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Top 3 Reasons Singaporeans Go Bankrupt

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Joanne Poh

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You don’t have to be addicted to casinos or get sued for defamation to go bankrupt. Every day, regular people like you and me file for bankruptcy—and the number is rising. In 2013, 1,992 people were made bankrupt, a rise of 14% from the previous year, and the highest since 2009 when the economy was in the doldrums.

You would think many of the people in financial trouble would have faced exorbitant medical bills or lost a huge lawsuit. But according to the Insolvency and Public Trustee’s Office, the top reasons Singaporeans go bankrupt are less dramatic:

 

Overspending

One of the top reasons identified by the IPTO was overspending, and irresponsible credit card use appears to be part of the problem. This has pushed the MAS to impose tighter limits on credit card debt—by June 2019, credit card users will be able to borrow a maximum of 12 times their monthly income, half of what they’re allowed to borrow now.

While the Orchard Road shopping belt might have something to do with it, experts say that rapid inflation has had a part to play, too. Not all the people accused of overspending are actually splashing out on luxuries they can’t afford. A number of these unlucky souls simply turn to credit card spending because they’re no longer able to keep up with their expenses on their current salaries thanks to rising inflation.

Unfortunately, with consumer debt levels rising year on year, it seems like Singaporeans aren’t going to stop spending. Other than spending on luxuries like fancy holidays and designer goods, many Singaporeans also have a weakness for gambling.

Rather unsexily, the key to curbing overspending is simply to do some good old budgeting and examination of expenses. Even if you think you’re not living extravagantly, there are usually ways to cut your expenses further.

 

Failed business ventures

The government often laments that Singaporeans are not entrepreneurial enough. But risk-averse locals will quake in their boots when they realise that failed business ventures are one of the biggest reasons Singaporeans go bankrupt. But failing in business doesn’t necessarily mean putting down all your money on a ridiculous idea without first conducting a modicum of market research.

In fact, many failed businesses that have landed their founders in hot soup used to be profitable. In recent years, the business environment has gotten a lot more challenging. Thanks to high COE prices, it now costs much more to buy company vans and cars than it did ten years ago.

Tighter rules on hiring foreigners have forced some SMEs, unable to find people willing to work for them for pathetic wages, to hire Singaporeans in low wage positions at slightly higher prices. The higher qualifying salaries for foreigners working in Singapore on the various passes has also increased the cost of hiring.

While starting a business always involves some element of risk, SME owners should be particularly wary of relying too heavily on the exploitation of cheap labour.

 

Unemployment

A third huge reason cited for escalating bankruptcy was unemployment. This does not seem too obvious at first glance, given the fact that unemployment rates in Singapore are some of the lowest in the world, at 2% currently. If not many people are unemployed, why are so many people going bankrupt because of it?

If unemployment can be cited as a key source of bankruptcy even with such a low unemployment rate, it stands to reason that anyone who becomes unemployed has a high likelihood of falling into bankruptcy. The low unemployment rate suggests that chronic unemployment is not a problem, meaning that those who lose their jobs find new ones soon after. So you might not even need to be unemployed for too long before the long arm of the law hoists bankruptcy upon you.

Given the high cost of living and the fact that Singaporean households are not saving much cash from month to month (if this report is to be believed, nearly half the households here live from paycheck to paycheck), being unemployed for just a few months could lead to rolling over of credit card balances, which can then spiral out of control quite quickly thanks to compounding interest.

Have you ever come close to being made bankrupt? Tell us about your ordeal in the comments!

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Joanne Poh

In my previous life, I was a property lawyer who spent most of my time struggling to get out of bed or stuck in peak hour traffic. These days, as a freelance commercial writer, I work in bed, on the beach, in parks and at cafes, all while being really frugal. I like helping other people save money so they can stop living lives they don't like.

  • Aksel Yap

    Wow this is interesting, didn’t think that Singaporeans could be out control when it comes to spending. Most people I meet seem pretty prudent with their cash

