When you are placed under the Debt Repayment Scheme (DRS), no unsecured creditor may proceed to take further legal action against you without the Court's permission. Your debts also stop accruing interest once your Debt Repayment Scheme take effect.
In Singapore, there are various debt settlement options available for debtors looking for a way out. More specifically, you have 6 options:
- 1. Debt Settlement Appeal
- 2. Discounted Lump Sum Settlement
- 3. Debt Consolidation Plan
- 4. Debt Management Programme
- 5. Debt Repayment Scheme (pre-brankruptcy)
- 6. Bankruptcy
Unbeknownst to some is the fifth option which is the Debt Repayment Scheme (DRS) - an initiative started in 2009 to offer an alternative to debtors who have been unable to repay their debts, to do so though a repayment plan. It is also meant to emphasize rehabilitation and inculcation of financial responsibility in debtors to avoid future financial embarassment such as bankruptcy.
What is a Debt Repayment Scheme (DRS)?
A Debt Repayment Scheme in Singapore gives the you the opportunity to repay your debt within a set timeframe at no additional interest charge levied, with the aim of settling your debt and potentially avoid bankruptcy.
It's akin to a final lifeline for you to avoid the penalties and social restrictions that comes with being a bankrupt.
In a Debt Repayment Scheme, eligible debtors will be afforded a monthly instalment payments of up to 5 years (length of time is as mandated by law in the Bankruptcy Act) to pay off their creditors. A court-appointed officer called the Official Assignee will assist in administering a suitable repayment plan.
The Official Assignee is a public servant appointed by the High Court as the trustee of the bankruptcy estate. His role is to administer the debtor's estate and consult with the individual's creditors to pay off the owings based on the liquidation of the debtor's assets
When you are placed under the Debt Repayment Scheme, no unsecured creditor may proceed to take further legal action against you without the Court's permission. Your debts also stop accruing interest once your Debt Repayment Scheme take effect.
If you managed to repay your debts in full under the Debt Repayment Scheme, you will effectively start off afresh with a clean slate. In other words: debt-free!
The Debt Repayment Scheme seeks a win-win outcome for both the debtor and his creditor in which the former makes a commitment to pay off his debt based on an agreed payment schedule and for the latter to get their money back - lowering the risks of potentially losing all debt repayments if the debtor goes bankrupt.
The Debt Repayment Scheme also allows you to continue paying off your debts in a structured and affordable manner without stretching your finances and living expenses.
How does a Debt Repayment Scheme (DRS) in Singapore works?
You can't self-apply for a Debt Repayment Scheme in Singapore. Here's why:
Unlike other schemes such as the Debt Consolidation Plan (DCP), you cannot apply for a Debt Repayment Scheme in Singapore. It can only be initiated when a bankruptcy application is made against you in the High Court either by yourself or your creditor.
The Court will refer your case to the Official Assignee who will then do a preliminary assessment on your suitability for the Debt Repayment Scheme.
The Debt Repayment Scheme in Singapore is voluntary and you may choose to opt out of the scheme. However, this also means that your other sole alternative route would be to declare bankrupt.
Once your case is referred to the Official Assignee, the Court will adjourn bankruptcy proceedings against you for up to 6 months to enable the Official Assignee to assess your suitability for the Debt Repayment Scheme.
If they find you eligible, you will be placed in the scheme and you will have to make monthly instalments under a Debt Repayment Plan (DRP) for a maximum period of 5 years.
Once you have successfully repaid your debts in accordance with the terms of your Debt Repayment Plan, the Official Assignee will issue you a Certificate of Completion.
The Certificate of Completion will release you from all debts provable under the Debt Repayment Scheme except for debts:
- which you had not disclosed to the Official Assignee; or
- where a corresponding proof of debt was not filed by the creditor.
A bankruptcy application can be made if your total unsecured debts owed do not exceed SGD 150,000. Do note that the amount threshold may change from time to time due to the COVID situation. The figure stated here is the latest update. Contact Debt Aid Singapore directly for any changes.
What is the eligibility criteria to apply for a Debt Repayment Scheme in Singapore?
