Bankruptcy Proceedings

Impact of COVID-19 (Temporary Measures) Act 2020 on bankruptcy and winding up applications

Part 3 of the COVID-19 (Temporary Measures) Act 2020 (“C19TMA”) provides for temporary relief for financially distressed individuals, firms and other businesses and has introduced modifications to, amongst others, the Bankruptcy Act, the Companies Act and the Insolvency, Restructuring and Dissolution Act 2018, which apply during the prescribed period, which is presently 6 months commencing on 20 April 2020, subject to any further extensions. The modifications increase the monetary threshold for the bankruptcy of individuals and firms to $60,000 and increases the monetary threshold for the insolvency of other businesses to $100,000. 

The information provided below in respect of bankruptcy and winding up applications is subject to any modifications arising from the C19TMA and should be read together with these modifications.

More information is available at

https://www.mlaw.gov.sg/news/press-releases/2020-04-20-covid-19-temporary-measures-act-provisions-relating-to-temporary-reliefs-to-commence-on-20-april-2020

You may also wish to refer to the FAQs at

https://io.mlaw.gov.sg/bankruptcy/covid-19-faq/

https://io.mlaw.gov.sg/debt-repayment-scheme/covid-19-faq/

https://io.mlaw.gov.sg/corporate-insolvency/covid-19-faq/

What are Bankruptcy Proceedings?

Bankruptcy proceedings are commenced by the filing of a bankruptcy application in the High Court. A bankruptcy application can be filed by a debtor or a creditor provided that the amount of the debt, or the aggregate amount of the debts, which the debtor is unable to pay is not less than S$15,000.00. Bankruptcy applications filed on or after 30 July 2020 shall be made under the Insolvency, Restructuring and Dissolution Act 2018 (“IRDA”).

Debtor's Bankruptcy Application

A debtor (who is an individual) may file an application to make himself a bankrupt. A statement of affairs containing such particulars of the debtor’s assets, creditors, debts and other liabilities as may be prescribed must be filed together with the debtor’s bankruptcy application.

A debtor’s bankruptcy application may also be made against a firm by all the partners in the firm or by a majority of such partners who are residing in Singapore at the time of the making of the application.  In such cases, the following must be filed together with the debtor’s bankruptcy application: (i) a statement of affairs containing such particulars of the firm’s assets, creditors, debts and other liabilities as may be prescribed; and (ii) a statement of the affairs of each of the partners in the firm by whom the application is made containing such particulars of each partner’s assets, creditors, debts and other liabilities as may be prescribed.

Debt Repayment Scheme (DRS) 

The Debt Repayment Scheme (“DRS”) is a pre-bankruptcy scheme which is administered by the Official Assignee.  The DRS was introduced in the Bankruptcy Act in 2009 and, with the repeal of the Bankruptcy Act, it is presently retained in the IRDA, which came into force on 30 July 2020.   

For more information about DRS, please visit the Internet website of the Ministry of Law here.

Downloadable Forms for the Use of Debtors

Please note that forms for the following documents can be downloaded from the Internet website of the Ministry of Law. Please click here. 

  1. Debtor's Bankruptcy Application
  2. Affidavit in support of Debtor’s Bankruptcy Application
  3. Statement of Affairs 
  4. Affidavit Verifying Statement of Affairs

Creditor's Bankruptcy Application

A creditor may only file a bankruptcy application against a debtor if, amongst other things, the debt owed is not less than S$15,000 and the debtor is unable to pay the debt. Under the law, a debtor is presumed to be unable to pay a debt if he does not comply with or apply to set aside a Statutory Demand. After a Statutory Demand demanding payment is served on a debtor; and the debtor:

(a) does not make payment within 21 days; or
(b) does not apply to the Court within 14 days (or 21 days, if the Statutory Demand was served on the debtor outside jurisdiction) to set aside the Statutory Demand, the creditor may proceed to file a creditor’s Bankruptcy Application against the debtor.

Setting Aside a Statutory Demand

If a debtor wishes to set aside the Statutory Demand served on him, an application to set aside the Statutory Demand must be filed within 14 days (or if the Statutory Demand was served outside Singapore, within 21 days) from the date of service of the Statutory Demand. In the affidavit filed in support of the application, the debtor must:

  1. specify the date on which the statutory demand came into the debtor’s hands;
  2. state the grounds on which the statutory demand should be set aside; and
  3. exhibit a copy of the statutory demand.

Every application to set aside the statutory demand and the affidavit in support must be filed at the same time and must be served on the creditor in question within 3 days after the date of filing.

Voluntary Arrangement

A suitable debtor may make voluntary arrangements to persuade his creditors to refrain from resorting to bankruptcy proceedings, and encourage settlement of debts wherever possible. If the debtor intends to propose a voluntary arrangement to the creditor, the debtor must first file an application for an interim order to stop all further proceedings against him. The application is to be accompanied by a proposal containing information of all the assets and liabilities of the debtor and how the debtor proposes to settle the debts. The proposal must provide for a nominee who will be appointed to supervise the implementation of the proposed voluntary arrangement. The nominee must be a licensed insolvency practitioner.

If the creditors approve the proposed voluntary arrangement and if the debtor fulfils his obligations under the voluntary arrangement, the debt is considered settled. If the debtor fails to comply with the voluntary arrangement, the nominee or any of the creditors may file a bankruptcy application against the debtor.

Opposing a Creditor's Bankruptcy Application

If a debtor opposes a creditor’s bankruptcy application, the debtor must file, and serve on the applicant creditor and the Official Assignee, a notice specifying his/her objections not later than 3 days before the scheduled hearing date of the bankruptcy application.

Bankruptcy Order

The hearing of a bankruptcy application is usually fixed approximately 4 to 6 weeks from the date of filing of the bankruptcy application. After a bankruptcy order has been made against a person, notification of the bankruptcy order will be published in the Government Gazette, and the Official Assignee or a private trustee in bankruptcy appointed by the Court will then administer the bankrupt’s affairs in bankruptcy. The Official Assignee or the private trustee in bankruptcy will contact the bankrupt for him or her to come to their office for a briefing.

Once a person is made a bankrupt, he or she is subject to many disqualifications and disabilities such as prohibition from overseas travel and starting court actions, and disqualification from appointment as a trustee or personal representative, amongst others.

The fees payable for the filing of documents in respect of bankruptcy proceedings may be found in the Third Schedule of the Insolvency, Restructuring and Dissolution (Personal Insolvency) Rules 2020.

 
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