Spotlight on debt repayment programmes

Schemes may help borrowers to avoid bankruptcy or to be more disciplined in repaying debts

While the new Debt Consolidation Plan (DCP) is offered by 14 participating financial institutions, the Debt Management Programme (DMP) is another debt repayment scheme offered by Credit Counselling Singapore (CCS) since 2004. CCS is a registered charity and an agency that assists people with unsecured debt problems.

Yet another avenue, the Debt Repayment Scheme (DRS), is an alternative to bankruptcy.

The Sunday Times outlines the three debt repayment schemes.


Launched in late January, the DCP provides an avenue for customers to be more disciplined in their debt repayments. In a nutshell, it offers a customer the option to consolidate his unsecured credit facilities (such as credit cards and some types of unsecured loans) across financial institutions with one participating institution.

To qualify, there are certain eligibility criteria, including having unsecured debt that exceeds 12 times your monthly income.

Data from the Monetary Authority of Singapore showed there were about 14,000 borrowers with outstanding unsecured debt exceeding 24 times their monthly income as of September last year. This has more than halved from 32,000 in February 2015. They represent less than 1 per cent of all unsecured credit borrowers.

The DCP is aimed at cutting debt. Customers applying for this restructured plan through one bank would have to cut their unsecured debt to eight times their monthly income before they can access fresh unsecured credit from a second bank.

Mr Kuo How Nam, chairman of CCS, notes that the DCP offers the benefit of having one credit card with a month's credit to help facilitate payments, something which is not available for DMP.


The DMP is a monthly instalment plan that allows the individual to gradually repay his unsecured consumer debts - such as credit cards and overdraft - including the principal amount and moderated interest charges, to all his creditors over a reasonable period of time.

Unlike the DCP, the debts are not consolidated under one institution.

As of Dec 31 last year, CCS had put up more than 13,300 DMPs since it was launched in October 2004.

CCS stated in its website that this repayment plan is suitable for people who are willing (that is, with the desire to avoid bankruptcy and the determination to live within a disciplined budget) and able (that is, in possession of some money) to repay their unsecured consumer debts.

According to general manager Tan Huey Min, CCS conducts a one-hourly debt advisory session with eligible applicants to help them work out how much they need to spend per month to take care of family living expenses, before working out a payment proposal that their creditors can approve.

Thus, the monthly instalment payment will be within the person's servicing capacity and the applicant is expected to make prompt, full and regular payment during the repayment term.


Not every borrower is eligible for a DCP or DMP. There are people who are in such a dire financial position that they may have to explore the bankruptcy route.

The DRS is an alternative to bankruptcy. It may be an option when the debtor is sued by a creditor or he can voluntarily apply to become a bankrupt.

When a bankruptcy application is made to the High Court and the debts owed do not exceed $100,000, the court may refer the debtor to the Insolvency Office for the Official Assignee (OA) to assess the debtor's eligibility and suitability for the DRS.

If the debtor satisfies the qualifying criteria and the OA assesses him to be suitable, the OA will assist the debtor in devising a DRS.

A borrower's DMP or DCP status is not on public record but is registered with Credit Bureau Singapore, whose data is accessible to its members, mainly the financial institutions. However, a person's DRS status is a public record.


Mr Matthias Dekan, head of customer value management at HSBC Singapore, said that it is important to start financial planning early and not to wait until debts pile up before seeking help.

"Especially for those who have just joined the workforce and have access to credit cards and personal loans for the first time, do remember to pay off your debts in a timely manner and not live beyond your means," he said.


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A version of this article appeared in the print edition of The Sunday Times on March 05, 2017, with the headline Spotlight on debt repayment programmes. Subscribe