Debt Settlement Options
You can consider approaching your creditors directly to make an appeal for an affordable instalment repayment plan. You will need to explain your financial situation and propose a repayment amount that you can afford.
You may approach your 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 in preparing a proposal for self-administration:
1. Self-administration may be suitable if you have debts owing to one or a few creditors.
2. You need to be able to articulate and explain your financial situation.
3. You also need to be able to speak with your creditors to discuss or negotiate the repayment terms, such as monthly payment amount.
All requests and appeals are subject to your creditors' acceptance.
If you are able to a lump sum of money, you may consider approaching your creditors directly to offer a discounted settlement of the debt with a lump sum payment.
This approach may be suitable if you are able to raise a lump sum either through:
1. The sale of assets, such as shares or properties, or
2. Taking a low-interest loan from non-bank institution such as a credit co-operative society or a company loan.
You may then negotiate to settle the debt owed, offering an amount less (discounted) than the actual amount owed.
All proposals for settlement are subject to your creditors’ acceptance.
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:
1. Be a Singapore Citizen or Permanent Resident;
2. Earn between S$20,000 and below S$120,000 per annum with Net Personal Assets of less than $2 million;
3. 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 and unable to make payments for unsecured debts owing to banks and licensed moneylenders.
The individual may be experiencing distress because he/she is unable to pay for basic living expenses and at the same time, make the minimum payment demanded by creditors. He/she may be also be facing legal actions.
During a financial counselling session, our Financial Counsellors will assess the borrower’s payment capacity to make monthly instalment payments within his/her payment capacity to settle the debts to all creditors in full within 10 years.
On behalf of the borrower, CCS proposes a repayment arrangement with a lower interest rate and a longer repayment period to fully repay the amount owed in monthly instalments that are within the borrower's payment capacity.
The DMP will include all unsecured personal debts (ie, credit cards, credit lines or overdrafts, personal loans, renovation loans, study loans) from banks. In addition to bank debts, money owing to license moneylenders may be included under a Moneylender DMP.
While on a DMP, all credit cards and unsecured facilities will be cancelled, and the borrower’s Credit Report will reflect the DMP arrangement.
There are some important considerations that you need to take note of when considering if you should be on a DMP, as follows:
1. You have unsecured debts owing to one or more banks.
2. Total unsecured debt amount is $10,000 or more. There is no maximum limit.
3. All credit card and credit line accounts will be terminated.
4. While on DMP, you will not be able to apply for any unsecured credit facilities with any bank. Your Credit Report will reflect that you are on DMP.
All DMP proposed are subject to approval by banks. Moneylender DMP are subject to approval by Moneylender creditors. Creditors have full discretion to decide on the specific terms and conditions of a DMP, including the interest rate and monthly instalment amount.
When a borrower owes a debt that cannot be repaid, either the borrower or the creditor may file a Bankruptcy Application with the High Court.
Bankruptcy may be filed by creditors owed at least the following amounts:
1. For individuals: $60,000* (up from $15,000)
2. For businesses: $100,000* (up from $10,000)
There are consequences to being declared bankrupt such as travel restrictions, difficulties in obtaining a loan or in securing a job in some industries. However, if you have exhausted all other options for repaying your debts, bankruptcy may be seen as the last resort.
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.
You may visit Ministry of Law Insolvency Office webpage for more information.
*Temporary Relief for Financially Distressed Individuals and Businesses
Commencing 20 April 2020 and lasting up to and including 19 October 2020, the COVID-19 (Temporary Measures) Act increases the monetary threshold for individual bankruptcy from $15,000 to $60,000, and that for corporate insolvency from $10,000 to $100,000.
The time period to satisfy a statutory demand from creditors has been increased from 21 days to six months.
~Ministry of Law (20 April 2020)
The Debt Repayment Scheme (DRS) is a pre-bankruptcy scheme which is administered by the Official Assignee (OA). The OA will assess the debtor’s eligibility and suitability for DRS and avoid bankruptcy.
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.
To be eligible, the debtor must fulfil the following criteria:
1. Total liabilities do not exceed $150,000;
2. Gainfully employed and earning a regular income;
3. Have not been a bankrupt or been on the DRS in the last 5 years;
4. Have not been subject to a court-based arrangement in the last 5 years; and
5. Not a sole-proprietor or partner in any firm.
If you meet all of the eligibility criteria, the OA will also assess your suitability. When successfully placed on DRS, the debtor is not considered a bankrupt and must commit to a repayment plan to repay creditors over a period of up to five years. This means that he/she avoids bankruptcy along with its restrictions and social stigma.
If the debtor fails to comply with the terms of the DRS, the scheme fails and creditors may initiate fresh bankruptcy proceedings.
You may visit Ministry of Law Insolvency Office - DRS webpage for more information.