Debt Settlement Options
If a borrower opt for self-administration, he or she makes an appeal to the creditors for an affordable instalment payment arrangement.
You are advised to approach the creditors directly by putting up a written appeal. By submitting a written appeal, you can explain your financial situation and propose a repayment amount that you can afford. It is important to include relevant supporting documents such as income and CPF statements in the written appeal.
Here are some pointers to guide you during self-administration:
- Self-administration may be suitable if you have debts owing to one or a few creditors.
- You should be able to articulate your financial situation.
- You should be comfortable to negotiate the repayment terms directly with your creditors.
Creditors have the sole discretion to accept or reject your proposed payment arrangement.
A Discounted Lump Sum Settlement is when the borrower makes an appeal to the creditors directly to request for a discount on the outstanding debt amount owed.
In a discounted debt settlement, the creditor expects the borrower to make a lump sum payment.
This approach may be suitable if you are able to raise a lump sum either through:
- The sale of assets, such as shares or properties, or
- Taking a low-interest loan from non-financial institution such as a credit co-operative society.
This option is heavily dependent on your ability to raise a substantive lump sum amount that is attractive for the creditor to enter into negotiation.
Creditors have sole discretion to accept or reject your proposed discounted amount.
Debt Consolidation Plan (DCP) is a debt refinancing program which offers an individual the option to consolidate all unsecured debts (such as credit card debts and some types of unsecured loans) across financial institutions with one participating financial institution.
However, certain types of unsecured debts are excluded from a DCP. The types of debts excluded from a DCP are as follows: debts under joint accounts, renovation loans, education loan, medical loans, and/or credit facilities granted for businesses or business purposes.
To be eligible for DCP, you must meet the following criteria:
- Be a Singapore Citizen or Permanent Resident
- Earn between S$20,000 and below S$120,000 per annum with Net Personal Assets of less than $2 million
- Total interest-bearing unsecured debt on all credit cards and unsecured credit facilities with financial institutions in Singapore must exceed 12 times of your monthly income.
All existing unsecured credit facilities will be closed or suspended once your DCP application is approved. However, you will be automatically given a revolving credit facility (fixed at one time your monthly income) by the approving DCP bank to provide you with a convenient mode of payment for managing your daily essentials.
For more information or to apply for a DCP, you are advised to approach the participating financial institutions directly. DCP terms and conditions, such as interest rate and repayment period, may vary across different financial institutions.
Banks and financial institutions have full discretion to approve or reject DCP applications by eligible individuals.
A Debt Management Programme (DMP) is a debt repayment arrangement that is facilitated by Credit Counselling Singapore (CCS) for borrowers who are in genuine financial distress.
Individuals experiencing financial distress with their unsecured consumer debts may be unable to pay for basic living expenses and at the same time, make the minimum payment to all bank creditors. He may also have increasing amount of debts owed to several creditors and may already be facing legal actions.
When an individual has been assessed to be suitable to be on a DMP, bank creditors may offer a lower interest rate and a longer repayment period to repay debts through monthly instalments.
If you are facing an unsecured debt problem, CCS will work with you to establish your household budget, determine how much money you are able to set aside as monthly payments to all your bank creditors and propose a repayment schedule.
There are some important considerations that you need to take note of when considering if you should be on a DMP, as follows:
- You must have total unsecured debts of $10,000 or more. There is no limit on the maximum amount owed.
- You have debts owing to more than one bank creditor.
- You have account relationships with bank creditors of one year or more.
- All your credit card accounts and overdraft facilities will be terminated and you will have no access to unsecured credit facilities.
- Your DMP status will be reflected in your Credit Report.
Bank creditors have full discretion to approve and decide on the specific terms and conditions of a DMP, including the interest rate and monthly instalment amount.
If you wish to be considered for DMP, you will have do either of the following:
- Attend our Information Talk on Debt Management, or
- Enroll and complete an Online Debt Management Course and pass the Debt Advice Knowledge Quiz.
After attending the Information Talk (sign-up here) or completing the 0nline Debt Management Course, you will be required to submit a Counselling Request Package, along with the required supporting documents. After receipt of your submission, CCS will schedule you for a 1-to-1 Debt Advising session with a Debt Adviser.
Alternatively, you may complete an online DMP Application, if you meet the suitability criteria for online assessment mode.
If a borrower owes a debt of at least $15,000 that cannot be repaid, then either the borrower or creditor may file a Bankruptcy Application with the High Court.
There are consequences to being declared bankrupt such as travel and credit restrictions.
However, if you have exhausted all other options for repayment of your debts, bankruptcy is an option for consideration.
When a person has been made a bankrupt by a Court order, a trustee, either a Private Trustee-in-Bankruptcy (PTIB) or the Official Assignee (OA), will be appointed to administer the individual’s financial affairs.
The PTIB or OA will discuss with you to determine your Target Contribution to be repaid to your creditors. The Target Contribution will be paid through your monthly contribution, which will be determined by your income and basic necessary expenses required for yourself and the maintenance of your family.
You are encouraged to seek professional legal advice as appropriate, if you are considering bankruptcy as a debt settlement option.
Please visit Ministry of Law Insolvency Office webpage for more information.
The Debt Repayment Scheme (DRS) is a pre-bankruptcy scheme administered by the Official Assignee (OA). It is not possible to sign up or apply for the DRS as it is only initiated when a bankruptcy application made by yourself or against you by your creditor.
When placed under a DRS, the individual avoids bankruptcy, along with its restrictions and social stigma.
If you meet all of the eligibility criteria, the OA will assess your suitability to be placed on DRS. The five criteria are as follows:
- Your total liabilities do not exceed $100,000;
- You are gainfully employed and earning a regular income;
- You have not been a bankrupt or been on the DRS in the last 5 years;
- You have not been subject to a court-based arrangement in the last 5 years; and
- You are not a sole-proprietor or partner in any firm.
When you are placed on DRS, you will have to agree to a monthly payment plan and pay the agreed amount for up to 5 years. If you fail to comply, creditors may initiate fresh bankruptcy proceedings.
Please visit Ministry of Law Insolvency Office webpage for more information.