Repayment plan to help debtors avoid bankruptcy
Repayment plan to help debtors avoid bankruptcy
By Serene Luo
PEOPLE facing bankruptcy proceedings for debts under $100,000 will get a new lifeline from May 18.
The Debt Repayment Scheme, approved by Parliament in January, kicks in then.
The High Court, which hears bankruptcy petitions, can decide to put debtors on the scheme instead.
If they are, they will not be declared bankrupt.
They will, instead, have to come up with a plan to repay their debts within five years. Creditors will receive no less than if the person had been made bankrupt.
An average of 3,200 people have been declared bankrupt each year for the past five years.
About 40 per cent of them owed less than $100,000 and could have been considered for the scheme had it been in place, said a spokesman for the Ministry of Law.
The plan was mooted to help wage-earners repay their debts, and keep the number of bankrupts down. There are 26,606 bankrupts here now.
The scheme aims to give those on it a better chance of getting back on their feet, particularly as they are unlikely to lose their jobs and sources of livelihood if they are not declared bankrupt, the spokesman said.
Self-employed people, current undischarged bankrupts and those who have been discharged within the past five years cannot go on the scheme.
Those on the plan will face fewer restrictions than bankrupts do. They will not need official permission to travel overseas, nor will they have to disclose their financial status if they want to apply for credit for sums of more than $500, for example.
They can also be trustees of estates or directors of companies, unlike bankrupts.
But if they do not cooperate or are dishonest, administrators can kick them off the scheme, and fresh bankruptcy applications can be made against them.
Creditors contacted welcomed the scheme. Said OCBC Bank’s group chief credit officer Joseph Wong: ‘Debtors will be able to avoid the stigma of bankruptcy and have a fresh start in their lives.’
Creditors, who will be paid with part of the debtor’s monthly salary, will also get a fair shake, others added.
Source : Straits Times - 06 May 2009
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