The Debt Repayment Scheme (DRS) is a bankruptcy alternative for Singaporeans whose loans are almost due. This scheme allows debtors to escape the stigma of declaring bankruptcy and get more time to pay back their loans. It’s like a dream come true for a country where certain loans, like education and housing loans, are seen as necessities.
If you’re considering the DRS, it’s crucial to understand how the scheme works and what is required to qualify. This knowledge will prepare you for the application process and set realistic expectations.
This guide will provide you with an overview of the DRS and explain how you can manage your debts more effectively. I-Credit licensed moneylender in Singapore currently offers loan to individuals under the DRS scheme.
What is the Debt Repayment Scheme (DRS)?
The debt repayment scheme is the final way out for anyone who wants to avoid the restrictions and shame of bankruptcy. This program was initiated in 2009 as another repayment plan for debtors who want to repay their debts.
When an individual is placed on this program, their creditors cannot take further action against them. The creditors can only give their debtors more time to repay their loans.
Debtors are given up to five years, during which no interest will be incurred, to clear this loan. During this period, they’ll be paying back the loan in instalments. The DRS Singapore is overseen by an Official Assignee, a court-assigned official.
Objective of the Debt Repayment Scheme Singapore
Now that we’ve answered the question, ‘What is DRS?’ The next part is about this program’s objective.
The objective of the debt repayment scheme is to provide Singaporean debtors with another alternative to repaying what they owe. This scheme offers a new, no-interest repayment plan for debtors, allowing them to finally attain financial freedom.
Understanding Debt Restructuring and Debt Repayment Programs
There are many debt repayment program Singapore for debtors who are looking for a way out, and they’re discussed below.
- Debt Settlement Appeal
- Debt Repayment Scheme
- Debt Consolidation Plan
- Discounted Lump Sum Settlement
- Debt Management Program
- Bankruptcy
Debt Settlement Appeal
This is a case where you meet with your creditors to talk about a more affordable payment plan. It usually involves explaining your financial situation to your creditor and proposing a new plan to repay the money. If the plea is successful, most debtors create a written document with the new payment terms.
Debt Repayment Scheme
For debt recovery Singapore, the debt repayment scheme is the last choice before bankruptcy. This loan repayment scheme brings in an Official Assignee to help structure a new loan payment plan. In this case, the debtors also get more time to repay their loan, and they don’t have to worry about interest either.
Debt Consolidation Plan
This debt restructuring plan allows debtors in Singapore to consolidate their unsecured credit facilities with one financial institution. With this program, debtors can consolidate all of their unsecured loans and credit cards from multiple financial institutions in Singapore into one institution. Note that this loan repayment scheme doesn’t work with medical loans, education loans, renovation loans, joint account loans, or business-related credit.
Discounted Lump Sum Settlement
Do you have a large sum of money to pay to clear your Singapore debt? Then, you can apply this repayment scheme and approach your creditor to offer a discounted final settlement. This way, you not only clear your debt in one go, but you also pay less to do so.
Debt Management Program
This is a formal debt repayment plan that works in conjunction with major credit card issuers and consumer banks in Singapore. Most debtors cannot create a proposal and repayment schedule for paying in instalments, hence, a loan consultant is usually hired. After this schedule has been drafted, the creditors will have to accept it before it becomes effective.
Few debtors in Singapore can opt for this plan, as it requires sufficient payment capacity as the first criterion. While on this loan repayment scheme, all unsecured credit facilities and credit cards will be cancelled.
Bankruptcy
If all else fails, then bankruptcy is the only way out of paying a loan. Bankruptcy is a legal process that occurs when a debtor cannot settle a loan worth $15,000 or more. This process can be initiated by a creditor who is being owed money or the debtor.
While the debtor is absolved of their Singapore debt, they face other consequences. This includes travel restrictions, the inability to serve as a company’s director, and challenges in applying for loans.
Eligibility and Criteria for Debt Repayment Scheme (DRS)
If you’re wondering ‘Is Singapore in debt’ because of the financial status of those around you, you can break free with the DRS. All you need to do is ensure that you’re eligible for this scheme, and you can apply. The following are the loan repayment scheme’s eligibility criteria
- Total Liability Criteria: You are eligible for this scheme if your total liabilities are more than SGD 15,000 and don’t exceed SGD 150,000.
- Business Status: Sole proprietors and people in partnerships cannot apply for this scheme.
- Debt Agreement Criteria: If you’ve entered into a formal debt agreement with your creditors in the last five years, you’re not eligible for this scheme.
