THE Singapore Ministry of Law (MinLaw) is seeking to have most first-time bankrupts discharged five to seven years after the bankruptcy order, under proposed amendments to the Bankruptcy Act.
It also wants institutional creditors such as banks and large companies to bear the cost and duty associated with bankruptcy. This takes the administrative task away from the government's Insolvency and Public Trustee's Office.
"The Bill seeks to introduce reforms to the bankruptcy regime to create a more rehabilitative regime for bankrupts, ensure better utilisation of public resources and encourage creditors to exercise financial prudence when extending credit," MinLaw said in a press statement on Monday.
Under the proposals - introduced in Parliament by Senior Minister of State for Law Indranee Rajah on Monday - MinLaw has proposed a regime where bankrupts can be discharged based on a fixed timeline, based on his or her ability to meet a target contribution. This amount will be calculated based on the bankrupt's earning potential.
Assuming that he or she fulfils the contribution, and has approval from his or her creditors to seek a discharge, a first-time declared bankrupt can be discharged as early as five years' time. Currently, no timeline is set.
If the amended Act is passed, institutional creditors will also have to appoint private trustees - such as accountants or lawyers - to administer the bankruptcy. Currently, most bankruptcies in Singapore are handled by the Official Assignee at the Insolvency and Public Trustee's Office, and at a low cost.
MinLaw said in its statement that institutional creditors have "sufficient resources" to appoint private trustees. "They will also be incentivised to undertake better risk assessments before granting credit."