The minimum level of debt that can render a person bankrupt will rise from $10,000 to at least $15,000 under new laws that will come into force next week.
The new bankruptcy framework, which also aims to encourage creditors to exercise prudence when extending credit, will also feature an expedited bankruptcy application process.
The amendments to the law were first mooted in 2013 and passed in Parliament last year.
While the reforms apply only to bankruptcy applications filed from Aug 1, 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 yesterday.
One key change under the new framework is that the bankruptcy debt threshold, or minimum debt that needs to be owed before a person may be made bankrupt, will be increased from $10,000 to $15,000.
RAISING DEBT THRESHOLD
This change seeks to encourage both debtors and creditors to resolve debts falling below the threshold, without resorting to the formal bankruptcy process. This will help such debtors avoid the inconveniences and social stigma associated with bankruptcy.
MINISTRY OF LAW, in a statement
The new threshold is based on the same income-related benchmarks that were used when the threshold was last revised in 1999.
"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 "differentiated discharge regime" to create a more rehabilitative regime that sets out fixed exit points for bankrupts to be discharged.
First-time bankrupts, for example, will generally be eligible for discharge within five to seven years, while repeat bankrupts will have to wait seven to nine years.
These clear timeframes will give bankrupts an incentive to adhere to their payment plan and their conditions of bankruptcy, and seek gainful employment as a means of achieving their discharge.