Some of my friends who were unable to attend my talk on Debt management at the seminar on 9 September, organised jointly by the Singapore Professional Centre and the Society of Financial Service Professionals, have asked me if I could write a short article about it.

So, here are some tips on HDB and CPF, if you are cash-strapped or dead broke.

Private property & EC not protected from creditors?

Why is it that bankrupts may be compelled to sell their Executive Condos (EC) or private properties to pay their creditors, from the sale cash proceeds left after paying the outstanding housing loan balance and CPF used plus accrued interest?

HDB protected from creditors?

All proceeds from property sales (except HDB flats of Singaporeans (not permanent residents (PRs)) which are protected from creditors) may be subject to your creditors’ claims.

Don’t sell HDB before bankrupt?

Therefore, you should try not to sell your HDB flat before you are made bankrupt, because any cash proceeds on top of your CPF used (plus accrued interest) will be subject to the claims of your creditors.

Sell HDB after bankrupt?

However, if you sell your HDB flat after you are made bankrupt – your cash sale proceeds are also protected from creditors.

Owe money – no need to pay?

Your CPF is protected from creditors.

CPF protected from creditors?

You should try to keep a paper trail of your CPF withdrawal at age 55, or later if you had chosen to delay your withdrawal, because your CPF is protected from creditors of debts incurred before your CPF withdrawal date.

However, after you withdraw your CPF savings at say age 55, they will not be protected from creditors for new debts incurred after the withdrawal date.

CPF monthly payouts protected from creditors?

The monthly retirement payouts (normally from age 65) from your CPF is also not subject to any claim by the Official Assignee or creditors.

CPF invested not protected from creditors on death?

However, CPF that is not in your CPF account, such as the amounts withdrawn for investment, insurance, etc, are only protected from creditors whilst you are alive, as there is no protection on death.

Therefore, if you know that you are going to die – you should try to liquidate all your CPF investments and return them to your CPF account before death, so that they will be protected from creditors too.

Medisave may not be protected from the hospital creditor?

According to the CPF Board’s web site,

“For a member who passed away on or after 1 July 2006 during his/her hospitalisation, he/she can use his/her Medisave savings to pay for the last inpatient hospital bill in full, without being subjected to the existing Medisave withdrawal limits. This is because the need to save for future healthcare needs is no longer relevant”.

Hospital also a creditor?

Whilst this helps both public and private hospitals to recover their fees from deceased patients, it may deprive the deceased’s dependents of much needed CPF funds.

With the Basic Healthcare Sum (BHS) currently at $52,000, this may be the maximum amount that a deceased’s dependents may be deprived of.

As the BHS increases every year, this amount may increase in future years.

For example, if a hospital is owed say $52,000 and the medical fees are not eligible to be paid under the existing Medisave withdrawal limits and eligibility rules – under the old rules, the hospital would not be able to claim the amount from the deceased’s Medisave balance because CPF is protected from creditors, including hospitals.

Try not to die in a hospital?

Therefore, if you are in such a situation (no other assets that the hospital as a creditor can claim, other than your CPF and HDB) – try not to die in a hospital, so that your Medisave account balance will be protected from any debts owing to the hospital, because you have already exhausted your Medisave withdrawal eligibility and withdrawal limits.

When this rule changed in 2006, was any announcement made in Parliament or in the media?

Editor’s note – The short answer to Mr Leong’s question about the announcement of the change is “no”. The long reply is CPF, as a statutory board has the power to change the regulations of how CPF medisave can be claimed without having to go through the parliament. But at least, there ought to be an announcement to the public about this important change. What the CPF board has done is to remove the limit of how much the hospital can claim from the deceased’s medisave balance based on the treatment schedule and daily rates, in benefit of the hospitals. The fact that the creditor has to dip into the medisave to claim back the hospitalisation fees, would mean that the family does not have ready cash or liquefiable assets to begin with. This means what little money the family could have possibly gotten from the medisave, would be claimed by the hospital.

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