- Income Criteria: Before applying for this loan repayment scheme, you should have a regular source of income.
- Bankruptcy Status: Undischarged bankrupts cannot apply for this loan repayment scheme.
- Debt Repayment Scheme Status: Anyone who has been in the DRS for the last five years cannot apply for this scheme.
Bankruptcy Eligibility Criteria
Anyone who is interested in filing a bankruptcy application must also meet certain criteria. The bankruptcy criteria eligibility is detailed below.
- A bankruptcy application cannot be made to a High Court unless a debtor cannot repay a debt of $15,000 or more.
- The debtor filing for bankruptcy has to be a resident of Singapore.
- Debtors need to have been residents of Singapore for at least a year.
- The debtor filing for bankruptcy needs to have property in Singapore.
- Debtors need to have owned property in Singapore for at least a year.
- The debtor filing for bankruptcy needs to have run a business in Singapore for at least a year.
Process and Steps Involved in Applying for DRS
Everything related to the DRS is handled by the Ministry of Law Insolvency Office. While applying for this loan repayment scheme, a court official called an Official Assignee (OA) will oversee your proceedings.
You cannot apply for the debt repayment scheme until there is a case of bankruptcy made against you in court. This could have been submitted by yourself or your creditor. When there’s a bankruptcy application against you, an Official Assignee will be assigned to your case, and the DRS proceedings can begin.
A step-by-step guide to applying for DRS is detailed below:
- Ensure you have a bankruptcy application filed against you in court.
- Make sure your total liabilities do not exceed SGD 150,000 and that you meet the other DRS eligibility criteria. You may also reach out to i-credit for a DRS loan.
- Submit a statement of affairs document, an income and expenditure document, and a debt repayment document to the Ministry of Law’s e-collection portal. You can also support these documents with payslips, Notice of Assessment, and various bills.
- After submitting these documents, you must also make a Ministry of Law payment of SGD 350. This payment is made after the documents have been accepted and verified.
- For a further assessment of your suitability for the debt repayment scheme, you’ll need to hold a meeting with your creditors. This meeting will be held at the Ministry of Law, and a payment of SGD 250 is required before it starts.
- If you’re found suitable for this loan repayment scheme after all these, the Official Assignee will draft a debt repayment scheme for you.
- You’ll be required to make your first monthly instalment and also pay the first annual fee of SGD 300 at this point.
Benefits and Advantages of Debt Repayment Scheme (DRS)
There are many perks to operating under the Singapore debt recovery law called the DRS, and they include:
- Zero-interest rates: Debtors on the DRS do not have to worry about interest penalties on their outstanding loans.
- Covers all unsecured borrowings: The DRS allows debtors to include all unsecured borrowings in their repayment plan.
- No Bankruptcy record: The biggest advantage of this Singapore government debt recovery scheme is that there will be no bankruptcy record on that debtor.
- Access to a regular bank account: According to the scheme of arrangement Singapore uses for the DRS, debtors can hold onto their existing bank accounts.
- Shorter period to financial freedom: With the DRS, you can get your finances under control within five years, and you’ll be a free man.
- No travel restrictions: The DRS doesn’t restrict your movement like a bankruptcy order.
Frequently Asked Questions (FAQs) About DRS
What Happens When I Don’t Make the Ministry of Law Payment?
If you don’t make the Ministry of Law payment at the right time, you’ll be referred back to the High Court. After which, your bankruptcy proceedings will resume.
When Does Interest Stop Counting on My Loan after Applying for the DRS?
The interest from your creditors stops counting on your loan on the day you start this debt collection plan. That means the day you make the first SGD 300 payment and your first monthly instalment is when interest stops counting.
What Is the Best Debt Recovery Singapore Scheme?
The best debt recovery Singapore scheme pre-bankruptcy is the Debt Repayment Scheme (DRS). If you’re not close to declaring bankruptcy, the next best thing is the Debt Consolidation Plan (DCP).
Conclusion
If you don’t want to file for bankruptcy, the Debt Repayment Scheme (DRS) is one of the two options you can choose. Not only does it allow you to pay back your loan, it halts all interest on the loan during the repayment period. With this loan repayment scheme, you can get back your financial freedom within five years.
The DRS eligibility criteria require that you’re employed, with liabilities less than SGD 150,000, and that you’re not a sole proprietor or partner. It also requires you to be an undischarged bankrupt who hasn’t entered the DRS in the last five years. When you meet all these criteria, you can go to the Ministry of Law Insolvency Office to start the DRS application.