Dealing with bankruptcy woes

Dealing with bankruptcy woes

Just being handed a bankruptcy order and feeling helpless? Or stuck in bankruptcy for a while now and trying to get out? Don’t panic yet.

With the new 1 August 2016 amendments to the Bankruptcy Law, perhaps it is time to relook at whether you can escape your current bankrupt state.

Annulment of bankruptcy order

Annulment is one of the two main ways of getting round a bankruptcy order.

Unlike a discharge, annulment wipes out the bankruptcy altogether and puts the bankrupt in the same position as if no bankruptcy order has been made. So if you can get an annulment, that’s your best game plan.

How do you then go about doing so? Well, it depends on why you landed with such an order in the first place.

Certain pre-conditions are needed before a bankruptcy order can be made by the court, such as an immediately payable debt of at least $15,000, or establishing that the bankrupt should fall within Singapore’s jurisdiction. Thus, if any of these pre-condition is proven unsatisfied, the order can be annulled provided an application to the court was made within 12 months of the order.

Another way is to settle your debts in full, since a bankruptcy order is granted precisely because a debtor is unable to pay his or her debts. If you can indeed do so, annulment can be obtained from the court, upon the bankrupt’s application, by the OA’s certificate of annulment, upon his satisfaction of the bankrupt’s full settlement of his debts.

A third way is to prove that the distribution of assets ought to be made under Malaysian law.

Lastly, annulment may be obtained if the debtor’s creditors accept a composition or scheme of arrangement of the bankrupt’s affairs by a special resolution.

Discharge of bankruptcy order

On the other hand, even if the debtor may not be able to repay all its debts, he may still get a discharge on the satisfaction of certain conditions.

The method of discharge differs according to the total value of your debts.

If your proved debts exceed $500,000, you can only apply to the court for a discharge within the first 3 years of your bankruptcy. The court, upon hearing what the OA and any creditor has to say, will then either refuse your application, grant you an unconditional discharge, or impose conditions on your discharge.

Such a decision is based on various factors, including how cooperative the bankrupt has been, how many creditors the bankrupt has, dividends declared, and the grounds for the application. For example, a bankrupt who was caught in an economic downturn through no fault of his own is more likely to get a discharge, as compared to an uncooperative bankrupt.

Additionally, the court cannot grant an unconditional discharge if the bankrupt committed certain offences, or where special facts are present. The latter pertains to those relating to the bankrupt’s fraudulent or dishonest business conduct or preferential treatment of certain creditors leading up to his bankruptcy.

Alternatively, if your proved debts do not exceed $500,000, the OA can exercise discretion to issue a certificate discharging you from bankruptcy. The 1 August 2016 amendments to the Bankruptcy Law have clarified this process by establishing clearer exit points and time frames.

For bankruptcy applications made on August 1 2016 or later, a first-time bankrupt becomes eligible for discharge somewhere between 3 to 7 years, while a repeat bankrupt becomes eligible for discharge between 5 to 9 years.

The exact period depends on factors such as whether creditors object to the discharge, whether a bankrupt has paid its target contribution in full or whether a bankrupt has become unable to do so due to “extenuating circumstances”.

Also, such bankrupt must also have submitted a statement of affairs and not have travelled or remained overseas without permission.

In addition, a bankrupt who is able to settle his target contribution in full prior to their discharge will have their records removed from a register maintained by the OA 5 years after the discharge. A target contribution is the amount of debt a bankrupt has to pay before becoming eligible for discharge. Paying up one’s target contribution in full prevents a permanent record on a publicly accessible register, which adversely affects one’s credit rating and trustworthiness.

Are you in the clear yet?

Bankruptcy can have devastating effects on not only one’s financial status, but also one’s social status. If your woes persist even after this self-help article, do not hesitate to contact us for more guidance.

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The contents and views set out above are those of the author(s) and/or are personal views and for information only. It does not constitute in any way any legal advice or representation to the reader even if the facts appear similar to your fact situation.  You are strongly encouraged to seek legal advice should you have any legal issues.