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25-06-2011, 08:43 AM
So low interest rates and low unemployment means less bankruptcies? OK good, then why are so many people over-extending themselves on property? A disaster waiting to happen?
Jun 25, 2011
Fewer people going bankrupt
Number last year hit 14-year low, thanks to vibrant economy
By Jessica Lim
A BETTER economy and low unemployment have led to a 14-year low in the number of people who are declared bankrupt.
Last year, the number of personal bankruptcy orders issued by the courts dropped to 1,537 - from 2,058 in 2009.
The previous low was in 1996 when 1,251 orders were issued.
A spokesman for the Insolvency and Public Trustee's Office (Ipto), which oversees the bankruptcy process, said the fall could be due to factors such as the economic and employment situation.
Economy watchers agree that the dip can be attributed to the low jobless rate and vibrant economy.
They note that the number of bankrupts usually goes up when many people lose their jobs and are unable to make ends meet.
The unemployment rate hit a three-year low of 1.9 per cent in March, down from 2.2 per cent in December last year, said the Ministry of Manpower.
The number of applications for personal bankruptcy - typically filed by creditors such as banks - also fell to a 14-year low last year.
Ipto's data shows that there were 2,202 applications, down from 2,754 in 2009.
The record-low number of people declared bankrupt comes even as two casinos opened last year - which had led to some concern that problem gamblers could run up big debts and risk bankruptcy.
But according to Standard Chartered economist Alvin Liew, a person who incurs gambling debt can avoid bankruptcy if he has income to pay it off.
'Assets may be liquidated but if the debtor has a job, he can structure his way out.'
However, given that the casinos have been operating only since last year, it is still too early to gauge their impact on personal bankruptcies, he said.
'The test will come if there is a global downturn and there are significant job losses. The picture of personal bankruptcies will be very different then, especially with the compounding effect of gambling-related bankruptcy,' he said, adding that current low interest rates also make for easier repayment of debts.
Last year, 2,252 people were discharged from bankruptcy, down from 3,056 in 2009.
But this has to be seen in the context of a drop in the number of people being declared bankrupt over the last seven years.
Insolvent persons are discharged when their debts are paid in full. The Official Assignee can also decide to discharge a bankrupt after three years and if the debts do not exceed $500,000.
Factors such as cause of bankruptcy, assets, age and conduct are taken into account.
At end-April, there were 24,721 undischarged bankrupts.
But with the economy powering ahead, the prospects of more people being taken off bankruptcy are promising.
Take the case of Mr Jimmy Kong who lost his job in 2004 and was declared bankrupt soon after.
The former trainee manager at a food court, who had taken an $80,000 loan for home renovations in 2003, could no longer make the monthly payments.
The 38-year-old has since repaid most of his loan, using money earned from helping a friend run a flourishing wholesale vegetable business. He has filed for a discharge and hopes that this will happen this year.
'I'm glad that the economy is doing well and I can get a job,' he said. 'If not, it will be impossible to pay back my debt.'
limjess@sph.com.sg
Jun 25, 2011
Fewer people going bankrupt
Number last year hit 14-year low, thanks to vibrant economy
By Jessica Lim
A BETTER economy and low unemployment have led to a 14-year low in the number of people who are declared bankrupt.
Last year, the number of personal bankruptcy orders issued by the courts dropped to 1,537 - from 2,058 in 2009.
The previous low was in 1996 when 1,251 orders were issued.
A spokesman for the Insolvency and Public Trustee's Office (Ipto), which oversees the bankruptcy process, said the fall could be due to factors such as the economic and employment situation.
Economy watchers agree that the dip can be attributed to the low jobless rate and vibrant economy.
They note that the number of bankrupts usually goes up when many people lose their jobs and are unable to make ends meet.
The unemployment rate hit a three-year low of 1.9 per cent in March, down from 2.2 per cent in December last year, said the Ministry of Manpower.
The number of applications for personal bankruptcy - typically filed by creditors such as banks - also fell to a 14-year low last year.
Ipto's data shows that there were 2,202 applications, down from 2,754 in 2009.
The record-low number of people declared bankrupt comes even as two casinos opened last year - which had led to some concern that problem gamblers could run up big debts and risk bankruptcy.
But according to Standard Chartered economist Alvin Liew, a person who incurs gambling debt can avoid bankruptcy if he has income to pay it off.
'Assets may be liquidated but if the debtor has a job, he can structure his way out.'
However, given that the casinos have been operating only since last year, it is still too early to gauge their impact on personal bankruptcies, he said.
'The test will come if there is a global downturn and there are significant job losses. The picture of personal bankruptcies will be very different then, especially with the compounding effect of gambling-related bankruptcy,' he said, adding that current low interest rates also make for easier repayment of debts.
Last year, 2,252 people were discharged from bankruptcy, down from 3,056 in 2009.
But this has to be seen in the context of a drop in the number of people being declared bankrupt over the last seven years.
Insolvent persons are discharged when their debts are paid in full. The Official Assignee can also decide to discharge a bankrupt after three years and if the debts do not exceed $500,000.
Factors such as cause of bankruptcy, assets, age and conduct are taken into account.
At end-April, there were 24,721 undischarged bankrupts.
But with the economy powering ahead, the prospects of more people being taken off bankruptcy are promising.
Take the case of Mr Jimmy Kong who lost his job in 2004 and was declared bankrupt soon after.
The former trainee manager at a food court, who had taken an $80,000 loan for home renovations in 2003, could no longer make the monthly payments.
The 38-year-old has since repaid most of his loan, using money earned from helping a friend run a flourishing wholesale vegetable business. He has filed for a discharge and hopes that this will happen this year.
'I'm glad that the economy is doing well and I can get a job,' he said. 'If not, it will be impossible to pay back my debt.'
limjess@sph.com.sg
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