More getting out of bankruptcy

This post came out from The Sunday Times (26 July 2015)

More bankrupts are being discharged and the number of bankruptcy orders made last year fell after a high in 2013. There were 3,546 cases of bankrupts being discharged last year, a 37 per cent increase from the 2,584 in 2013, according to the latest figures from the Insolvency Office under the Ministry of Law.

The number of bankruptcy orders made last year also fell to 1,758, after 2013 saw 1,992 orders made - the highest since 2009. The rise in discharges may be due to a better and more robust system for bankrupts set in place, said Mr Alfred Chia, chief executive of financial advisory firm SingCapital. "The Official Assignee (OA) may not be more understanding and pay more attention to individual cases," said Mr Chia. "They may be more willing to give a second chance to bankrupts who stick to the repayment scheme, and work and cooperate with them to pay off their debts in a timely manner."

But Mr Chia cautioned against viewing the increase in discharges as an indication that it is easier to get out of bankruptcy now. "Bankruptcy should always be a last option, and people should always look into schemes to address their debt before that," said Mr Chia.

These include the Debt Repayment Scheme (DRS) , which was started in 2009 to help those with debts of under $100,000 avoid bankruptcy by letting them pay off their debts in installments. There are currently 934 people on the DRS at the end of June.

Lawyer Vijai Parwani said the scheme could have contributed to the falling rates of bankruptcy orders made last year, as those under the scheme would not be declared bankrupt.

Credit Counselling Singapore (CCS) may also have helped some people avoid becoming bankrupt, said its general manager Ms Tan Huey Min. More people have been approaching CCS for help in recent years, possibly because of tighter credit rules which started to kick in at the start of last month, she said. From June 1, those with total unsecured debt of more than 24 times monthly income for more than 90 days are unable to get more unsecured loans.

Insolvent persons are discharged when their debts are paid in full or if creditors accept a settlement offer. The OA can also decide to discharge a bankrupt after three years and if the debts do not exceed $500,000. Factors such as cause of bankruptcy, assets, age and conduct are taken into consideration.


Thoughts:

1. While the number looks good, with Debt Repayment Schemes and Credit Counselling Singapore to help people with debt with advices to manage their debts, is there enough being done to promote awareness of financial prudence? These schemes are in place due to reactive responses to a trend, but we should also do something to prevent them in the first place!
2. Managing credit cards and hire purchases are something that we should look into deeply, so that people do not over-spend what they can. While I understand businesses might need credit for daily operational costs, individuals should try not be over extend their limits just to fuel his/her own desires and ego.
3. Likewise for low income families especially those with unstable income. The monthly interest fees do add up and makes no financial sense to tap on credit if you have no money to spend in the first place. They can approach the Social Service Office or the Voluntary Welfare Organisations to seek help!

Thoughts anyone?

Yours,

Something Small Thinking Big