To be eligible for the Debt Repayment Scheme in Singapore, you will have to fulfill the following criteria:
- 1. Your total owings and liabilities should be a minimum of SGD 15,000 and should not exceed SGD 150,000 ;
- 2. You should be gainfully employed and earning regular income;
- 3. You are not an undischarged bankrupt;
- 4. You have not previously been on the Debt Repayment Scheme in the last 5 years;
- 5. You have not entered into a voluntary arrangement with your creditors in the preceding five years last 5 years; and
- 6. You are not a sole-proprietor or a partner in any firm.
If you satisfy the eligibility criteria, you will be further assessed on your suitability by the Official Assignee. You have to submit a statutory declaration concerning your financial affairs, submit a record of what you earn and what you spend, as well as your proposed debt repayment plan to your creditors via the e-Services portal* of the Insolvency Office.
Here's a handy guide on how to file your documents online at the e-Services portal. You can also watch an introductory video on using th e-filing service here.
You will have to file the below-mentioned documents in the following order:
1. Form A - Statement of Affairs
In this form, you are to disclose your assets and liabilities (eg. monies owed to banks and financial institutions, licensed moneylenders, loan societies, as well as personal creditors such as relatives and friends)
2. Form C - Income & Expenditure Statement
In this form, you are to disclose your monthly income and your monthly expenditure.
3. Form D - Debt Repayment Plan (DRP)
You will have to propose a reasonable (and feasible) monthly instalment amount that you apportion from your disposable income for the repayment of your debts. This proposed amount will be evaluated by the Official Assignee and must be acceptable to your creditors.
If the eventual amount set by the Official Assignee for the Debt Repayment Plan is not agreeable with the creditors, the creditor may file a Notice of Appeal no later than 14 days from the date of notice of the Official Assignee's decision.
To calculate your disposable income, subtract your monthly expenditure from your monthly income.
4. Annex B - Other supporting Documents
You will be required to furnish various supporting documents such as your Notice of Assessment, payslips, various bills and more. Contact us at Debt Aid Singapore for the complete list of documents to submit.
You will be given 14 days to complete the online submission, failing which your case will be referred back to Court for the bankruptcy proceedings to be heard again. You will also be required to view the Introductory Video on Debt Repayment Scheme which you can watch here.
Once you have cleared the administative requirements and are found to be suitable for the Debt Repayment Scheme in Singapore, the Official Assignee will devise a Debt Repayment Plan for you based on what your financial standing.
If the Debt Repayment Scheme application process seems tedious or if you are in doubt, you can book an appointment with Debt Aid Singaporeand we will assist you accordingly to ensure all grounds are covered.
How much does the Debt Repayment Scheme (DRS) in Singapore costs?
While the Debt Repayment Scheme in Singapore is voluntary, there are fees charged by the High Court that are payable in the assessment and administration of your case.
Before Debt Repayment Plan commences:
- Preliminary Administration Fee of SGD 350 - payable upon the complete submission of your forms and documents.
- Suitability Review fee of SGD 250 - payable on or before the Meeting of Creditors for further assessment of your suitability for the Debt Repayment Scheme.
After Debt Repayment Scheme commences:
- Annual Administration Fee payable upon approval of your Debt Repayment Plan under the Debt Repayment Scheme at the start of each administration year at SGD 300 each year for first 2 years of the plan, and SGD 350 each year for the 3rd, 4th and 5th year.
- Payments of your monthly instalments and bonus contributions are subject to the deduction of both collection & distribution fees at 1.5% & 3% respectively
- If applicable: Appeal Fee of SGD 100 at the submission of Notice of Appeal
- If applicable: Debt Repayment Plan Modification Fee of SGD 50 on or before the Meeting of Creditors for the modification of the plan
If you are found unsuitable at any stage of the the preliminary assessment for the Debt Repayment Scheme, fees that you have paid are non-refundable.
*Rates updated as of the time of publishing. Contact Debt Aid Singapore for information on latest rates.
What happens if you do not qualify for the Debt Repayment Scheme (DRS) in Singapore?
If you do not meet the eligibility criteria or if fail to comply with the Official Assignee's instructions with regards to your statement of affairs, you will be deemed unsuitable for the Debt Repayment Scheme and your case will be referred back to the High Court for bankruptcy proceedings to be heard again where you may be made a bankrupt.
As mentioned earlier, fees that you have paid during the assessment process will be non-refundable.
The Official Assignee (OA) or a Private-trustee-in-Bankruptcy (PTIB) will also be appointed to take charge of your available assets from your estate and sell them to pay your creditors.
