Debt Settlement in Singapore - What to Do When You Can't Repay Loans (2025)

One of the most common and faster ways to debt settlement is appealing to your bank directly to negotiate for a discounted final settlement of the debt through one lump sum payment.

However, this is only a good option if you’re able to raise a lump sum amount of money by selling off some of your assets, such as properties or investments, or taking out a low-interest loan from an MAS-approved non-bank institution such as a credit co-operative society or a company loan.

Also known as DMP, the Debt Management Programme is offered by Credit Counselling Singapore (CCS), a charitable organization that helps those with unsecured debt issues. If you’re eligible for this programme, CCS will hold a debt advisory session with you to work out your monthly spending needs and a payment proposal that the banks can approve.

Similar to personal loans with a monthly instalment plan, a DMP enables you to gradually repay unsecured consumer debts including credit cards and overdraft with moderated interest charges over a reasonable and agreeable tenure that is discussed between you and the creditor.

The tenure can range from 5 to 10 years, depending on your financial capability to pay back the debt. However, your debts in a DMP are not consolidated under one bank unlike the Debt Consolidation Plan (DCP) which we will explain in more detail later on. So you’ll have to bear with the inconvenience of making repayments of your debt with multiple credit cards or debit cards.

The Debt Repayment Scheme (DRS) is considered a pre-bankruptcy scheme administered by the Official Assignee (OA) from the Ministry of Law’s Insolvency Office. Through DRS, you’ll be able to avoid bankruptcy, along with its financial restrictions.

Moreover, unlike in a bankruptcy, you do not have to face any travel restrictions, and have the flexibility to repay your debts over a fixed period that is often about 5 years, and can maintain a regular savings account. Note that a DRS is not like a personal loan which you can sign up or apply for.

Most of us do not wish to reach the stage of bankruptcy as it comes with many consequences, but at times, it may be the last resort one has to take. So to be mentally prepared, you’ll need to know that you can only file for bankruptcy if you cannot repay debts of greater than $15,000 (according to the Bankruptcy and Insolvency Act in Singapore).

While this can be done voluntary, banks can also begin proceedings without any permission from you to declare you as bankrupt (if the banks have evidence that you’re in this state). Thereafter, there are many restrictions placed on you as a bankrupt such as having your assets seized, having to declare every single expense although you can still continue to be employed and working, getting a travel ban, difficulty in future loan applications due to impaired credit score.

Not to be confused with the DRS, a debt consolidation plan or a “DCP loan”, is a type of repayment scheme that helps you combine all your outstanding unsecured debt (including those from different banks) into one single loan with one bank. It usually involves a 1-month income revolving revolving facility and has a tenure of up to 10 years. Your DCP loan will be calculated by your DCP issuing bank which is typically a sum of the total outstanding debts, plus outstanding interest, plus 5% on top of the total.

There are some limitations when signing up for a DCP as it is only meant for credit card bills, personal loans, and personal line of credit, meaning a DCP excludes any secured loans like home loans, car loans, education loans, renovation or business loans. In addition, you’ll have to be a Singapore citizen or PR to qualify for this type of loan.