Understanding Debt Repayment Scheme (DRS) In Singapore 2023
In Singapore, being in debt is quite a norm as taking out loans to pay for essentials like housing, education, medical needs or other big-ticket liabilities like cars or business funding. These kinds of debts are socially acceptable and will often not be considered bad debt.
However, when it comes to outstanding credit card balances, personal loans or other types of loans for additional lifestyle indulgences, it can result in bad debt and get you stuck in a tricky financial situation. At some point, you may owe so much debt that you may consider or be considered by the bank or creditor for an application of the Debt Repayment Scheme (DRS).
What Is The Debt Repayment Scheme (DRS)?
Administered by the Official Assignee (OA) from the Ministry of Law’s Insolvency Office, the Debt Repayment Scheme (DRS) is considered a pre-bankruptcy scheme that enables you to avoid bankruptcy. It has several advantages over declaring bankruptcy as you will not have to face any travel restrictions, and have the option to repay your debts for a fixed period that is often about 5 years, and even maintain a regular savings account. However, a DRS is not like a personal loan which you can sign up or apply for.
What Is The Eligibility Criteria For DRS?
You can only be eligible for a DRS in the situation if your total debt amount does not exceed $150,000 after you file for or your bank files a bankruptcy application. To be eligible, there is a list of criteria that you need to fulfill:
Total liabilities do not exceed $150,000;
- To be employed and earning a regular income;
- To not be bankrupt or placed on the DRS in the recent past 5 years;
- To not be subject to a court-based arrangement over the past 5 years
- To not be a sole-proprietor or partner in any organisation
How Does The DRS Work In Singapore?
Once you meet the eligibility criteria, the OA will further assess your suitability to be for the DRS and submit documents including those related to your income, expenditure, financial affairs, and proposed debt repayment plan to your creditors.
Submission of required documents
If the OA deems you suitable for the DRS, you’ll receive a “Notice of Introduction on DRS & Filing of Statement of Affairs”, in which you’ll be notified to submit the following documents online, via the Ministry of Law’s e-Collection Portal. These documents include:
- Statement of Affairs
- Income & Expenditure Statement
- Proposed Debt Repayment Plan
- Other supporting documents (as per Annex B which you can refer to on their e-Collection Portal
A total of 14 days will be given to you to view the Introductory Video and complete the online submission. Note that you’ve got to stick to this deadline well, or complete it before the 14 days to avoid a failure in your DRS suitability. If you miss this deadline, your case will be referred back to Court for the bankruptcy proceedings to be heard again.
When your online submission has been verified, a payment of the $350 preliminary fee will need to be paid online. Thereafter, you’ll have to prepare to head down to the Ministry of Law’s office (there may be more fees to be paid prior to the meeting, so set aside a few hundreds for this) for a further assessment of your suitability for the DRS.
Customising your DRP
At the meeting, the DRS administrators will chair the meeting, discuss your approved monthly instalments and terms and conditions of your proposed DRP with your creditors, before devising a final Debt Repayment Plan (“DRP”) for you. You’ll need to wait within 7 days of the meeting to be notified of the outcome of the discussion and DRP.
Unsuitability for a DRS
In the situation the OA assesses that you are unsuitable, or if you do something that results in failure to comply with the OA’s instructions, you will be deemed unsuitable and your case will be referred back to Court for the bankruptcy proceedings to be heard again.
What Can I Do If I Don’t Qualify For DRS?
If you do not qualify for DRS, and have a creditor filing you for bankruptcy, you may consider these 3 options:
Annulment of the Bankruptcy Order by full settlement or Offer of Composition or a Scheme of Arrangement
If you choose this option, you’ll need to apply to the court for an annulment of the Bankruptcy Order under Section 123 of the Bankruptcy Act. Note that a summons supported by an affidavit stating the reasons why your Bankruptcy Order should be annulled, must be filed in order for this application to be considered, or else, it’ll be rejected.
Discharge by Certificate of the Official Assignee
Applying to the Official Assignee for a certificate of annulment under Section 95A or Section 123A of the Bankruptcy Act, may actually increase your chances of getting your bankruptcy order annulled as the OA plays a big role in determining the outcome of the annulment.
Discharge by the High Court
The High Court’s assessment of your annulment of bankruptcy will also depend on the views of the OA and the bankrupt’s creditors, as well as other important factors such as your age, monthly income and total assets, as well as the amount of monthly instalments payments you have contributed to his bankruptcy estate.
Advantages and Disadvantages of A DRS
- No interest rate as compared to Debt Consolidation Plans (DCPs) and other personal loans
- Convenient online submission of documents via the Ministry of Law’s e-Collection Portal
- No travel restrictions unlike those who declared bankruptcy
- Able to maintain a regular savings account unlike those who declared bankruptcy
- Flexibility of choosing repayment loan tenor (1 year - 5 years)
- Time-consuming process of assessment for eligibility and suitability
- Requests are all subject to the approval of the OA and High Court
Frequently Asked Questions
Can I apply for the DRS?
- No. A DRS is not like a personal loan which you can sign up or apply for. You can only be considered for the DRS if you file for a bankruptcy or if your creditors start bankruptcy proceedings against you.
Are there any fees payable if I am eligible and considered for the DRS?
- Yes. There is a list of fees to pay for and it includes the Preliminary administration fee of $350, the OA’s review of DRS suitability fee of $250, the DRP Modification fee of $50, the Appeal fee of $100, Annual administration fees that range from $300 to $350, and other fees which you can find out more in our above list.
Am I eligible for the DRS?
- If your total unsecured debt is up to S$100,000, you’re employed and earning a regular salary, and not be bankrupt or placed on the DRS in the recent past 5 years, or be subject to a court-based arrangement over the past 5 years, or be a sole-proprietor or partner in any organisation, then you may be most likely eligible.
If I do not qualify for the DRS, are there other options?
- If you do not qualify for DRS, and have a creditor filing you for bankruptcy, you may consider these 3 options: annulment of the Bankruptcy Order by full settlement or Offer of Composition or a Scheme of Arrangement, applying to the Official Assignee for a certificate of annulment or discharge by the High Court.