MinLaw proposes changes to Debt Repayment Scheme: Criminalising the soliciting and canvassing of any person to make a bankruptcy application: Allen & Gledhill

12 June 2025

On 9 June 2025, the Ministry of Law (“MinLaw”) launched a public consultation to seek feedback on proposed legislative amendments to the Insolvency, Restructuring and Dissolution Act 2018 (“IRDA”) and the Insolvency, Restructuring and Dissolution (Debt Repayment Scheme) Regulations 2020 (“DRS Regulations”), in relation to the Debt Repayment Scheme (“DRS”). The public consultation closes on 27 June 2025.

One key proposal is the introduction of a new criminal offence to target the soliciting and canvassing of any person, in the course of any business, to make a bankruptcy application. The proposal aims to address the increasing number of debtor-initiated bankruptcy applications where debtors borrow irresponsibly to pay for consultancy firms’ services in helping them apply for bankruptcy with the intention of abusing the DRS to obtain a discount off their debts. Regulated professionals, in particular lawyers, accountants, and financial advisers, as well as charitable entities that are institutions of a public character, will be exempted. The offence will be punishable with a S$10,000 fine or three years’ imprisonment or both.

Introduced on 18 May 2009, the DRS is a voluntary debtor-driven scheme intended to help wage-earning debtors with unsecured debts not exceeding S$150,000 avoid bankruptcy, while helping creditors receive higher repayments than what they would otherwise receive in the event of bankruptcy. Under the DRS, a debtor with a regular source of income will formulate and implement a debt repayment plan (“DRP”) where he uses a portion of his income to pay all or some of his debts within a maximum period of five years under the supervision of the Official Assignee (“OA”). Upon completion of the plan, the debtor will be released from his debts under the DRS.

The DRS was last reviewed in 2016, which led to several amendments being implemented with effect from 30 July 2020 in the IRDA.

Set out below is a summary of the other proposed changes to the DRS which MinLaw is consulting on:

Adding two new grounds of unsuitability for the DRS: Currently, the OA must report to the court on a debtor’s unsuitability for the DRS if any of the conditions set out in section 289(2) of the IRDA is satisfied. MinLaw intends to add two additional grounds of unsuitability:
- Debtor’s failure to pay preliminary fees: Under regulation 3 of the Insolvency, Restructuring and Dissolution (Official Assignee’s Fees) Regulations 2020, debtors who are referred by the court to the OA to be assessed for their suitability for the DRS must pay S$350 (for the OA’s preliminary administration) and S$250 (for the OA’s review of the debtor’s suitability for the DRS and the OA’s approval of the DRP) (collectively, “preliminary fees”). MinLaw intends to include the non-payment of such preliminary fees, by such time as may be specified by the OA, as an additional ground of unsuitability, so that debtors are placed on express notice that to qualify for the DRS, they must pay the preliminary fees, and to do so when directed by the OA.
- Debtor’s incurring of debts without any reasonable ground of expectation of being able to pay: MinLaw is proposing that the OA may find a debtor unsuitable for the DRS if the debtor, within 12 months before the making of a bankruptcy application, or after the making of the bankruptcy application but before the commencement of the DRS, incurs a debt provable in bankruptcy without any reasonable ground of expectation of repaying it. This proposal seeks to tackle a recent rise in cases where debtors take out loans from licensed moneylenders and financial institutions, shortly before self-petitioning for bankruptcy and thereafter being placed on the DRS, effectively avoiding full repayment through a “haircut” in the DRS while avoiding the stigma and restrictions of bankruptcy.
Adding one further ground of failure for the DRS: To address cases where the OA only becomes aware that a debtor had obtained credit with no reasonable ground of expectation of paying after the debtor had commenced his DRP, MinLaw proposes to include the incurring of such debts as an additional ground of failure under section 300(1) of the IRDA. This new ground will not apply to bankruptcy applications filed before the operative date of the amendment. The OA may issue a certificate of failure to a debtor who has commenced a DRP if any of the conditions set out in section 300(1) of the IRDA is satisfied.
Imposing a four-week deadline for creditors to file proofs of debt (“PDs”): MinLaw proposes to amend section 290(2) of the IRDA to state that the OA’s notice to creditors to file PDs will require creditors to file a PD within four weeks from the date of the OA’s notice. Creditors failing to meet the filing deadline may submit a request to the OA for an extension of time (“EOT”) to file their PDs under regulation 10(7) of the DRS Regulations. The creditor must satisfy the OA that there was a reasonable justification for failing to meet the deadline before an EOT is granted. If a creditor fails to file a PD within four weeks from the date of the OA’s notice without reasonable justification and the debtor is issued the Certificate of Completion, the debtor would be released from the debt in respect of that creditor under section 301(2) of the IRDA.

MinLaw is also proposing various miscellaneous amendments to the DRS.

Submission of feedback

If you have any queries or require any assistance, the specialists listed below would be happy to assist. Please note that the deadline for providing feedback to MinLaw is 27 June 2025.

Reference materials

The following materials are available on the MinLaw website www.mlaw.gov.sg: