Flat sale may not help speed up bankruptcy discharge

Flat sale may not help speed up bankruptcy discharge


Q My brother, 58, was declared a bankrupt three years ago because of a credit card debt of about $90,000.

He and his wife own a five-room Housing Board flat and they have to pay $800 every month to service the HDB loan. But he is unable to do so owing to various financial reasons.


He plans to downgrade to a four-room flat and use a portion of the sale proceeds to reduce his debt and get a discharge from bankruptcy from the Official Assignee (OA).


He has worked out that after the sale of the flat, he can pay the OA about $20,000. However, the OA said he cannot be granted a discharge based on this figure.


My brother cannot decide if he should sell the flat. There appears to be no point in doing so because even if he pays $20,000 to the OA, he will still remain a bankrupt.


I understand that if a bankrupt owes less than $500,000, he can write to the OA after three years to request a discharge. Is this true?


As the amount he owes is not huge and there is no way for him to raise the cash other than to sell his flat and downgrade to a smaller unit, is this method the only way to get him out of bankruptcy?


How can the OA help him? Are there any Central Provident Fund or HDB restrictions if he disposes of his flat and buys another?



A A discharge from bankruptcy may be done in two ways, either by an application to a court or by a certificate of the OA.


Your brother, the OA or any person with an interest may make an application to a court, which may grant an absolute or a conditional discharge.


If your brother is granted an absolute discharge, he will be free from any further obligations.


For a conditional discharge, the court may attach conditions such as requiring him to make contributions from his post-discharge income.


The court will take into account factors such as your brother’s age, the cause of bankruptcy, why he incurred the debts, the number of creditors involved and the value of his assets compared against that of his liabilities.


For a discharge through a certificate of the OA, the latter generally reviews all cases in which there is a bankruptcy of at least three years and the debts are less than $500,000.


The OA also takes into account similar factors as reviewed by a court and also looks at the bankrupt’s conduct and level of cooperation. The discharge is not automatic.


In both situations, the creditors have to be notified and they are entitled to object. If the OA rejects the objections, the creditors can go to a court for an order prohibiting the OA from granting the certificate.


As both situations involve the exercise of discretion, the interests of the bankrupt are balanced against those of the creditors, the public and commercial morality or common honesty.


An HDB flat is protected as it is not available for distribution to a bankrupt’s creditors, and it has been argued the same protection should apply to sales proceeds.


However, in practice, the OA has always intervened and taken the bankrupt’s share of the proceeds for distribution.


For the purchase of an HDB flat, following an arrangement between the OA and the HDB, there may be no need to apply for the OA’s consent to buy a four-room or smaller flat.


Your brother should work and cooperate with the OA if he wishes to be discharged. This is because the OA keeps a fair balance between the interests of the creditors, which is to be repaid a reasonable sum on the one hand, and the eagerness of a bankrupt to be discharged on the other.


Amolat Singh


Amolat & Partners


Advice provided in this column is not meant as a substitute for comprehensive professional advice.


Source: Straits Times

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