Guide to the Debt Repayment Scheme in Singapore

Guide to the Debt Repayment Scheme in Singapore

Many people in Singapore struggle with debt, meaning repayments are often challenging to manage. The Debt Repayment Scheme (DRS) was introduced by Parliament in 2009 to help ease this financial burden and minimise bankruptcies.

The DRS is effectively a payment plan that provides individuals with a period within which they can settle their debt with no additional interest being charged. It provides the person who owes the money (i.e. the debtor) with a final chance to settle the debt and avoid bankruptcy.

When will the Debt Repayment Scheme apply?

Unlike other repayment schemes in Singapore, the DRS cannot be applied for directly by the debtor. The scheme will only become available once an application for bankruptcy has been made to the High Court by either the debtor himself or the creditor to whom the money is owed.

To benefit from the DRS, the debtor must satisfy specific eligibility criteria:

  1. The total liabilities should be at least S$15,000 and no more than S$150,000;
  2. The debtor should be employed and receiving regular income;
  3. The debtor must not have any other ongoing bankruptcy proceedings;
  4. The debtor cannot have been subject to the DRS within the last 5 years; and
  5. The debtor must not be the sole owner or partner of a company. 

What is the process?

Once an application for bankruptcy has been filed, the case will be referred to the High Court and handed over to the Official Assignee. They are an officer of the court responsible for assessing the debtor's eligibility for the DRS. The bankruptcy proceedings will be put on hold to allow the Official Assignee to carry out their assessment, which should not usually take longer than 6 months.

The debtor must file certain documents with the Insolvency Office via the e-Services portal, which will form part of the Official Assignee's assessment. The relevant documents are:

Form A Statement of Affairs

The debtor will use this form to provide details of their current finances, including their assets and liabilities.

Form C Income and Expenditure Statement

The debtor will use this form to provide details of their income and outgoings.

Form D Debt Repayment Plan

The debtor must set out a proposal for debt repayment based on their monthly income and outgoings. The Official Assignee will expect this to be a realistic monthly payment from the debtor's disposable income.

Annex B Supporting Documents

The debtor must provide documentary evidence to support what he has stated in the 3 documents listed above. Annex B usually includes documents such as payslips, bills, and evidence of any assets.

The debtor will have 14 days to submit the above documents, and it is advised that this deadline is complied with. If the debtor fails to do so, the bankruptcy proceedings will need to be re-heard by the court.

Provided the above documents have been filed, and the Official Assignee is satisfied that the debtor is suitable for the DRS, a Debt Repayment Plan (DRP) will then be provided. This will detail the monthly payment the debtor will make and must be agreed by the debtor's creditors.

A creditors meeting will be held, which the debtor needs to attend. The creditors will ask the debtor to clarify any points in respect of their repayment plan proposal, and if it is approved, they will finalise the terms. If they disagree, the creditors must file an appeal within 14 days of the Official Assignee providing them with notice of the DRP decision.

The debtor is not obligated to participate in the scheme should they not wish to. However, the debtor should be aware that the only other option is declaring bankruptcy, which has several negative implications. For example, a bankrupt person cannot become a company director, nor can they travel outside of the country without the Official Assignee's permission.

Debt Repayment Plan

The DRP will require the debtor to pay off the debt in monthly instalments for no longer than 5 years. The specific terms of the DRP will depend upon the amount owed and the debtor's financial circumstances.

The debtor will be provided with a Certificate of Completion once they have repaid their debts under the terms of the DRP. The purpose of this certificate is to formally release the debtor from all the liabilities provided for under the DRP.

DRS fees

Specific fees will be payable by the debtor when undergoing the DRS process, which are summarised in a helpful table below.

Fee Amount When to Pay
Preliminary Administration Fee S$350 Upon the debtor submitting their forms and documents
Suitability Review Fee S$250 Upon or before the creditors meet to assess the debtor's suitability for the DRS
Annual Administration Fee S$300 per year for the first 2 years

S$350 per year for the last 3 years

Upon approval of the debtor's DRP at the start of each administration year
Collection & Distribution Fees 1.5% of monthly instalment

3% of any bonus contributions

When relevant payments are taken
Appeal Fee (only if a Notice of Appeal is filed by creditors) S$100 Upon submission of the Notice of Appeal
DRP Modification Fee (only if the repayment plan is changed following the creditors meeting) S$50 On or before the creditors' meeting for the modification

It is important to note that any fees paid are non-refundable, even if the debtor is found unsuitable for the DRS at any stage.

Termination of the DRS

As mentioned above, the DRS will be terminated when all payments have been made per the terms of the DRP and the Official Assignee issues the Certificate of Completion. The Official Assignee does have the power to revoke the certificate if the debtor fails to disclose information that was required under the scheme or if they have made misrepresentations that resulted in the DRS being approved.

The DRS will also be terminated in the following circumstances, which will all result in a Certificate of Failure being issued by the Official Assignee. This, in turn, will allow the creditors to file a new application for bankruptcy against the debtor:

  1. If the debtor fails to comply with the terms of the DRP;
  2. If the debtor does not provide full and frank disclosure of their finances;
  3. If the debtor incurs a debt over S$1,000 after the date the DRS begins and fails to disclose to the lender that they are subject to a DRS;
  4. The debtor is a party to a transaction at an undervalue at any time 5 years before the bankruptcy application (i.e. by selling an asset less than its actual value);
  5. The debtor makes a preferential payment to a creditor at any time two years before the bankruptcy application (i.e. by transferring an asset or paying a debt to the creditor); or
  6. The debtor becomes the sole owner or partner of a company or limited liability partnership during the DRS without the permission of the Official Assignee.

If the debts are found to be more than a total of S$150,000 after the commencement of the DRP, the Official Assignee will issue a Certificate of Inapplicability. This means that the DRS will cease, and a fresh application for bankruptcy can be filed.

Advantages of the DRS

Opting for the DRS as opposed to bankruptcy has many benefits. The debtor will not be subject to the same restrictions that would apply if they were bankrupt. In particular:

  • There will be no public record of the debtor being bankrupt.
  • They will be free to travel abroad without needing the Official Assignee's permission.
  • They will be able to keep hold of any pre-existing bank accounts.
  • The debt repayment period is usually much shorter, with a DRP lasting a maximum of 5 years.
  • They will not be subject to interest on their repayments.
  • The DRS can encompass all the debtor's liabilities.

Disadvantages of the DRS

Whilst the DRS is usually considered the preferable option instead of bankruptcy, it does not come without its pitfalls. In particular:

  • The process for using the scheme must begin with a bankruptcy application (either by the debtor or his/her creditors) and must be referred to the High Court. The debtor cannot simply apply for the scheme himself.
  • Although the debtor will not be found on the public bankruptcy record, their name will still appear on a public DRS record.
  • There are fees arising from the DRS, as highlighted above.

The DRS is a helpful scheme that bankrupt parties can access to minimise the impact of bankruptcy on their financial and personal circumstances. Any person subject to a DRS needs to ensure compliance with the relevant processes, the terms of the repayment plan, and the payment of fees. Otherwise, the debtor will likely be subject to fresh bankruptcy proceedings and may not have another chance to benefit from the DRS.

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