Legal Options for Debt Recovery in Singapore

Singapore does not have any specific legislation for debt collection proceedings. Consequently, several options exist to recover money owed by an individual or a business.

The ultimate sanction is a legal process through the courts, but this is not the only route, and may not be the most effective way to recover money owed. A lawyer can review your situation and advise accordingly on your best course of action, but this article will give you a general introduction to debt recovery in Singapore via legal channels.

Court proceedings

Small Claims Tribunal

If the debt is less than S$20,000, the Small Claims Tribunal (SCT) is the best route. Lodging a claim is relatively inexpensive, and a creditor doesn’t require legal representation at hearings, so there’s no exposure to costs.

Some people hire a lawyer to guide them through the process; however, a creditor who chooses to do this will be liable for the lawyers professional fees.

The SCT can deal with claims of up to S$30,000, but the debtor must agree.

There are restrictions on which types of cases the SCT can hear, so the debt owed must not fall within one of the stated exceptions.

Civil litigation

Civil litigation is the option for large debts more than S$20,000 and claims not within the SCT’s remit.

Civil litigation can be expensive and usually requires legal representation. At the very least, a lawyer can assess the case and advise whether it’s viable before you decide to proceed.

Early strategic input is crucial to make an evaluation, as there may be better options than court proceedings.

A lawyer will send a letter of demand if it hasn’t already been done. Sometimes, this is enough to persuade the debtor to pay, but it is also a prelude to further legal action.

A lawyer can estimate their costs, but some of this may be opaque and will depend on how complex the case is, and how the debtor reacts in defence of the claim.

Enforcing a judgement debt

Despite the presence of a judgement order, the creditor is responsible for enforcing the judgement and may have to take further action to ensure the debtor repays the money.

The creditor still must extract the money from the debtor, so the problem remains. There are several options available to the creditor to enforce a court judgement.

Negotiated payment plan

The creditor can agree to a payment plan with the debtor, which can be tactically advantageous. However, this route may have already been tried before without success.

If the debtor still refuses to pay and has assets of sufficient value, one option for the creditor is the issue of an enforcement order for the seizure and sale of property.

Enforcement order for the seizure and sale of property

This order authorises a bailiff to seize movable property belonging to the debtor and sell it to satisfy the judgement debt.

Enforcement proceedings are only worth the paper they are written on if the creditor is reasonably sure the debtor has sufficient physical assets which will be worth enough to cover the debt.

There is no point even commencing court action in the first place if this is not the case, and this again highlights the importance of professional advice from the outset.

Determination of the judgement debtor’s assets

A judgment creditor can apply to the court for permission for an examination of a judgement debtor, formerly called an application for leave. Application is made via a summons without notice supported by an affidavit, which is a signed statement made on oath.

Creditors may use a lawyer to do this or make their own application to the CrimsonLogic Service Bureau.

If the court gives permission, the judgement debtor must attend before a court registrar. The registrar questions the debtor about their assets and where they are, and the debtor may also have to provide supporting documentation.

This information is then given to the creditor.

What assets can be taken under an order for the seizure and sale of property?

An order for the seizure and sale of property can include most property types, so it’s easier to look at what can’t be taken by a court bailiff. Items which cannot be seized include:

• Clothing and bedding valued at under S$1,000.
• The debtor’s wages or salary – these can be accessed via a different type of enforcement proceedings.
• Work tools which the debtor uses in their line of work, the seizure of which would prevent them from earning a living, and where the value does not exceed S$1,000.
• Pension or government allowances.
• Partnership shares.

Know your debtor

The financial circumstances of your debtor will impact how likely you are to get the money back and the best method of doing so. Court proceedings may not be the best and first recourse.

The debtor’s assets

If the debtor cannot repay the money, there will be no point in starting legal proceedings, and a creditor will just incur unnecessary legal costs; civil action is economically unviable in that situation.

Assessing someone’s financial position can be difficult and may require expert help.

Creditors should establish an individual’s employment status or financial circumstances if the debtor is a business.

If the debtor owes money to other people and organisations totalling S$15,000 or more, and has not filed for bankruptcy, this option is open to the creditor, hence the importance of determining their exact financial status.

Sometimes the threat of bankruptcy is a short, sharp shock, and can result in the debt being repaid, but this is only worth doing if a creditor is confident the debtor has the available funds.

Action before legal action

If legal action isn’t the creditor’s first choice, out-of-court options can be worth trying before starting civil proceedings to save time and money. Court action is still available if they fail.

Negotiation

It’s always worth trying to negotiate staged repayments with the debtor or a payment plan. This might involve a more extended period for repayment and/or a discounted amount as an incentive for the debtor to cooperate.

The advantage of this is that it avoids an impasse for which the only possible route to recover the money is a court action which will incur legal costs.

Using a debt collector

Debt collection agencies primarily broker a deal between the creditor and the debtor. They are an option if the debtor refuses to cooperate.

In Singapore, debt collection agencies must follow a code of conduct when pursuing money owed.

It’s vital that creditors use a reputable agency that won’t resort to illegal actions such as threats, abuse, or other unlawful behaviour to recover the money.

A debtor can report a creditor to the authorities if they receive threatening or insulting behaviour from either the creditor or a debt collection agency acting on their behalf.

Letter of demand

A letter of demand is usually prepared by a lawyer. It can be an effective way of asking for the money back, or a precursor to legal action. Often, a lawyers letter will carry more weight as the implication is that court action may follow.

A letter of demand states the amount the debtor owes and the consequences of non-payment, including interest being charged, and/or legal action.

A legal letter of demand can sometimes evoke a response where a simple request direct from the creditor may not be taken seriously.

Final thoughts on debt recovery in Singapore

There are different options to recover money owed in Singapore. Professional legal advice can help creditors find the most effective debt recovery route.