Is Debt Repayment Scheme (DRS) same as Bankruptcy?

Debt Repayment Scheme (DRS) and Bankruptcy are two distinct debt relief mechanisms available in Singapore, each with its own features and implications. 

Here are the key differences between DRS and bankruptcy:

1. Nature of the Arrangement:

• DRS is a formal and structured debt repayment plan. It is designed to help individuals who are struggling with unsecured debts (e.g., credit card debt, personal loans) but want to repay their debts over time. It does not involve complete liquidation of assets.

• Bankruptcy is a legal process where an individual is declared bankrupt by the court of Singapore. It involves the liquidation of the individual's assets to pay off creditors. Bankruptcy typically results in the discharge of most debts, but it can have significant long-term consequences.

2. Protection from Legal Actions:

• DRS: When you enter a Debt Repayment Scheme, you are protected from legal actions by creditors to recover the debt covered by the plan. Creditors are not allowed to pursue bankruptcy or take you to court during the DRS plan.

• Bankruptcy: Bankruptcy offers protection from creditor legal actions, but it involves the official declaration of bankruptcy, which can have more profound implications for your financial and personal life.

3. Asset Retention:

• DRS: In a DRS plan, you can retain ownership of your assets (e.g., home, car) as long as you continue to make the agreed-upon payments.

• Bankruptcy: In bankruptcy, your assets may be sold to repay your creditors. Certain assets may be exempt from liquidation, depending on Singapore's bankruptcy laws.

4. Duration:

• DRS: The duration of a DRS plan varies based on your financial situation and the amount of debt owed. It can only reach a maximum of 5 years.

• Bankruptcy: Bankruptcy typically lasts for a longer period, and may even take up to seven to ten years, depending on the circumstances.

5. Credit Report Impact:

• DRS: Entering a DRS plan may have a temporary negative impact on your credit report, but as you successfully complete the plan, you can work on rebuilding your credit over time.

• Bankruptcy: Bankruptcy has a significant and long-lasting impact on your credit report. It remains on your credit report for several years, making it challenging to obtain credit during that period.

6. Eligibility:

• DRS: DRS is available to individuals who meet specific & more stringent criteria, including not having been a bankrupt OR not been on the DRS OR not been subject to a court-based arrangement in the last 5 years.

• Bankruptcy: Bankruptcy is available to individuals who are unable to repay their debts and whose financial situation warrants the declaration of bankruptcy.

7. Debt Treatment:

• DRS: DRS focuses on structured repayment of debts through a single monthly payment. Debts may be reduced or repaid in full.

• Bankruptcy: In bankruptcy, your assets are used to pay off your creditors. Some unsecured debts may be discharged, meaning you do not have to repay them.

Choosing between DRS and bankruptcy depends on your individual financial circumstances and goals. It's essential to consult with a reliable credit counselor, financial advisor, or legal professional to determine the best option for your situation. 

Both options have significant implications, so careful consideration is necessary.