More Singapore bankruptcy cases filed by debtors, not creditors, in past 5 years: MinLaw

More than half of the bankruptcy applications in 2024 were made by the debtors themselves, according to the Ministry of Law (MinLaw).

This is the fifth consecutive year since 2020 that the number of self-filed applications was higher than the number of applications by creditors, based on figures the ministry provided to The Straits Times in response to queries.

MinLaw data showed that 2,928 bankruptcy applications were filed by debtors in 2024. That represents 59 per cent of all applications made that year.

The remaining 1,997, or 41 per cent of bankruptcy applications, were made by creditors.

The total of 4,925 bankruptcy applications filed in 2024 was a 24 per cent increase from the 3,986 cases in 2023.

Ms Debby Lim, senior partner at law firm Dentons Rodyk & Davidson, said the relatively higher self-filed numbers could be an indication that bankruptcy is less of a stigma these days.

“The idea is that it (bankruptcy) is not the end of the world,” Ms Lim said.

Ms Tan Huey Min, general manager of the non-profit Credit Counselling Singapore (CCS), noted that some people may have filed for bankruptcy despite there being other avenues to resolve their debt.

“These people who self-file, how many are because they went to see the private debt consulting firms and received information that may not be the most objective or most complete?” Ms Tan said.

“There are other solutions to address a debt problem than to go and file for bankruptcy so that one may be placed under the Debt Repayment Scheme.”

CCS, for example, runs a debt management programme that helps debt-distressed borrowers work out a plan to repay all their creditors through affordable instalments every month.

A debtor does not need to file for bankruptcy to qualify for the CCS programme.

There is also the Debt Repayment Scheme (DRS), a pre-bankruptcy scheme administered by MinLaw. A debtor can avoid being made bankrupt if he is put on the DRS.

However, the debtor must file for bankruptcy first before being considered for the DRS, but there is no certainty that the debtor will be accepted for the scheme.

Among its criteria are a total debt size of not more than $150,000, and, most importantly, that the debtor is employed.  

If deemed unsuitable for DRS, the debtor can be declared bankrupt. A debtor on the DRS must repay debts over a fixed period of not more than five years.

The number of borrowers who were eventually declared bankrupt in 2024 rose 12.4 per cent to 1,232, from 1,096 in 2023, MinLaw data showed.

The total number of undischarged bankrupts was 10,175 as at Jan 31, 2025, up 5.2 per cent from the same period a year ago.

Mr Jonathan Ong, director of restructuring and insolvency at EisnerAmper Singapore, a global accounting, tax and business advisory firm, said those who seek his help are mostly small business owners in the food and beverage industry or renovation contractors.

Some took up temporary bridging loans during the Covid-19 pandemic and are now approaching the expiry of their loans.

They gave personal guarantees for the business loans, and when the business does not pick up, they become liable to repay the debts, Mr Ong added.

The Government’s Temporary Bridging Loan Programme was introduced in March 2020 and extended until Sept 30, 2022.

The loan, which has a maximum repayment period of five years, was meant to provide small and medium-sized enterprises with access to working capital, or the cash needed for daily operations, during the pandemic.

Slightly more than two-fifths of bankruptcy orders in the first half of 2024 were due to business failures, Mr Alvin Tan, who is Minister of State for Trade and Industry and a board member of the Monetary Authority of Singapore, told Parliament on Oct 16, 2024.

Mr Tan said these individuals borrowed from a range of sources, such as banks, credit card issuers, licensed moneylenders and private individuals.

Others who were declared bankrupt probably could not manage their own personal finances and ended up overspending, said Dentons Rodyk’s Ms Lim.

She added that some may have been retrenched and trying to make ends meet. 

The data from CCS supports this observation. 

Ms Tan said those who sought help from CCS cited “lifestyle” and “drop in household income” as the main causes of their indebtedness, with “lifestyle” overtaking “drop in household income” in 2024.

“They overspend to lead a certain type of life,” Ms Tan added. 

“It can be that the person buys a car that he actually cannot afford, he holidays frequently, he likes to buy branded goods, he frequently goes for fine dining and clubbing.”

The CCS data also revealed that renovation expenses contributed to indebtedness in 2023 and 2024, unlike in previous years.

EisnerAmper’s Mr Ong has noted more young people seeking help with their debt problems.

“They are 24, 25 years old,” he said. “Some of them told me they dabble in speculative investments like cryptocurrencies.”

He said most young people qualify for the DRS because their debts generally do not exceed $150,000.

Mr Ong and Ms Lim expect to see more people with debt issues as the economic environment remains challenging.

Ms Lim said: “I do not think we have seen the peak yet. I think it (number of bankruptcy orders) might get worse. The economic outlook is just not good.”

Mr Ong said that middle-income workers in their 40s and 50s are at a higher risk as they would find it harder to get another similar-paying job if they suddenly lose their jobs.

He advised those facing financial difficulties to seek help early before their debts snowball.

“Business owners are trying to hold on to the business,” he said. 

“Some of them have been in the business for 10 years. For us to ask them to give up just because their business did not improve within the year, I can understand why they do not want to give (it) up.”

They end up borrowing more even though business prospects are dim, Mr Ong said.

If they cut their losses while their debts are below $150,000, they can join the DRS and not be declared bankrupt, he added.

Mr Ong said he felt that the threshold for DRS, which was raised temporarily during the Covid-19 pandemic to $250,000, should go up permanently to $250,000.  

This will enable more individuals to enter the DRS and avoid being declared bankrupt, he said.

Ms Lim said some of her clients who took personal guarantees for their businesses have approached CCS for help.

CCS can help to negotiate a voluntary repayment plan with creditors on the debtor’s behalf, she added.

Ultimately, society has to accept that bankruptcy “is a corollary of risk-taking and having start-ups and entrepreneurs”, Ms Lim said.

“You want people to take risks and have start-ups, (but) there is always a bankruptcy risk if the business fails.”

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.

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