Almost everyone has some form of debt, but when does it become a problem?

“The person can get angry and uncooperative. So being a friend or being a family member, (you) really have to be very patient,” she said.

She added, however, that one way families can help is to take care of household expenses so that the debtors can dedicate their earnings to clearing their debt.

What’s the worst that can happen if I don’t repay my debt?

A creditor that is owed can issue a writ of seizure and sale. When this happens, someone appointed by the court will go to the debtor’s house and mark items that have been seized.

If no payment is made, the items will be sold away, she said.

“It could be very traumatising because this is done at home.  If you have neighbours, it’s possible that your neighbours may see it,” she said.

The other possible action is to sue the person for bankruptcy, she said.

Should I resort to declaring bankruptcy?

While declaring oneself bankrupt is an option, Ms Tan said that it should be viewed as a last resort, after exploring all other solutions first, including discussing with creditors.

“Some creditors may offer you their own in-house debt relief plan. If that helps, then there’s no need to go for bankruptcy,” she said.

She added that firms like hers that can help with a debt management programme are another avenue. Her firm has a support programme for bankrupts and their families, she said.

People with money issues, especially those who are newly bankrupt, experience a lot of stress, she said.

“There’s probably a lot of emotional turmoil and relationship issues so we have taught these people how to better manage their relationship problems, their mental stress and psychological stress,” she said.

If need be, they will be referred to other agencies that can help as well, she said.

She noted that bankruptcy records are publicly searchable. Even after being declared bankrupt, the individual will need to pay at least a fraction of the amount, she added. Bankrupts cannot travel without first getting permission, she said.

“There are responsibilities expected of a bankrupt on top of making the monthly contribution and target contribution in order for me (him) to get discharged and record removed,” she said.

What kind of debts are considered good?

A debt that can help generate income or build human capital, for instance, is considered “good” debt, Ms Tan said. In the case of an education loan, one can earn more after graduation; while loans for property investments can allow for rental income, she said.

But still, people need to be mindful about how much debt to take, she said.

“No doubt there is potential, but I still have to think of ‘am I able to service?’ I think that is a very important question to answer before we apply for a loan,” she said.

One way to assess the need for a loan is thinking of its purpose – whether it is needed and whether it is needed now, its affordability – based on an individual’s monthly cash flow, and whether there are options to taking a loan or installment plan.

What can I do if I am in debt or prone to debt?

If a person is impulsive in making purchases, he should not have credit cards, she said.

“If you don’t have the cards with you, you can’t buy things that you don’t have cash to purchase and the worst scenario is that you use up your savings because you still have a debit card. But at least you don’t have a credit issue,” she said.

While they may have to figure out how to stay afloat until they get their next pay, this is a “smaller problem to address than having a S$10,000 credit card bill outstanding to address”, she said.

She added that her firm holds free-of-charge weekly talks on how to manage debt problems, the dos and the don’ts and the options available to debtors. If engaged, the firm will draw up a family living expense budget and work on a repayment arrangement with the debtors and give creditors a proposal, she said.

“If the creditors accept what he (the debtor) proposed, now the ball is in his court. He just needs to make payment according to what he has proposed, and as long as he makes the payment in full, on time, every month, he can see himself become debt free in a few years down the road,” she said.