Are you experiencing restless nights over the mountain of debt you’re struggling to stay on top of? If so, you're not alone. In Singapore, the amount of debt that people owe is on the rise, and it's becoming increasingly difficult to manage. Although it can be extremely stressful figuring out how to navigate repaying these debts, there are a few options for freeing your loan debts before having to file for bankruptcy. One of these options includes the Debt Repayment Scheme (DRS).
When you feel as though you’re past the point of no return with your debt, declaring bankruptcy is the most obvious last-resort option to relieve you from your debt burden, but it comes with serious consequences, including restrictions to overseas travel, restrictions in managing a business, poor credit score which may hinder you from getting a loan or securing a job – and not to mention, the social stigma. In this article, we will provide you with a comprehensive guide to the Debt Repayment Scheme in Singapore 2023, including an overview of what it is and how it works, as well as some other options which may be more suitable for your financial circumstances. Read on to learn more.
What is the Debt Repayment Scheme in Singapore?
An initiative that started in 2009, Singapore’s Debt Repayment Scheme is a pre-bankruptcy scheme offered to debtors who are financially overburdened and unable to repay their debts. Under the Debt Repayment Scheme, individuals are put on a fixed timeframe of up to 5 years to repay their unsecured debts with no additional interest charged. This way, both the interest of the debtor and creditor are safeguarded.
When you are placed under the Debt Repayment Scheme, a court-appointed offer known as the Official Assignee (OA) will assist in devising a suitable monthly debt repayment plan. During this time, all unsecured creditors will not be able to take any legal action against you without court permission. All interest on your debts will cease once your Debt Repayment Scheme takes effect. After repaying all your debts under the Debt Repayment Scheme, individuals will be able to begin a new financial life with a clean slate.
In addition to helping individuals get out of debt, the Debt Repayment Scheme 2023 also places emphasis on rehabilitation and instilling an awareness of financial responsibility so that debtors can avoid getting into serious debts again or bankruptcy in the future.
How does the Debt Repayment Scheme work?
Firstly, you must meet certain eligibility criteria before being approved for the DRS (which are outlined below). Once you are placed under the Debt Repayment Scheme, a court-appointed offer known as the Official Assignee (OA) will assist in devising a suitable monthly Debt Repayment Plan (DRP) including your monthly instalments and various other terms and conditions. During this time, all unsecured creditors will not be able to take any legal action against you without court permission. All interest on your debts will cease once your Debt Repayment Scheme takes effect. After repaying all your debts under the Debt Repayment Scheme, individuals will be able to begin a new financial life with a clean slate.
Who is Eligible to Apply for the Debt Repayment Scheme in Singapore 2023?
Individuals applying for Debt Repayment Scheme in Singapore must meet the following eligibility criteria, which include:
You must be employed with a regular and stable income.
Your total debt should not exceed S$150,000
You must not be in any form of a business partnership or a sole proprietor
You must not have been declared bankrupt in Singapore within the past 5 years
You must not have entered into any voluntary arrangement with your creditors in the past 5 years
You must not have used DRS previously within the past 5 years
If an individual meets all these requirements, then he or she is eligible to apply for the scheme. After submitting an application, there is an assessment process that takes place to determine if an individual is indeed suitable for participation in the scheme before being approved. Keep in mind that even if you do meet all five criteria, there is still no guarantee that your application will be accepted, and each individual case is assessed on its own merits.
Advantages and Disadvantages of the Debt Repayment Scheme
The Debt Repayment Scheme has both advantages and disadvantages which you should be aware of before deciding to apply, especially if you are choosing it as your final option over a debt consolidation or debt management plan. The pros and cons of the DRS are outlined in the table below.
Public Record of the Debt Repayment Scheme:
Greater freedom than bankruptcy:
You can’t apply on your own:
It's not free:
Once you have evaluated the advantages and disadvantages of the Debt Repayment Scheme, you will have a clearer understanding to determine if it is appropriate for your situation. However, it is crucial to note that one should never apply for both a Debt Repayment Scheme and another option such as a Debt Management Programme or Debt Consolidation Loan - you should only apply for one or the other.
Alternative Ways of Managing Debt
You should also be aware of and consider alternative debt management solutions in Singapore before applying for the Debt Repayment Scheme, declaring bankruptcy or deciding the best solution for you. These include Debt Management Programmes and Debt Consolidation Loans. Both of these methods are generally less time-consuming to apply for, and may result in you paying off your debts faster as well. Be sure to always do your research before deciding on the best way to manage your debts.
Debt Management Programme
Offered by the Credit Counselling Singapore (CCS), the Debt Management Programme is a debt repayment arrangement for borrowers who are in genuine financial distress to negotiate better terms with their creditors. It helps individuals better manage their debts and get out of debt faster through education, credit counselling, and facilitate debt restructuring.
Debt Consolidation Loan
A debt consolidation loan is a type of personal loan that allows you to roll your existing debts into one easy-to-manage loan —typically at lower interest rates—so that you can effectively reduce the total repayment amount for your debts and pay off your debts faster. With one single monthly payment each month, getting a debt consolidation loan greatly simplifies debt management and makes it easier to keep track of your repayment progress.
Manage Your Debt with Lendela
If you want to find a way to manage your debt safely and according to your preferred payment terms, Lendela’s online platform can help find the best solution for you. Our personal loans can help consolidate your debts, allowing you to easily pay them off in one go with low interest rates so you can reduce your stress and focus on one loan, in contrast to worrying about multiple debts. Just fill out our loan application form and we will show you the best options according to your needs, sourced from our extensive network of reputable banks and financial institutions. Start managing your debts effectively today!
- The Debt Repayment Scheme in Singapore is a pre-bankruptcy plan that allows debtors to repay their outstanding debt within a set timeframe without additional interest charges levied. It is administered by the court-appointed Official Assignee (OA).
- Individuals considering applying for the Debt Repayment Scheme should be aware of the advantages and disadvantages which come along it. Although it may appear that it is beneficial for paying off your debts, there are major disadvantages such as the scheme being on public record, visible to everyone; and cannot be applied directly by the individual.
- Apart from the Debt Repayment Scheme, those struggling with debt may also consider alternative debt management solutions, such as the Debt Management Programme and Debt Consolidation Loans.
- Lendela’s online platform can help individuals find the best Debt Consolidation Loans for their needs, allowing them to easily pay off one debt instead of multiple ones, relieving stress and facilitating easier debt management according to personal needs.