Debtors may now be able to avoid ending up bankrupt.

Starting May 18, 2009, a debtor with debts of less than $100,000 who applies for bankruptcy to the Insolvency and Public Trustee's Office (IPTO) may be referred by the High Court to be considered for the Debt Repayment Scheme (DRS).

Benefits and requirements

A debtor who is employed and earning a regular income may be able to avoid bankruptcy if he is found suitable for the DRS.

The DRS, administered by IPTO, seeks an outcome that would be beneficial for both the debtor and his creditors.

The debtor, who will avoid losing his job as a result of bankruptcy, will be expected to repay as much of his debt as possible with his income, through the realisation of his assets and adjustments to his lifestyle.

He will also be required to propose a debt repayment plan, which must be approved by the Official Assignee (OA). This plan must be completed within three to five years under the OA's supervision.

He will also need to go through financial education, which will emphasise the importance of financial discipline and instill greater awareness of financial responsibility.

Implementation

The OA will make the necessary modifications to the payment plan to ensure that both the debtor's and creditor's interests are adequately considered.

Dishonesty, failure to cooperate with the OA or comply with the terms of the plan or duties under the Bankruptcy Act and the Bankruptcy (Debt Repayment Scheme) Rules, may result in the OA issuing a Certificate of Failure on the debtor in the DRS. Creditors may then proceed to initiate fresh bankruptcy proceedings against the debtor.

The IPTO expects up to 1,300 debtors to be considered for the DRS every year.

Details about the DRS are available at www.drs.gov.sg