What is Debt Repayment Scheme?

Debt Repayment Scheme (DRS) is a scheme administered by the Official Assignee, who is also in charge of bankruptcy cases. It’s an alternative for you if you are unable to repay your debts and do not want to declare bankrupt. It allows you to avoid bankruptcy, along with its many restrictions (such as travelling) and social stigma. DRS provides a win-win situation for you and your creditors whereby you will repay your debts over a period of not more than 57 months. At the end of this period, your debts will be cleared off and you will have a fresh start in life.

In order to declare bankrupt, your total unsecured debts (including both principal and interest) will have to exceed $150,000. If you do not exceed this amount, you have an alternative such as DRS to avoid bankruptcy.

Why did the government initiate this scheme?

Ministry of Law first introduced this scheme in 2009 to seek a win-win situation for both debtors and creditors. For debtors, they faced many issues such as high interest rates and high monthly repayments which make it impossible for them to clear their debts on their own. This led to many bankruptcy cases and for creditors, bankruptcy may not be a good sign as often, they do not get back most portion of the debt owed. Hence, the government designed this scheme to prevent so many bankruptcy cases, as well as to provide Singaporeans with an option early on (before the total debt size reach $150,000) to clear their debts without leaving any restrictions or social stigma.

How is DRS different from other debt consolidation plans?

As we have been emphasizing, this scheme is initiated by the government, which means that the priority of DRS is the people’s interests at heart and to help us avoid bankruptcy. This is contrary to many debt consolidation plans introduced by banks, whose focuses are still on generating profits based on interests (they still charge 4% to 8% interest rate for such consolidation plans).

How does DRS work?

If you are eligible for DRS, our agency will assess your income and financial capacity using your income and expenses statement. We will propose a suitable monthly repayment amount and repayment period, also known as Debt Repayment Plan (DRP). For example, if your income after CPF is $2,300 and your expenses for you and your family amount to $2,000, your disposable income will be $300. We will use your disposable income to gauge an affordable monthly repayment amount (i.e $300 to $350). This DRP proposal, along with supporting documents such as your income and expenses statement, will then be submitted to court for approval. Rest assured, the court will only propose a monthly repayment amount within your affordability.