Going into debt and facing bankruptcy is a difficult and overwhelming process. The stress from the proceedings themselves puts an unenviable strain on a person, making it that much harder to meet loan obligations. Various schemes exist to help people who have racked up large amounts of debt and are facing difficulties paying it off.
For individuals who may be facing bankruptcy, the Debt Repayment Scheme (DRS) is a lifeline that gives you the opportunity to settle all your liabilities and avoid the penalties that come with being bankrupt. Offered only to those who already have an outstanding bankruptcy application made against them in the High Court, it is a scheme that aims to procure a favorable outcome for both debtor and creditor. However, there are several important factors to note for the DRS.
1. DRS Eligibility Criteria
Not everyone is eligible for the DRS in Singapore. In fact, individuals are not allowed to apply for the scheme. You can only be considered for DRS after a bankruptcy application is filed against you. You also have to fulfill the eligibility criteria stated below:
- Your total liabilities cannot exceed $150,000
- Must be gainfully employed and receive a regular income
- Not been bankrupt or on the DRS in the last 5 years
- Not been subject to a court-based arrangement in the last 5 years
- Not a sole-proprietor or partner in any firm
These conditions, along with other considerations such as your assets, expenditure, and proposed debt repayment plans, will be used to determine your suitability for the DRS.
2. DRS Proceedings
Once the above criteria have been fulfilled, you will be offered the DRS. The court will assign your case to the Official Assignee (OA) who will assess your suitability for the scheme and also take charge of your repayment plan.
3. How does repayment work?
Repayment of liabilities under DRS will be worked out in a schedule created with assistance from the OA. Your debt repayment plan must be approved by OA before payments to creditors can begin. Monthly installments under DRS will continue for a maximum period of 5 years, after which all debt should be paid off.
4. What happens if you fail to make payments?
Your DRS may be terminated if you fail to make your monthly installments. However, this is at the discretion of the OA and the termination will be handled on a case-by-case basis. If the OA finds that you have a legitimate reason for not making your payments, such as loss of employment or income or unintended expenses, then an extension may be granted.
If your OA deems that you have not complied with the terms of the repayment plan, you may be issued with a Certificate of Failure which allows your creditors to initiate fresh bankruptcy proceedings against you.
5. Are there any limitations to the type of loans that can be consolidated with DRS?
Unlike the limitations of other repayment options, all kinds of unsecured liabilities can be consolidated under the Debt Repayment Scheme. This includes but is not limited to, Hire Purchases, company bonds, and amounts borrowed from licensed moneylenders. DRS also does not institute any interest during the repayment period which can be a big source of relief for debtors.
Many would reject the idea of declaring bankruptcy due to the preconceived negative stigma attached to it, hence shunning the idea of DRS. However in actual fact, this scheme has, and continues to, support many of those drowning in debt and gives them a chance to rebuild their lives to start afresh.
At Debt Aid Singapore, we understand the traumatic process of going into debt and having the thought of imminent bankruptcy looming over your head. Our sole purpose is to help individuals navigate their way through their liabilities and support them in repaying their debts in full through schemes like DRS. Contact us today to book an appointment for a private no-obligation consultation to find out how we can work with you.