Here are some no-nos that may render your application for the Debt Repayment Scheme in Singapore to be unsuccessful or result in a rejection:
- Fail to attend scheduled appointments
- Fail to pay required fees
- Submit or furnish any information or document to be false or misleading in relation to your financial affairs;
- Fail to disclose any information relating to your financial affairs that is required by the Official Assignee;
- Fail to disclose your property or any disposal of your property; or
- Feign losses and expenses to account for your property;
When does a Debt Repayment Scheme (DRS) in Singapore be terminated for a debtor?
The Debt Repayment Scheme will be terminated upon the occurrence of any of the following events:
1. Certification of Completion
If you diligently repay your debt in accordance with the terms of the approved repayment plan, the Official Assignee will issue a Certificate of Completion. Getting this certificate means all debts owed by you is considered settled and you can start life afresh!
However, if the Official Assignee has reason to believe that you either failed to disclose information that was required as part of the Debt Repayment Scheme or made false representations that led to approval of the scheme, the Official Assignee reserves the right to issue a Revocation of your Certificate of Completion.
You will then be liable for all debts that you had previously been discharged from.
2. Certificate of Failure
The Debt Repayment Scheme may be terminated if you fail to comply with the repayment plan. In this case, the Official Assignee will issue you a Certificate of Failure. Your creditors will then be at liberty to initiate fresh bankruptcy proceedings against you.
You may also be issued a Certificate of Failure if:
- a. you fail to make full and frank disclosure of your financial affairs;
- b. you fail to attend the creditors' meeting without a valid reason;
- c. you incur a debt of more than SGD 1,000 after the effective date of the Debt Repayment Scheme and did not disclose the fact that you were under the scheme to the person to whom the amount is owed;
- d. you entered into an undervalue transaction or gave an unfair preference commencing five years or two years respectively before the day on which the bankruptcy application was made and ending the day immediately preceding the completion of the Debt Repayment Scheme; or
- e. you become a sole proprietor or partner of a firm or limited liability partnership during the scheme without the Official Assignee's consent
3. Certificate of Inapplicability
The Official Assignee will issue such a certificate if the aggregate of the debts exceeds SGD 150,000 or if the shortfall debt after the realisation of a security exceeds SGD 50,000 or a contingent debt becomes due and the amount thereof exceeds SGD 50,000.
You will also be issued a Certificate of Inapplicability if you are made a bankrupt or if you have passed on.
To qualify for the Debt Repayment Scheme, it is imperative that you comply with the Official Assignee's instructions dilligently and without delay. You should also be forthcoming with information about your financial standing.
I am approved for the Debt Repayment Scheme in Singapore, what's next?
Once the Debt Repayment Scheme commences, you are expected to dilligently comply with the terms and conditions set in the scheme. This includes:
- (a) Inform your case administrator if there is any change in your contact details, i.e. change in mobile number, address;
- (b) Inform your case administrator if there is any change in your employment details, i.e. change of employer, increase in salary, payment of bonus(es) and forward the necessary documents (employment contract/salary slip) to your case administrator;
- (c) Attend any meeting required by the Official Assignee and to inform your case administrator at least 3 days in advance if you are unable to attend the meeting;
- (d) Do not make any preferential payments to any of your creditors;
- (e) Do not incur further liabilities without the ability to repay;
- (f) Update your Income and Expenditure statement as required and to forward supporting documents e.g. salary slips, CPF statements and/or Notice of Tax Assessment and any other additional documents requested by your case administrator eg. receipts; and
- (g) Adhere to the terms and conditions of the approved DRP, including the payment of regular monthly instalments, Annual Wage Supplement/bonus, and annual administration fees when required.
If for whatsoever reason you fail to comply with the terms and conditions of your Debt Repayment Scheme and/or do not fulfil the duties expected of you, these may be grounds for the Official Assignee to issue you with a Certificate of Failure, after which your creditors may commence fresh bankruptcy proceedings against you.
In the event that your income has been affected because of COVID-19, you may write in to the Official Assignee with supporting documents for the Official Assignee to consider your request to lower/defer the payment of your monthly instalment. You may do so via the request form here which is subject to approval.
What are the advantages of the Debt Repayment Scheme in Singapore?
