A NEW scheme designed to help people repay troublesome debt already appears to be reducing the number of bankruptcy applications here.

Since the Debt Repayment Scheme (DRS) kicked off just over a month ago, banks have been thinking twice before taking the ultimate measure against recalcitrant debtors.

They would rather find a middle path using the DRS, although some banks may initially be watching to see how the new system plays out.

This, of course, is good news for those struggling to make debt repayments or who have been living in fear of becoming a bankrupt.

The introduction of the DRS is timely, indeed, given the fallout from the financial market and economic turmoil, as many workers lose their jobs or face pay cuts.

Experts in bankruptcy law and financial planning that The Sunday Times spoke to say that if DRS is not abused, it can prove to be a helpful tool in assisting both debtors and creditors.

Bankruptcy brings with it social embarrassment and also dire legal consequences for individuals and families.

For example, many employers have a policy of sacking staff who have been declared bankrupt. Bankrupts also need permission from the Official Assignee (OA) before travelling abroad.

Observers say they have noted a marked drop in bankruptcy filings since the DRS got under way.

Under the scheme, which started on May 18, the High Court can refer debtors who owe less than $100,000 to the Insolvency and Public Trustee's Office (IPTO) to be considered for the DRS.

If a debtor is employed and earning a regular income, he may now be able to avoid bankruptcy under the DRS.

Read the full story in tomorrow's edition of The Sunday Times.