Are you struggling in paying off your debts and have no idea what to do? Bankruptcy is an option but should you really go through it? What are the downsides of it and what are the options? This article will share with you what to do to resolve your outstanding debts.

Most debtors in Singapore are voluntarily filing for bankruptcy without understanding further on what they are putting themselves through. Declaring bankruptcy is one of the choices to handle your debts but it is not the only choice. Increasing number of debtors are going to debt refinancing advisors for help without knowing what to expect. Debt refinancing companies help their clients to address their debt problem through counselling and facilitating debt repayment arrangements. Most of the time, these debtors are advised to go through debt repayment schemes.

However, do you know what it means by going through such lengths? Let’s find out what it means and all its necessary steps so that you will be well-informed if you ever find yourself in such a situation!

Debt Repayment Scheme (DRS)

Debt Repayment Scheme is a pre-bankruptcy scheme that will help you to work out a suitable repayment plan to pay off your creditors over a period of time. An Official Assignee (OA) will be appointed to administer your (the debtor’s) estates. By going through DRS, you will be safe from receiving any legal action from your creditors (unless given permission by the court). Do note that there will be administration fees.

Steps to apply for DRS:

  1. Check your eligibility criteria for the Debt Repayment Scheme

  2. File for a bankruptcy application with the court

  3. OA will be appointed to you to assist in your DRS plan

What Does it Mean to Declare Bankruptcy?

Debtors are allowed to declare bankruptcy when they are unable to pay back their creditors and in order to be eligible, their current debts have to be minimum $15,000. It is advisable to declare bankruptcy only when the chances of you being able to pay your debts in full is low and if you are unable to make adjustments with your current creditors. On the other hand, your creditors can also file for bankruptcy for the debtor if the debtors are unable to repay them of what they have owed. Only when the debtor has finished paying off the amount of debt which the OA has requested the debtor to pay, then he/she will be able to be discharged from the bankruptcy.

Here are the pros and cons of declaring bankruptcy:


You Avoid Getting Sued by Your Unsecured Creditors

Some debtors may think that declaring bankruptcy is not a big deal and that they would not have to pay any of their debts, but they are wrong. Even if you’re declared bankrupt, you will still have to pay off your debts. Though, your creditors are not able to charge interest for the principal sum that you owe. Hence, your debts are ‘frozen’. Your creditors also are not allowed to sue you.

You Can Stop Worrying About Your Finances Every Month

Your OA will decide on the suitable monthly repayment amount that you will have to pay after taking into consideration your family and your monthly expenses. Hence, you do not have to worry about having not enough money for your repayments!


You Have to Pay For the Administration

Firstly, in order to be able to file for bankruptcy, your debts that you owe will have to be at least $15,000. Before you wish to declare bankruptcy, you will have to pay a deposit of $1,850 to your Official Assignee which is assigned by the court. Most debtors are struggling to get the extra cash to cover the deposit and may resort to getting another loan. This will only add on to your current debts. Hence, avoid taking a new loan for this!

Your Assets Will Be Controlled by Your OA

Your assets excluding any that are protected from bankruptcy (eg. HDB flats) will be sold and the proceeds put into a bankruptcy estate.

You Always Need to Keep Your OA Informed

If you are declared under bankruptcy, you will be prohibited from leaving Singapore without your OA’s permission. Not only that, before you make any huge financial decision such as opening a new business or investment, it will be a little more difficult as you will have to go through your OA as well.

Your Name Will Be Listed in the Singapore Bankruptcy Register

Also, by going through such lengths, your records will be listed in Singapore's bankruptcy register. This record is accessible to the public. This may affect your chances of getting a loan in the future when you have been discharged but of course, the records will be clean again after a period of time! Hence, once you are discharged, refrain yourself from applying for any new loans or credit cards in the meantime!

Drowning in Debt – What Should You Do?

But, what if you are currently drowning in debt? Should you go through bankruptcy proceedings? Declaring bankruptcy should be your last resort. You may feel like you are stuck in a never-ending cycle of debt but there are so many alternatives that could help you!

1. Discuss with Your Creditors

Since you already have a relationship with your creditors, your creditors know best when it comes to your financial situation since they have done the credit checks before they approved you the loan. The fact that they have given you a loan, it shows that they are trusting you as a client as well. By going back to your creditor, they will have a better understanding of what you’re going through. Hence, they will be able to restructure your payments accordingly which could lead to preventing you from paying more fees such as the late payments. Since you are honest about your situation, your creditors may be even more flexible in assisting you. On the other hand, if you avoid your creditors when you are unable to pay, they will take increasingly severe measures such as blacklisting you in their system or even sue you, which you do not want to go through!

2. Consolidate Your Debt

Instead of going through DRS which will require you to apply for bankruptcy, you can consolidate your debts by going through Debt Consolidation Plan. By having multiple creditors, it may be heavy on you to pay every month since there will be multiple interest rates and payments that have to be made.

Debt Consolidation Plan is a debt refinancing program that helps the borrower to combine all of his unsecured debts into one single loan which is being owed to one financial institution.

In order to be eligible for DCP, your debts with the financial institutions will have to be 12 times of your monthly income.

Licensed financial institutions are able to consolidate your debts as well, as long as it is kept within the 6 times monthly income credit limit. By consolidating your creditors into one, you can just focus on 1 creditor. Of course, do ensure to calculate your outstanding debts and the monthly repayments that you will have to do first in order that you will not end up paying more!

Avoid Getting Yourself into Such a Heavy Debt

Before you get yourself into a huge debt trap, it is important to understand your own financial situation. Debtors often found themselves getting into the debt trap cycle when they take a new loan to cover their old debts. This creates a never-ending cycle of debts. You will also find yourself falling into the debt trap when you spend more than what you earn and not having enough savings to cover your expenses. Best way to avoid having debts is definitely to not get any loans but of course, sometimes we do require to get loans to do a purchase and paying by instalments feels a little bit easier to handle. Here are some tips to ensure that you take up loans responsibly.

1. Draw Up Your Monthly Budget

There may be a time when you may need to take up a loan. It could be for your renovation, housing or even just a personal loan to cover your month before your next month’s salary. Before you take up a loan, you should calculate your income and expenses. By doing so, you will get a rough estimate on how much you would be comfortable with for the monthly repayment.

2. Review Your Debts

You should avoid having many sources of credit so that you can keep track of your repayments! Calculate the instalment payments that you have to pay such as your credit cards and only use plans which are interest free.

3. Always Pay Your Debts On Time

By paying your debts on its due date, you can avoid paying their late payment charges. On certain occasions whereby you receive your bonus, commissions and have more cash to space, why not pay more in that particular month and if you can, clear off the debt! By doing so, you will be able to pay lesser interest fees as well.

4. Focus On Paying Off Your Debt With the Highest Interest

If you have multiple debts but are struggling to pay the full amount, focus on paying off your debt which has the highest interest rate. By clearing such debts, you would not have to worry about having to pay much more than what you have owed. At the same time, you should contact your creditors if you need to make adjustments on your repayment plans. Avoid paying just the bare minimum - this will only lead to having to pay more on interest & your debt will never end!


The best way to keep yourself out of debt is definitely by having a stable financial situation. Always tell yourself whether it is a “need” or “want” before making any purchase, and calculate your income and expense to avoid having any negative balances. If you are currently struggling with a debt trap, do not worry as you can break the debt cycle! Start addressing the underlying problem that you’re currently facing and start putting together a plan.