SINGAPORE - After seven years during which it fell steadily, the number of people made bankrupt swung upwards again last year.
While the strong economy and a debt repayment scheme helped push individual bankruptcy orders down from a peak of 4,553 in 2004 to a low of 1,527 in 2011, the orders rose by 14.5 per cent to 1,748 last year.
No reasons were given by the Insolvency and Public Trustee's Office (IPTO) for the increase, but financial advisers, lawyers and counsellors who deal with bankrupts had some ideas about it.
More people might be finding it hard to keep up with their expenses even though they have jobs, as inflation has soared in recent years. Working-class families might turn to credit cards to get by and find themselves in trouble when they cannot pay what they owe.
A typical example is a renovation contractor counselled by Mr Leong Sze Hian, past president of the Society of Financial Service Professionals. The man in his 30s was made bankrupt for charging $6,000 to credit cards "to make ends meet" as he had an irregular income. He went under when his debt snowballed to more than $10,000.
Also, given the solid economy and sizzling property market of late, more Singaporeans may be feeling flush and spending beyond their means, said Credit Counselling Singapore's president Kuo How Nam.
More people may also be getting into gambling debt, especially with the opening of the two casinos in 2010, counsellors noted. There are signs that increasing numbers may be in financial distress.
One is the burgeoning amount on rollover credit card balances - the amount unpaid which usually incurs interest of 24 per cent per annum - which shot up by almost 50 per cent from $3.4 billion in 2008 to $5 billion last year.
Another is the growing credit card bad debt being written off. This nearly doubled from $115 million in 2008 to $227 million last year, data from the Monetary Authority of Singapore (MAS) shows. To prevent people from spending beyond their means, MAS proposed changes to rules on credit cards and unsecured credit last December.
According to IPTO, the top three reasons for bankruptcy are over-spending, business failure and unemployment.
About seven in 10 bankrupts have claims of less than $200,000 against them. Most are in the 31 to 50 age range and the good news is that the proportion of bankrupts just starting out in life has shrunk.
The share of bankrupts between 21 and 30 years old has fallen steadily in the last four years, from 14 per cent of all bankrupts in 2009 to 9 per cent last year.
Lawyer Adrian Peh, who handles insolvency cases, said one reason could be that younger people tend to have smaller debts, which qualifies them for the Debt Repayment Scheme. In 2009, the Government started the scheme, for employed people with regular incomes and debts of less than $100,000. A plan is made to help them to repay their debts within five years.
An IPTO spokesman told The Sunday Times about 700 people have been put on the scheme since 2009. Without it, they would have been declared bankrupt.
There were 24,895 undischarged bankrupts at the end of last year.
Johnny (not his real name), a 43-year-old technician, was declared bankrupt last year after he lost about $300,000 by speculating in stocks and chalked up about $260,000 in debt. He eventually borrowed from licensed moneylenders, at interest rates of up to 30 per cent per month.
Married to a factory worker with no children, Johnny said the moneylenders hounded him every day at his workplace. And he was forced to quit his previous $3,500-a-month job as his boss told him to either resign or get the sack. He said: "The high interest rates really killed me."