Filing for bankruptcy: what’s going on and why it’s not as bad as you think

Staying afloat financially can be a challenge at the best of times and Singapore’s COVID-19 breaker has made it even harder for people to make ends meet. The severe but ultimately necessary restrictions prevented total economic collapse and facilitated the spread of the pandemic, but it was not without its toll. The shutdown of non-essential businesses, a ban on large gatherings and restricted allowances for restaurants and take-out are just a few of the measures that have put livelihoods at risk.

Bankruptcy is the elephant in the room for many Singaporeans grappling with financial uncertainty: demands exploded in early 2020 and countless others have considered it. But while this is a grim reality that many people and businesses face, it is a generally misunderstood concept that doesn’t necessarily mean the end of the world.

What does “bankruptcy” mean?

Bankruptcy is a term most of us vaguely understand, but few have a clear idea of ​​what it really means, especially in the uncertainty of a pandemic. Essentially, bankruptcy occurs when an individual or business owes more money than they can afford. The affected party can file for bankruptcy themselves, or a creditor who is owed money can file on their behalf if a debt is not paid.

What happens when a person declares bankruptcy?

First, the debtor hires a commercial lawyer to help them file for Arkansas bankruptcy and their eligibility will be determined based on a number of factors which we will discuss below. A court-appointed official assignee (OA) will then review their estate and distribute the money and assets among the creditors for the purpose of settling the debt. If money is still owed, the OA may establish a debt repayment program whereby the debtor is required to make monthly payments within their means until the debt is settled. In this case, your income and basic needs will be taken into account so that you can make payments within your means.

How has this changed under COVID-19?

Before the COVID-19 breaker, bankruptcy could only be filed in Singapore if the debt was at least $ 15,000 (for individuals) or $ 60,000 (for businesses). Debtors also had only 21 days following a legal demand – a formal warning from a creditor that legal action will be taken if the debt is not settled – to either pay it off or get through. to an agreement.

Under the COVID-19 (Temporary Measures) 2020 Act (the COVID-19 Act), the debt threshold has been increased to 60,000 for individuals and $ 100,000 for businesses until October 19, 2020. The legal request was also extended from 21 days to 6 months. .

What these changes mean is that debtors now have more time and leeway to settle their debts before a creditor can file for bankruptcy.

How can declaring bankruptcy be a good thing?

No one wants to find themselves in a situation where they cannot repay their debts, but filing for bankruptcy under such circumstances prevents further damage and offers an invaluable opportunity to recover. The main advantages of filing for bankruptcy are:

  • Creditors are no longer allowed to charge interest, which means your debts will be frozen at their current amount and prevent you from taking on more debt.
  • The OA will set your monthly contribution to repay the debt based on your income and basic needs. This ensures that you can continue to take care of yourself and your family while making payments within your means.
  • Creditors are not able to take legal action against you for the debts covered by the bankruptcy order.

As you can see, there are several reasons why you can choose to voluntarily file for bankruptcy and take the opportunity to recover before the situation gets worse.

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