Q: Commercial Debt Management and Advice for Bankruptcy?
A: Group offers services to help debtors Credit counselling service, backed by more than 10 consumer banks, to help those in debt stay out of bankruptcy By Tanya Fong and Yap Su-Yin A CREDIT counselling service bringing together several agencies has been set up to help debtors who are in danger of being made bankrupt. The agencies involved are the Subordinate Courts, the Southwest Community Development Council and the Association of Banks in Singapore. The Credit Counselling Singapore (CCS), a non-profit group, has gained the support of more than 10 consumer banks, including DBS Bank, Citibank and United Oversees Bank - a critical step in ensuring its success. The service will work by counselling debtors who have trouble repaying credit card bills or bank loans. It will then work out a debt management plan for them, allowing them to repay the banks in monthly instalments that they can afford, and thus avoid bankruptcy. To do this, the CCS will look at a debtor's monthly earnings and deduct what he needs for basic expenses. The remaining money will be used to repay the banks - a bank that is owed more will get a larger repayment amount. On their part, the banks will help by considering whether to reduce a debtor's interest payment and allowing a longer repayment period. This is critical to the scheme's success because, although commercial debt management firms exist, banks have not cooperated with them. On top of this, the commercial companies charge higher fees: Anything from a flat $300 per case to 3 per cent of a person's total debt. This potentially increases the burden on a debtor. At the CCS, debtors pay an administration charge of $120 for a debt management plan to be put up to a maximum of six banks. Counselling sessions will cost $30 per session. It was not easy to get the banks to give the CCS their support, however, said Member of Parliament Tan Cheng Bock, who has backed a credit counselling service for the public since 2002, when several district judges brought to his attention the rising number of people being taken to court for defaulting on payments. He said: 'There was initial apprehension from the banks, which perhaps did not see a win-win situation between them and clients who encountered these problems.' Although the number of Writ of Summons - often a precursor to bankruptcy proceedings - filed against individuals and companies from January to September this year fell 26.7 per cent to 29,215 when compared to the same period last year, the number of bankrupts has risen to an all-time high here. Figures from the Insolvency and Public Trustee's Office show that at end-August, 3,075 bankruptcy orders were issued, bringing the total number of bankrupts in Singapore to 20,553. Hence the need for the CCS, which will be launched officially today by Education Minister Tharman Shanmugaratnam, who is also deputy chairman of the Monetary Authority of Singapore (MAS). The centre was informally started in July last year with $300,000 from the Social Enterprise Fund set up by the Community Development, Youth and Sports Ministry, National Council of Social Service and the Singapore Pools. Since then, more than 150 people have received help. Debtors were referred to the CCS by the banks, the MAS and the Consumer Mediation Unit of the Association of Banks in Singapore. About $1.1 million in credit card debts has also been collected by the centre through the debt management programmes implemented by the CCS staff. The challenge now, said Dr Tan, is to help those already in debt, and educate Singaporeans on the responsible use of credit .