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What Happens If You Are Declared Bankrupt?
By Max Fu
We all know what bankruptcy is, but do you really know what happens once you are declared bankrupt? How about your duties and restrictions as an undischarged bankrupt? And how can you ‘get out’ of bankruptcy?
After you are declared bankrupt
You are declared a bankrupt once a Court makes a bankruptcy order against you. As a bankrupt, your case and bankruptcy estate will be managed by a trustee. At present, all bankruptcy cases are handled by private trustees, except for cases where the Official Assignee determines there is sufficient public interest for it to be appointed as the trustee in bankruptcy. As such, your trustee can either be a private trustee or the Official Assignee.
Regardless of who the trustee is, the trustee plays an important role in your bankruptcy process. First, you are required to submit a Statement of Affairs to the trustee. The Statement of Affairs sets out relevant information about your financial circumstances and needs, such as your assets and liabilities, income, employment, and details of your dependants.
The trustee will thereafter manage your financial affairs as a bankrupt, which may include selling your assets and distributing the proceeds to your creditors, in order to ensure you can settle your debts. The trustee also determines the amount of money you need every month to support yourself and your family, as well as how much you ought to pay to the trustee monthly. Moreover, you will need to pay an amount to be considered for discharge from bankruptcy – this, too, is determined by the trustee.
The trustee is also able to advise you on matters pertaining to your duties and restrictions as a bankrupt.
Duties and restrictions as a bankrupt
Pursuant to the Insolvency, Restructuring and Dissolution Act 2018 (“IRDA”), as an undischarged bankrupt, you are required to fulfil certain duties. You are also subject to various restrictions on the activities you are allowed to undertake.
Apart from the duties of cooperating with the trustee in the management of your financial affairs as well as making the regular payments determined by the trustee, other duties include making property-related disclosures as required to the Official Assignee and attending any meeting of your creditors.
The status of bankruptcy does come with restrictions on regular life and activities. An undischarged bankrupt cannot travel overseas (i.e. out of Singapore) unless the trustee’s prior permission is obtained. You are also prohibited from managing a business or acting as a director of a company, save with the permission of the Court or the Official Assignee’s written permission. Furthermore, except for personal injury actions or matrimonial proceedings, you cannot start (or continue) any court action without the trustee’s approval. These are just some of the various restrictions which an undischarged bankrupt may be subject to.
Being discharged from bankruptcy
So, how does one get discharged from – or ‘get out’ of – bankruptcy? In Singapore, there is no automatic way to be discharged from bankruptcy. Generally, there are two ways to obtain a discharge from bankruptcy: either a discharge by the Court or a discharge by Certificate of the Official Assignee.
We at Salem Ibrahim LLC stand ready to advise and help you to take this step forward with employing the appropriate steps to pursue your interest, whether as a minority shareholder, or on behalf of the company.
Max Fu is an Associate at Salem Ibrahim LLC.
Salem Ibrahim LLC is your go-to insolvency lawyer in Singapore.