Debt Collection

Generally, Singapore’s payment culture is quite good. This is because invoices are usually paid within thirty to sixty days depending on the type of industry but late payments are very rare. The Days Sales Outstanding popularly referred to as DSO and the payment demeanor of domestic companies is exemplary. However, it is important to note that the law does not provide any direction as to how to handle any late payments. This means that contracts remain the sole reference whenever a business relationship turns sour. The legal action is still expensive but the court system currently prides itself as being efficient. Basically, there are two processes involved in the debt recovery process. The first process is getting to know who your debtor is and the second is court judgment and enforcement of debt in case the debtor still fails to pay.

Debt Collection

Late payment interest

Usually, the late payment system has to be consented upon in writing when contractual negotiations are ongoing. In practice, it is better that interest be part and parcel of the negotiation tool when collecting debts. In the same breath, costs for collection must also be consented upon in writing during contractual negotiations. This is despite the fact that the creditor will receive the payment of these funds upon a court request.

Collection practices

There are a number of debt collection practices in Singapore, they include the ones listed below:

Orchestrated negotiation first

Amicable settlement opportunities are normally considered as a very common and serious alternative of debt collection to formal proceedings that remain to be exorbitant despite the fairly efficient court system. The courts usually penalizes behavior that is deemed to be unreasonable such as the rejection of a settlement considered to be reasonable despite the fact that there is a lack of pre-legal action requirements. Before court proceedings against a debtor commence, there is always need to assess their assets so as to verify if the entity or business is still active and whether the chances of recovery of the debt are at best or not (proceedings are of no use if the debtor has no money). Furthermore, it is critical to have awareness of the solvency status of the debtor, in the event that insolvency proceedings were initiated then the enforcement of a debt becomes impossible. Knowledge of the debtor is also important because if it happens to be a person and the debt owed exceeds 10,000 S$ then bankruptcy proceedings become a viable option. All in all, amicable settlement heavily comprises of profiling and negotiating.

Debt Collection

Court proceedings

The Court System for Singapore comprises of State Courts i.e. District Courts and Magistrate Court as well as the Supreme Courts that consist of the Court of Appeal together with the High Court. The court system in the country is independent and fairly efficient but remains to be a costly experience. The court judging debt recovering proceedings in Singapore is determined by the total amount of money that needs to be recovered. For debts that don’t exceed 10,000 S$, a plaintiff should file a petition with the Small Claim Tribunal. The Magistrate Court handles civil cases with debts that are 60,000 S$ or less. On the other hand, District Courts handle cases whereby debts range between 60,000 S$ and 250,000 S$. Lastly, the High Court over debts that exceed 250,000 S$. Essentially legal dunning commences via a registered demand letter which recalls the debtor’s obligation to service the late payments interest together with the principal.

A legal rate can be taken as a reference or as had been contractually agreed. Singapore lacks a fast track scheme and this necessitates that a normal lawsuit be conducted regardless of whether the debt in question is undisputed and certain. There is a possibility of getting an earlier hearing date if emergency is demonstrated. Normally, ordinary legal action starts with the failure of amicable collection. The creditor issues out the Writ of Summons and has it served to the debtor. The debtor is then given a time period of eight to fourteen days within which a defense a defense has to be filed. If the debtor fails to react or pay then the court usually renders a default judgment. However, it should be noted that the refusal to recognize that they were served with the Writ of Summons does not deter the Plaintiff from going further or does not render the service invalid. The court will then set up hearings so as to examine the evidence that the parties have (discovery stage), considers the arguments of the parties as well as their witnesses before arriving at a decision. If the debtor fails to raise a defense or to counterclaim in the course of the proceedings or even if his defense absolutely has no chance of winning, a summary judgment is issued in order to make the proceedings brief.

Debt Collection

Insolvency proceedings

In Singapore, insolvency is related to cash flow. A debtor is considered insolvent when they become unable to pay the debts owed but just the company’s inability to fully make up for its indebtedness would never suffice. The High Court is mandated to handle all insolvency proceedings. They usually assume the kind of debt restructuration proceedings or alternatively consist in in applying the assets of the company of the debtor so as to satisfy the rights of the creditor.

Enforcement of debt

Getting a court judgment or an order of the tribunal is not an end in itself. The debtor may still fail to pay resulting in the enforcement proceedings. There are numerous ways by which a court judgment on debt collection can be enforced and every one of them will have its own process. However, several of the different options will end up in the enforcement of Writ of Seizure and Sale. A professional debt collector more often than not is involved in the enforcement of debt, a debt collector may necessarily not be an individual but rather a business or some other entity especially in recent times.


It should now be evident that the process of debt collection is a difficult and lengthy one. This is why businesses have opted to employ commercial measures to avoid ending up in such situations. Commercial measures comprise of credit limitation, bank and personal guarantees, upfront payment etc. It is only through such measures that the risk of bad debts can effectively be mitigated.

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