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NEW rules under Singapore's bankruptcy framework will come into force from August, said the Ministry of Law (MinLaw) on Wednesday. These rules have been created for a more "rehabilitative environment" for bankrupts, and to encourage creditors to be careful when extending credit.
The minimum debt amount that needs to be owed before a person may be made bankrupt will be increased to S$15,000 from S$10,000. This accounts for inflation since 2000.
Under the new framework, a timeline has been provided such that most first-time bankrupts should be eligible for discharge after five years, once they make, in full, a target contribution to creditors that is based on the individual's earning potential during the bankruptcy period.
After the seventh year, a first-time bankrupt should be discharged, even if he does not meet the target contribution.
Repeat bankrupts will generally be eligible for discharge within seven to nine years.
Before this, no timeline was set for bankrupts and no target contribution was declared to creditors. The change is meant to give bankrupts clear time frames, and the incentive to seek "gainful employment", MinLaw had said.
Institutional creditors will be also required to nominate private trustees to administer the bankruptcy estate when applying to make a debtor bankrupt. Such trustees would include accountants and lawyers.
Currently, most bankruptcies in Singapore are administered by the Official Assignee under the government's Insolvency and Public Trustee's Office, and at a low cost.
Much of the public feedback during the public consultation last year focused on the cost of trustees, which could run into hundreds of thousands of dollars for huge debt recovery proceedings. But MinLaw said involving a public trustee would result in lower distribution to creditors, but that this would ensure all repayment options are exhausted before bankruptcy proceedings are considered.
MinLaw added then that institutional creditors have sufficient expertise and resources to conduct credit assessments before extending credit, and have sufficient resources to bear the costs of debt recovery.
"Government resources and taxpayer dollars should not be used to subsidise the costs for the recovery of such debts," it added then.