you should be managing your money.
Make a Monthly Budget Regardless of the Amount of Available Funds
Having a Monthly Budget Is a valuable Tool for Effectively Managing Your Limited Finances Making a monthly budget is a valuable tool for effectively managing your limited finances.
Paying Your Bills on Time
Make it a priority to pay your bills on time so that you may avoid accruing further debt and so that you can start the process of restoring your credit score.
Rebuilding Your Credit Score
You can begin the process of rebuilding your credit score by applying for and successfully repaying a series of small loans over time. This methodical approach will, over time, assist you in regaining your financial footing and stability.
Read also: How do you improve your Credit Score?
Make Informed Lending Choices
When seeking financial assistance, exercise caution in selecting your lender. While many lenders may attempt to exploit your financial needs, it’s imperative to choose the most reputable and trusted money lender in Singapore as your financial partner. Rather than obtaining loans from multiple financial institutions, it’s often wiser to maintain a relationship with one lender. Money lenders with loyal clients may offer benefits such as discounts or waiving documentation fees.
For those in search of the best personal loan in Singapore from a reputable money lender, consider exploring MoneyIQ, we have a loan matching platform that can help you find the best loan options in minutes.
Read also: Getting a Personal Loan without Income Proof in Singapore: Is it Possible?
