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Number of bankruptcy applications at the lowest since October 2016

Number of bankruptcy applications at the lowest since October 2016

Source: Business Times
Article Date: 15 May 2020
Author: Kelly Ng

This comes from temporary laws having raised the debt thresholds for personal bankruptcy and corporate insolvency; also, courts are holding off on hearing insolvency cases.

Personal bankruptcy applications in Singapore have fallen to the lowest since October 2016 with temporary legal provisions having kicked in last month, and as non-urgent proceedings take a hiatus amid tightened lockdown measures.

The number of individuals applying for bankruptcy was 160 in April, a 65 per cent dip from the 462 cases in March - the highest monthly figure this year thus far.

The last time monthly bankruptcy applications fell to the hundreds was in October 2016, when 158 applications were made.

Actual bankruptcy orders made last month fell to 22, less than a quarter of the 91 orders made in March.

The number of individuals discharged from bankruptcy also fell - from 345 in March to 131 last month.

The slide comes after temporary laws taking effect last month raised the debt thresholds for personal bankruptcy and corporate insolvency.

Provisions under Singapore's Covid-19 (Temporary Measures) Act, which commenced on April 20, raised the debt threshold for personal bankruptcy from S$15,000 to S$60,000.

The debt threshold for the individual to apply for the debt repayment scheme has also been raised from S$100,000 to S$250,000.

The legislation also gives individuals and businesses more time to satisfy contractual obligations, with a statutory moratorium that will last through October 2020 - but the government has the power to extend it for another six months.

Lawyer Mohamed Baiross said this month's dip was expected.

"The government has made modifications to Singapore's bankruptcy and insolvency laws to grant temporary relief. All of this have drastically reduced the number of bankruptcy applications," said the managing partner at IRB Law, who advises on insolvency, among other things.

"I do not expect the numbers to pick up as long as the temporary provisions are in effect."

Insolvency lawyer Ng Yeow Khoon attributes last month's dip mainly to the "circuit-breaker" period which started on April 7, during which the courts are hearing only urgent, essential cases. "All the bankruptcy orders made for the month of April were made on April 2, as no bankruptcy hearings, which are considered non-urgent, have taken place during the circuit breaker. In fact, there won't be any orders made for the month of May since there are no bankruptcy hearings this month," said Mr Ng, a partner at Shook Lin & Bok.

Even after the circuit breaker lifts on June 1, he expects numbers to remain low due to the temporary provisions, which will be in force until April 2021.

Before this, the courts were processing a monthly average of 426 bankruptcy applications in the first quarter of this year.

The first quarter of the last four years have brought in a monthly average of between 231 and 252 applications.

The number of actual orders made, however, has been on a slight decline, year on year.

Between January and March this year, 375 orders were made in all; the figure was 408 for the corresponding period last year, and 410 in 2018.

A similar trend was observed in the number of forced liquidations, with the threshold for corporate insolvency raised 10 times, from S$10,000 to S$100,000.

Only four firms here were ordered by the courts to wind up in April, compared to 45 in January, said BizInsights, an information service provider for the Accounting and Corporate Regulatory Authority.

Source: Business Times © Singapore Press Holdings Ltd. Permission required for reproduction.

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