The bankruptcy threshold, or minimum debt that needs to be owed before someone can be made bankrupt, will increase from S$10,000 ($7,400) to S$15,000, in the hope that more debtors and creditors can resolve debts under this threshold and avoid the formal bankruptcy process, MinLaw said.
This will help debtors avoid the "inconveniences and social stigma" associated with bankruptcy, the Ministry said.
Creditors will also no longer have to wait for 21 days to file a bankruptcy application against a debtor after a demand for payment has been issued.
"However, the creditor must show a serious possibility that the debtor’s property or its value will be significantly diminished before the 21-day period ends," MinLaw said.
First-time bankrupts will generally be eligible for discharge within five to seven years, while repeat bankrupts will take seven to nine years. Eligibility for early discharge will depend on whether the bankrupt person has paid a 'target contribution' based on his or her earning potential, the Ministry said.
The timelines are designed to give people an incentive to adhere to their payment plan, and to look for employment, MinLaw said.
The reforms apply to bankruptcy applications filed on 1 August 2016 or later, but the Insolvency Office will "ensure some parity of treatment for existing bankrupts", MinLaw said.