SINGAPORE - Debtors will now be able to meet a higher debt threshold before being made bankrupt, while creditors can file a bankruptcy application sooner, under new laws aimed at creating a more rehabilitative environment for bankrupts.
The new bankruptcy framework, which also aims to encourage creditors to exercise financial prudence when extending credit, will come into force on Aug 1.
While the reforms apply only to bankruptcy applications filed from August onwards, the Insolvency Office will manage existing cases, where appropriate, to ensure some parity of treatment for existing bankrupts, the Ministry of Law said in a statement on Wednesday (Jul 27).
One key change under the new framework is that the bankruptcy debt threshold, or minimum debt amount that needs to be owed before a person may be made bankrupt, will be increased from $10,000 to $15,000.
This change seeks to encourage both debtors and creditors to resolve debts falling below the threshold, without resorting to the formal bankruptcy process, MinLaw said.
This will help such debtors avoid the inconveniences and social stigma associated with bankruptcy.
Another big change is the expedited bankruptcy application process. After a demand for payment has been issued to a debtor, the creditor will no longer have to wait for a 21-day period to lapse before filing a bankruptcy application.
However, the creditor must show a serious possibility that the debtor's property or its value will be significantly diminished before the 21-day period ends.
The new framework also introduces a new differentiated discharge regime, to create a more rehabilitative regime that sets out fixed exit points for bankrupts to be discharged.
These clear timeframes will give bankrupts an incentive to adhere to their payment plan, their conditions of bankruptcy, and seek gainful employment as a means of achieving their discharge.
For example, first-time bankrupts will generally be eligible for discharge within five to seven years, while repeat bankrupts will generally be eligible for discharge within seven to nine years.