What are the Debt Management options available in Singapore?

• Nature: DMP is a structured debt management plan administered by Credit Counseling Agencies.

• Offered by Credit Counselling Singapore (CCS), the Debt Management Plan (DMP) seeks to provide an alternative for individuals who find themselves in serious financial distress.

• Represented by The Association of Banks in Singapore (ABS), the DMP is a formal consumer debt restructuring agreement facilitated by CCS with major consumer banks and credit card issuers in Singapore.

• Under the DMP, CCS will help you draft out a DMP Proposal and Repayment Schedule for you to repay your creditors via affordable monthly instalments at a reduced interest rate and over a reasonable timeline.

• However, unlike DCP, debts are not consolidated if you are under DMP. This means that you would still have to make payments to each creditor according to the agreed repayment schedule. Another difference is that you are not given revolving credits.

• To be eligible for DMP, one must have unsecured debts of S$10,000 or more owing to two or more creditors. Applications are made through CCS where you would be required to attend an Onboarding Session with talks on debts and money management. After which, you have to go for a 1-to-1 financial counselling appointment whereby your suitability for the program would be determined.

• For more in-depth information, feel free to visit https://ccs.org.sg/consumer/dmp/.

• Nature: DCP is a regulated financial product in Singapore designed to consolidate multiple unsecured debts into a single, more manageable payment plan.

• Introduced in January 2017, the Debt Consolidation Plan (DCP) is a debt refinancing programme that allows you to consolidate your unsecured borrowings across various banks into a single loan with 1 participating financial institution.

• By combining all your loans that are charging higher interest into a single loan with a low-interest rate, you are able to reduce the amount of interest paid. Hence, alleviating some of the existing financial burdens. Another upside is the convenience of paying to one channel instead of paying each loan individually.

• Under DCP, you will also be given a revolving credit limit capped at your monthly income to allow you to spend on daily essentials. However, utilising this credit means that you are adding to your overall balance so make sure to spend wisely.

• Currently, only Singaporean Citizens and Permanent Residents with annual income between S$20,000 to S$120,000 with Net Personal Assets of less than S$2 million are eligible for DCP. Furthermore, the total interest-bearing debt must exceed 12 times your monthly income.

• If you fulfil all the criteria, you can apply with one of the following 14 participating financial institutions that provide the DCP:

• American Express International, Inc., Bank of China Limited Singapore, CIMB Bank Berhad, Citibank Singapore Limited, DBS Bank Ltd, Diners Club Singapore, HL Bank Pte Ltd, HSBC Bank (Singapore) Limited, Industrial and Commercial Bank of China Limited, Standard Chartered Bank (Singapore) Limited, Maybank Singapore Limited, Oversea-Chinese Banking Corporation Limited, RHB Bank Berhad, United Overseas Bank Limited

• For more in-depth information, feel free to visit https://www.abs.org.sg/consumer-banking/consumers/debt-consolidation-plan.

• Nature: DCL is a type of personal loan offered by Licensed Moneylenders in Singapore. These moneylenders are regulated by the Registry of Moneylenders (ROM) under the Ministry of Law (MinLaw) and must adhere to specific guidelines regarding loan terms and interest rates.

• DCLs are used to consolidate multiple unsecured licensed moneylender loans into a single loan. You essentially borrow enough money to pay off your existing debts, leaving you with just one outstanding loan. 

• DCLs come with fixed repayment terms. These repayments typically include both the principal amount borrowed and the interest charges.

• You'll have a specific period within which you must repay the loan. Loan tenures can vary, so you can choose a term that suits your financial situation.

• Nature: The Debt Repayment Scheme (DRS) is a pre-bankruptcy scheme which is administered by the Official Assignee. It is a legal debt relief program in Singapore that allows individuals facing unsecured consumer debts to create a structured repayment plan with legal protections.

• Targeted at individuals who are in dire financial positions and on the verge of bankruptcy, the Debt Repayment Scheme (DRS) allows you to repay your debt within a set timeframe with no additional interest charge.

• If you are not eligible for DCP/DCL or DMP, DRS is the final lifeline that can prevent your creditors from taking further legal action against you. 

To be eligible for DRS, you must meet the following criteria:

• Total liabilities between S$15,000 and S$150,000

• Gainfully employed and earning regular income

• Not a sole proprietor or a partner in any firm

• Do not have an undischarged bankrupt

• Have not been on the Debt Repayment Scheme in the last 5 years

• Have not entered into a voluntary arrangement with your creditors in the last 5 years

• Under the DRS, you will be assisted in coming up with a suitable repayment timeframe by a court-appointed officer, otherwise known as the Official Assignee. You will have to enter an agreement to make monthly repayment for up to 5 years. Do note that you are liable for the fees payable to your Official Assignee and other relevant administrative fees.

• For more in-depth information, feel free to visit https://io.mlaw.gov.sg/debt-repayment-scheme/about-debt-repayment-scheme/.

• Nature: Bankruptcy is a legal status of an individual who cannot repay debts of greater than $15,000 and is declared a bankrupt by the High Court. The High Court usually appoints the Official Assignee to administer the bankrupt’s affairs in bankruptcy. These include the selling off of the bankrupt’s assets to repay his creditors, the registration of the creditors’ claims and the distribution of dividends to the bankrupt’s creditors.

• If all else fails, your only option is to file for bankruptcy. There are many reasons why declaring bankruptcy is regarded as a last resort and generally avoided by individuals and institutions. Apart from having a public record, you would have to give up your assets as well as any plans of travelling overseas. Your credit score will also be in the worst state possible and could take years to rebuild back to a normal level.

• That said, there are many schemes such as the abovementioned to prevent you from filing for bankruptcy. However, it is not the end of the world if you find yourself in such a situation. Many have come out of bankruptcy and started afresh. Hence, it is important to know your rights and seek professional help.

• For more in-depth information, feel free to visit https://io.mlaw.gov.sg/bankruptcy/information-for-bankrupts/.