Demystifying Bankruptcy in Singapore
In most people’s minds, being financially savvy often equates to knowing how to save and invest money, and having the finger on the pulse of the latest financial products.
Bankruptcy, on the other hand, is a much hushed about topic. Perhaps, nobody wants to talk about not having money, or it’s simply an issue that just doesn’t cross the mind when one imagines the future.
Learning more about bankruptcy, however, is useful as it gives you an idea of what your options are in the most financially difficult times, as opposed to grappling with unknowns and anxieties.
If a debtor owes a debt of at least S$15,000 that cannot be repaid, then either the creditors or the debtor can file a Bankruptcy Application in the High Court.
Due to the consequences of being declared bankrupt, it’s certainly not to be seen as the easy way out, but rather as the last resort.
At the same time, it’s also not the end of a financially stable or even prosperous life when you have recovered.
What Happens When You Declare Bankruptcy?
When it comes to bankruptcy, the reset button doesn’t start you off on a clean slate, and also adds a number of restrictions to your life.
Firstly, any valuable asset that you own will be seized by the Official Assignee, who is the officer in the law court that oversees the distribution of the bankrupt’s assets to the creditors.
This includes anything from vehicles to local and foreign properties and bank accounts, securities, and even your mobile phone.
However, there are some necessary assets that are protected, such as furniture and personal effects as well as your HDB flat if at least one of the owners is a Singaporean.
Next comes the restrictions in your lifestyle. Checks will be made on your spending, and even your choice of taking a taxi instead of the MRT will have to be justified.
In addition, you will need to apply for permission with 14 days advanced notice if you want to travel, and it’s likely that work trips are approved over leisure trips.
When you declare bankruptcy, you still have to pay back you owe, although the monthly repayment will be worked in a way that is within your means.
One of the major reasons why people do file for bankruptcy is because interests will no longer be charged, and that makes a significant difference when compared to paying off a snowballing debt.
You may also face obstacles when finding employment as your records are made publicly available and any employer who runs a check will be able to see that.
This may hinder your job-seeking prospects. In addition, running a business may also be trickier as your credit score will be impaired and getting loans will be more difficult.
Getting Out of Bankruptcy
A debtor who declares bankruptcy for the first time is on average discharged in 3-5 years if the target contribution amount is made in full and creditors do not object to the discharge, or 5-7 years if there are creditors who object to it and were eventually declined by the court.
In these cases, the bankrupt’s name will be removed from public records five years after the date of discharge.
If the target contribution is not paid in full, then the discharge could happen after seven years, with the bankrupt’s name remaining on the record permanently.
Getting Through Dark Times
As you navigate through the murky waters of bankruptcy, remember that:
1) Reaching out for help is not only possible, but also sensible and practical
For some, one of the hardest things to do when facing a bankruptcy is to come out to family and friends.
Even for those who do have very supportive people around, the sense of financial failure may mean that people want to withdraw from the external world for fear of judgment, worry from others, or shame.
However, reaching out for help either financially or for emotional support is really the healthy thing to do.
Not only will you be able to relieve some of your financial pressures with the kindness of people who care, the mental and emotional support can give you the energy you need to get through your darkest days.
2) You’re dealing with bankruptcy; you’re not “a bankrupt”
Bankruptcy is situation that you are in; it is not your identity, regardless of the legal label that is placed upon you. The social stigma of bankruptcy can make this very difficult, but keeping the perspective that you are not your situation can go a very long way in helping you to problem-solve with a healthy and balanced mind.
If you’re looking for ways to avoid debt, read the tips on how to get out of your current debt today.