SINGAPORE: Reforms to Singapore's bankruptcy framework will kick in come Aug 1 this year, after the Bankruptcy (Amendment) Bill was passed in Parliament last July.
In a media release on Wednesday (Jul 27), the Ministry of Law said changes to the framework aim to create a "more rehabilitative environment for bankrupts", and to encourage creditors to exercise prudence when extending credit.
The reforms will only apply to bankruptcy applications filed on Aug 1, 2016, or later, but the Insolvency Office will manage existing cases to ensure "some parity of treatment for existing bankrupts".
Some of the changes include an increased debt threshold, where the minimum debt amount that needs to be owed before a person may be made bankrupt will be increased from S$10,000 to S$15,000.
"The new threshold is based on the same income-related benchmarks that were used when the threshold was last revised in 1999," the Ministry of Law said. "This change seeks to encourage both debtors and creditors to resolve debts falling below the threshold, without resorting to the formal bankruptcy process."
Creditors will also no longer have to wait for 21 days to file a bankruptcy application against the debtor after a demand for payment has been issued, the Ministry of Law said.
"However, the creditor must show a serious possibility that the debtor’s property or its value will be significantly diminished before the 21-day period ends," the media release stated.
Additionally, institutional creditors will be required to nominate private trustees to be appointed to administer the bankruptcy estate when applying to make a debtor bankrupt, according to the Ministry of Law.
"The vast majority of bankruptcies in Singapore are currently administered by the Official Assignee (OA). With this change, the OA will focus its resources on administering cases where the applicant is either an individual or a small business," the ministry said.
Currently, there are no mandated exit points for bankrupts. They can only be discharged via a High Court order or through a certificate of discharge issued by an OA if their debts are less than S$500,000.
Under the changes, there will be fixed exit points for bankrupts to be discharged, to give them an incentive to adhere to their payment plan, their conditions of bankruptcy, and seek employment as a means of achieving their discharge, Ministry of Law said.
With the reforms, first-time bankrupts will generally be eligible for discharge within five to seven years, while repeat bankrupts will generally be eligible for discharge within seven to nine years.
"A key consideration in a bankrupt’s eligibility for discharge will be whether he has paid his Target Contribution in full. The Target Contribution is determined based on the bankrupt’s earning potential," the ministry said.
Other changes to the framework include an increased timeframe for creditors to realise and claim post-bankruptcy interest on the debtor's assets, a deadline for creditors to file proofs of debt, as well as permanent bankruptcy records for those who fail to pay their Target Contribution in full prior to discharge.
The changes come after the Insolvency Law Review Committee submitted its report and recommendations in 2013. Following that, the Ministry of Law sought feedback on the changes through a public consultation in early 2015, while further closed dialogue sessions were held in June 2015 and June 2016 with groups of stakeholders on operational details of the new framework.