  • bmvjr

    The answer to why Singaporeans go bankrupt requires a few questions to be looked into first.
    One is: why do people get credit cards when their credit rating does not support giving them one (or sometimes two or more!) ? Is it a lack of due diligence by the credit card companies or banks? Or do they expect to make more money if they issue the card first, let the user max it out and then make a lot more money by charging higher rates on defaulted re-payments?
    Another question is: why do so many banks approve loans and credit lines to people who want to start up a business that is already way saturated in this limited market? There is a strange argument to be heard from bankers such as “oh yes, nail boutiques, hair salons, tuition centers are a proven concept so here you are…”. Those and quite a number of similar allegedly proven business concepts take up premises at exorbitant rental cost, renovate, open with fanfare, struggle for a few months and then, quite predictably go belly up. What remains is a disillusioned entrepreneur with debts that cost a small fortune to repay. On the other hand if you approach the banking sector in Singapore with a truly unique concept, they shy away as this does not fit their term of a “proven concept” as does everything really new. Beats me.
    One more question: why is it that nobody in Singapore manages to make frugal living within your means a sexy thing to do? What is sexy about longing for brands you can’t afford while discarding brands that cost half at the same quality or going makan to pretentious places where they charge you triple for tiny portions of food and beverage that the true expert knows to be way below the charged value or paying this ridiculous amount of membership fee for a fancy, shiny fitness club while in truth you could achieve more for your fitness either for free at home or outdoors or buying this new, latest model of a hand phone while your existing one is not only still working just fine but is already loaded with more features than you will ever use? I could go on, point being, there is nothing sexy about this kind of consumerism, if it lands you sooner or later in debt, because by then you lose more face than you would ever for not showing off a latest hand phone!
    Confident smart people don’t need the short term pseudo-admiration for being seen with a latest hand phone or at this super expensive club or restaurant or in latest sports fashion in a gym where the personal instructor checks his sms while you are fiddling helplessly with some machine. Confidence comes from not needing this. Confidence comes from living within your means, free of worries and able to smile at life while enjoying it. Now that’s sexy.

    My advice? Throw away this “special offer” leaflet, cancel the gym subscription and go running or stretch at home, buy smart, take care of your equipment so it lasts longer, get proper value for your money, don’t bother so much about what the others may think, invite friends over to cook and eat together because the company counts, not the glitzy venue. And remember – the Casino always wins, you don’t!

    • Jie Ming

      You can learn to enjoy all the good things in life but one must know who to manage their money. Overspending. Thats why I find we must set aside a minimum sum of money in the CPF cos not everyone knows how to manage their funds.

  • Angelia Ng

    My story is this.

    I started working at age 14 supporting myself and am a very prudent person who spent less than $30 in a month.

    When i started a family in 2009 at age 23, my savings was more than enough to see me through pregnancy, birth, raising a family and employing a helper. Life was good and i was better off than my peers when despite all of the above, my bank account was still in a healthy range of 5 digits.

    My problem started 2 years later in 2011, when i decided to ballot for a BTO – $380,000 for a 4 room flat. Despite 1 entire year of applying for the HDB loan, my application was rejected over and over again. One day i could receive a letter citing that everything is in order, another a letter saying rejected and another as cancelled. Finally, i received a letter from HDB citing that i will have to pay the full sum nett off my cpf in order to sign the agreement of lease. If i do not in 2 weeks time, my entire option will be cancelled.

    Desperate, one of my friends told me about stocks. I turned to it in May 2012 to try to raise that $380,000. In the end, it was a nightmare. I lost more than $100,000 in less than few days. After paying up my entire savings, i was still in deficit of $100,000 and was being threatened for bankruptcy from my broker.

    Then, i made the stupidest decision ever and applied for bank loans and credit cards (i have none prior to this) in order to pay off ocbc securities. Despite this, i was made a delinquent by sgx and in debt of $100,000.

    From 2012 to now 2015, i have been working 3 jobs, laying off my helper and still, not a dent was made in the loans due to the finance charges and interest laden on.

    It was a sad turn and i am now seeking credit counselling for help. The only person to suffer from all these is my young son for he has never known hardship since he was born. Suddenly he has to go without. For me, there is no change in lifestyle since i dont spend beyond the neccesities since young.

    • Angelia Ng

      It would be smarter to go into bankruptcy enjoying life to the fullest rather than reasons like mine – attempt to buy a bto only to end up with savings wiped out (15 years of hard work gone in days), never travelled overseas nor have any branded stuff etc.

      The worst thing to rub salt into my wounds is that in 2013 when i applied for rental flat the officers took a look at all my documents in their system and commented that there is no reason my loan application is rejected. The only reason they gave me was the messy handover from mah to khaw and urged me to apply for a refund of my option fees ($2000).

      It was rejected

      • Sunny Sun

        After reading your story, I feel so sorry for you.
        I sincerely wish you all the best and I hope things will turn better for you.
        Do seek financial assistance.

    • Jie Ming

      Not everyone is into stocks. Majority who touch stocks lost money.

  • A.T

    I am a bankrupt.

    One of my family member suffered for a health condition and I spent 4 years taking care of him full time. I barely slept for 3 hours per day for 4 consecutive years. My business suffered because of the lack of focus on my part. My health suffered. My income suffered. My savings suffered. Soon enough, I’m using credit card to pay off bills. Before I knew it, I’m over $100k in debt and you can guessed what happened next.

    The debt collectors for my case is not any civilized than illegal loan sharks. They called daily from as early as 8am to 11+pm. They left sms with a number that led to voice mailbox. They called from unknown numbers and some times their office numbers. They banged on my door at late nights and shouted my name at the door to make sure my neighbors heard. They taped legal letters on my door and also intentionally left it on the floor so that everyone walked past can see the letter lying on the floor. They even called my ex-company which I left 10 years ago.