The Debt Repayment Scheme is a pre-bankruptcy option. Your only other option if you do not take up the Debt Repayment Scheme is bankruptcy.
The Debt Repayment Scheme provides some level of freedom to debtors compared to bankruptcy, including the right to manage a business, while remaining in possession of their property and assets.
So what are other advantages of the Debt Repayment Scheme in Singapore compared to bankruptcy?
1. No public record as a bankrupt
A debtor on the Debt Repayment Scheme will not have his name published in the newspapers while a bankrupt would be publicly recognised as a bankrupt. Do note, however, that if you are deemed eligible for the Debt Repayment Scheme, your DRS status will be part of your public record and visible to everyone.
2. No travel restrictions
A debtor on the Debt Repayment Scheme will not face any travel restrictions unlike a bankrupt who will require prior approval from the Official Assignee before leaving Singapore.
3. Able to maintain a regular bank account
A debtor on the Debt Repayment Scheme will be able to maintain existing bank accounts while a bankrupt may find his accounts closed with the balances transferred to the Official Assignee to pay off the creditors.
4. Shorter period to potentially achieve debt-free status
A debtor on the Debt Repayment Scheme will be able to repay his debts within 5 years while the period of bankruptcy for a bankrupt may be longer.
5. Zero-interest rates on debts outstanding
A debtor on the Debt Repayment Scheme will no longer have interest penalties levied on balance outstanding.
6. All unsecured borrowings can be under the Debt Repayment Scheme
Unlike the Debt Consolidation Plan which only allows for certain unsecured borrowings, a Debt Repayment Scheme can include all unsecured borrowings.
What are the disadvantages of the Debt Repayment Scheme in Singapore?
1. No self-application
A Debt Repayment Scheme is a program that you cannot apply on your own. It has to be initiated by a bankruptcy application either by yourself voluntarily or your creditor(s) and is only applicable upon referral from the High Court.
2. Public DRS record
If you are deemed eligible for the Debt Repayment Scheme, your DRS status will be part of your public record and visible to everyone. This is due to the bankruptcy application which has to be made public.
3. Debt Repayment Scheme is not free
As we have highlighted above, the Debt Repayment Scheme comes with its own set of administrative fees and charges.
Summary of the Debt Repayment Scheme process in Singapore
Here's a summary of the entire Debt Repayment Scheme assessment process:
Stage 1: Referral by High Court
The High Court refers the bankruptcy application that was filed against/by you to the Official Assignee to begin the assessment for the Debt Repayment Scheme. Bankruptcy proceedings will be adjourned for up to 6 months while your eligibility is being assessed. The Official Assignee then notifies you of the Introductory Briefing to inform you of the timeline and requirements needed for document submission.
Stage 2: Submission of supporting documents
You will be scheduled to submit your Statement of Affairs and other relevant documents along with the payment of SGD 350 for the preliminary assessment fee.
Stage 3: Meeting with Creditors
You will then be required to attend the meeting with creditors where the Official Assignee and your creditors will seek clarification on your earlier submission and finalise the details of your Debt Repayment Scheme plan. You will be required to pay a review fee of SGD 250 at this meeting.
Stage 4: Approval of Debt Repayment Scheme
Upon the approval of your Debt Repayment Scheme, you will attend the final appointment to make the payments of your first monthly instalment and first annual fee of SGD 300.
Upon the conclusion of all the above stages, your debt repayment scheme commences and the bankruptcy application that was earlier filed against you will be deemed withdrawn.
However, at any stage of the assessment, should you fail to attend scheduled appointments, fail to pay the required fees, your liabilites exceed SGD 150,000 or if you are not forthcoming with information, you will be deemed unsuitable for the Debt Repayment Scheme. When this happens, you will be referred back to the High Court and bankruptcy proceedings will resume against you.
If you are not at a stage where bankruptcy or Debt Repayment Scheme is your last resort, we recommend for you to read up on the Debt Consolidation Plan (DCP). Read our 2022 comprehensive guide on Debt Consolidation Plan here..
At Debt Aid, we help individuals such as yourself on the process and requirements mandated by the Debt Repayment Scheme. As the preferred debt consultancy company in Singapore, we are with you at every step of the way. Should you have any questions about the Debt Repayment Scheme, we are on hand to provide you with comprehensive advice.
Book an appointment with Debt Aid Singapore today. For your convenience, you can fill up the form below.