More chances for bankrupts to start anew

Bankrupts in Singapore now have a clear time frame to meet specific repayment goals in order to be discharged, under changes to the law passed in Parliament.
Bankrupts in Singapore now have a clear time frame to meet specific repayment goals in order to be discharged, under changes to the law passed in Parliament.PHOTO: ST FILE

New discharge framework sets clearer schedules for them to meet repayment goals

Bankrupts in Singapore now have a clear time frame to meet specific repayment goals in order to be discharged, under changes to the law passed in Parliament yesterday.

Under a new discharge framework, a first-time bankrupt who has fully paid a "target contribution" will be discharged after three years if more than half of his creditors have no objection.

This target contribution is the total sum, determined by bankruptcy trustees, that a bankrupt must repay to be eligible for discharge.

After five years, creditors will have to obtain a court order if they wish to block the discharge of a bankrupt who has paid his target contribution in full .

After seven years, a bankrupt who has not paid the target contribution in full will still be eligible for discharge. A court order must be obtained to prevent the discharge.

FRESH START

The Bill strikes a balance between the need to hold the bankrupt accountable while ensuring that bankrupts have the opportunity to make a fresh start in their financial affairs after a reasonable period of time.

SENIOR MINISTER OF STATE FOR LAW INDRANEE RAJAH

Speaking at the start of the debate on the Bankruptcy (Amendment) Bill, Senior Minister of State for Law Indranee Rajah said: "The Bill strikes a balance between the need to hold the bankrupt accountable, while ensuring that bankrupts have the opportunity to make a fresh start in their financial affairs after a reasonable period of time."

As for repeat bankrupts, the timelines are pushed back by two years.

In addition, those who pay their target contributions in full will be removed from the public register of undischarged and discharged bankrupts five years after their discharge. Those who do not make full payment will remain on the register permanently. "This will also allow future creditors to make informed decisions on whether to extend credit," Ms Indranee said.

Previously, discharge from bankruptcy was granted only by the High Court or Official Assignee on a case-by-case basis.

Other key changes include:

•Raising the debt threshold for obtaining a bankruptcy order from $10,000 to $15,000.

•Allowing creditors to make an expedited bankruptcy application.

•Requiring institutional creditors such as banks to appoint a private trustee at their own expense to administer the bankruptcy.

Ms Indranee noted that the $10,000 debt threshold was set in 1999, adding that it was "timely to review the threshold given the rate of inflation over the past years".

Also, creditors no longer have to wait 21 days after issuing a statutory demand for repayment before making a bankruptcy application, if they can show that "there is a risk that the debtor could dissipate his assets during this 21-day period".

The expedited bankruptcy application will allow creditors to preserve assets of the debtor that can be used for repayment.

As for the administering of bankruptcies, Ms Indranee said the current practice, where the Official Assignee is trustee in over 99 per cent of cases, sees the state bearing "the cost of resolving debts entered into between private parties, and often, for the benefit of private parties".

Banks and companies with annual sales of over $100 million and more than 200 employees will now have to spend their own money to appoint a private trustee.

This will encourage them " to carefully consider whether to apply for a bankruptcy order", she added.

According to the Law Ministry, there were 22,194 cases of bankruptcies as of May 31. Since 2011, about 1,500 to 2,000 new bankruptcy orders have been filed annually.

Five MPs spoke on the Bill over two days. Nominated MP Thomas Chua said the Bill would strengthen the spirit of risk-taking as those who failed in business can be discharged from bankruptcy within the set time frame and apply the lessons learnt to their next venture.

Mr Zainal Sapari (Pasir Ris-Punggol GRC) urged the Government to step up public education on the risks of taking unnecessary loans as "prevention is better than cure".

A version of this article appeared in the print edition of The Straits Times on July 15, 2015, with the headline 'More chances for bankrupts to start anew'. Print Edition | Subscribe