    For those who assumed negotiate with banks and debt collectors will help, it is a cock and bull story. Each debt collector I called, they wanted to negotiate a partial sum to be pay back in a week or two. I called banks and I have the same reply although in more civilized English. After each attempt to negotiate with them, perhaps they know they have caused enough stress and I feel humiliated, they make it a point to send more letters at my door step and by post, and call more often than usual. I reckon they assumed I do have money to pay but just doesn’t want to. Soon, I’ve learned that if I have no means to pay, there is no need to talk.

    During that period of time, coincidentally, I have received many texts and emails to offer unsecure loan. The number and email address I received the unsecure loan ads are mainly used for personal matters and transactions. I registered that number and email with only a handful organizations such as Banks, CPF board, ACRA, Hospitals. I normally use my business numbers and emails for everything else. It is suspicious to me banks have leaked personal data. However, what can I do? I swallow the extreme practice because it is a fact that I owe money.

    At that point of time, I didn’t know how to cope with the enormous stress from the fear of losing my family member, the commitment in taking care of him, the compounding bills, the humiliation by debt collectors’ calls and legal letters, the embarrassments and my own health. I feel like ending my life daily but I can’t. There was still someone who needed my care. The last thing I want to happen is to let my family aware of the plight I’m in.

    Phone is always in silent mode. I always tear in the toilet whenever I opened the letters from banks stating the increasing amount I owed. The amount is increasing by thousands every month. Some statements does not tally, they are throwing figures for the presuming legal charges and handling, but what can I do? I can only suffer in silence. I can’t call them to clarify. The only thing I can do to stay sane is to ignore all the calls and letters from the debt collectors.

    There weren’t much available information about bankruptcy in Singapore then. Even the ipto website didn’t provide much information on bankruptcy in Singapore. I even came across missing links and wrong links on the website. I had lots of uninformed worries. I was afraid if I declare bankrupt, my house will be taken away. My family has no place to stay. I was afraid what if my debt is transferred to another family member? I was afraid my computer will be taken away and I can’t work anymore. I was afraid if my bankruptcy will affect my immediate family members. I didn’t know how and where to file for bankruptcy. I combed all forums and blogs I can find but to no avail. Perhaps it is a shameful thing and people don’t want to talk about it openly. I don’t know what to do and I wasn’t qualify for legal aid. With many other important issues on hand, I let it run its course.

    Finally, they sued me bankrupt.

    I remember when I was to fill a form to declare bankruptcy, I looked at the options that were available for reasons of bankruptcy. I was badly deprived of sleep and was really sick, my mind was in a blank. I looked at the options, I don’t know what caused it but I have to give a reason. I was afraid if I listed too many reasons and I looked like someone who runs away from responsibilities. My business didn’t fail technically. I wasn’t really unemployed. I was afraid to state ill health because I was afraid it will affect my future employment. I felt guilty to blame it on my family member condition. Someone next to me whispered something and I think I wrote what they whispered. I can’t remember what it is. Frankly, the only reason is unable to repay debt but it is not one of the option given.

    Weeks after my bankruptcy, I had a near death situation due to illness and before I can regained my strength, the family member passed away. My world collapsed.

    Fast forward to now, I can’t find a full-time job due to my health condition. Daily commuting is a toll to my health and I can’t work continuously for 4 hours without a rest. With such health condition, I can’t find full time permanent employment.

    If only I can start a very small home business where I can work at my own time, I can still have means to support myself and contribute some to the family. However, as a bankrupt, I can’t start a business. I can’t do business with my name. Realistically, I can’t tell everyone I want to do business with I’m an undischarged bankrupt.

    Now, my parents have to pay for the family expenses and I live in shame and stress daily. The shame is not from bankruptcy but for the inability to support myself. Before bankruptcy, I always live my life with the basic necessities and not much extra. However, I will buy 1-2 sets of new clothes for new year each year. These few years, I have not bought anything. My shoes, jeans and T-shirts have tiny holes due to wear and tear and I sewed up the holes and wear them still. Sometimes I cried to sleep, I wish I won’t see the sun tomorrow. Sometimes I am thankful to be alive.

    Before all these issues, I had always cleared off my credit bills monthly. There were probably few occasions I forgot to pay in time but rarely with any outstanding. I have always lived within my means and never have the habit to advance money from someone or bank. With my earnings, I have to help my family members to clear off their debts monthly. Although I don’t have much savings but I was never in need of borrowing money.

    Not all bankrupts are made a bankrupt because of advancing money for personal leisure, irresponsibility and speculation. Sometimes we are caught in a situation where we have lesser control than we think we have. When I looked back, there were many critical points where I could have made better decisions to have a better outcome. But such insights happened only after I walked the path.

    I hope the society can be gentler to allow bankrupts a chance to start fresh. Thanks for the time to read this if you have followed so far.