Is the debtor disputing the debt, or admitting it but saying it cannot pay?
This should be determined before deciding which route to take. If the debtor admits the debt but claims that it is unable to pay due to cash flow, you should consider either (1) commencing insolvency proceedings against the company (i.e., proceedings to wind up the company) or (2) negotiating a settlement with security, as this is usually faster and cheaper than suing.
If the debtor disputes the debt (e.g., by raising quality complaints, claiming a set-off, or relying on a different reading of the contract) and you cannot agree on a settlement, the dispute will need to be decided in court or arbitration, depending on what the contract provides.
Should I consider settling?
Often, yes – a negotiated settlement is usually the quickest and cheapest outcome. Common terms include a discount for prompt payment, payment by instalments, or security such as a personal guarantee from a director. Record the deal in writing, and state what happens if the debtor defaults (e.g., the full outstanding sum becomes immediately payable). Offers made in genuine settlement negotiations are generally “without prejudice”, which means they cannot later be used as evidence against the party who made them. This lets both sides negotiate openly.
Which court hears my claim?
Civil claims in Singapore are allocated by value: claims up to S$60,000 go to the Magistrate’s Court, up to S$250,000 to the District Court, and above that to the General Division of the High Court. Claims of up to S$20,000 (or up to S$30,000 if both parties agree in writing) arising from contracts for the sale of goods or the provision of services can go to the Small Claims Tribunals, where lawyers do not appear and filing fees are lower.
If the debtor fails to file a defence, you can often obtain default judgment within weeks. A contested claim takes longer (typically a year or more to reach trial), which is why most debt claims settle after proceedings start.
When is insolvency pressure the better tool?
If a company owes you more than S$15,000 and the debt is not disputed, you can serve a statutory demand (i.e., a formal written demand for payment). If the company does not pay, or secure or settle the debt to your reasonable satisfaction, within three weeks, it is presumed unable to pay its debts, and you may apply to wind it up.
The real power of a statutory demand is commercial. A winding-up application (if taken out) is advertised publicly, and banks typically freeze the company’s accounts once they learn an application has been filed. If a liquidator (an independent insolvency professional who takes control of the company, sells its assets and pays its creditors) is appointed, the directors’ past transactions will also be scrutinised. Solvent companies that are merely slow payers tend to pay at this stage.
However, if the company is truly insolvent with little to no remaining assets, winding it up may recover little, because unsecured creditors like you are paid last. Secured creditors (e.g., a bank holding a mortgage or charge over the company’s property) are generally paid first out of the assets secured to them. Next come the costs of the liquidation and “preferential” debts, which the law requires to be paid ahead of others (e.g., employees’ unpaid salaries, CPF contributions and certain taxes). Only what is left is shared among unsecured creditors, in proportion to the amounts they are owed.
Is it worth suing at all?
Before spending on proceedings, you should assess whether the debtor can pay a judgment. Searches on ACRA, litigation records, and property or charge registers can give you an early picture of this. Obtaining a judgment against an empty shell is a costs liability, not an asset.
For cross-border debtors, check where their assets are and whether a Singapore judgment can be enforced there before choosing where to sue.
What to do now
- Gather the contract, invoices, and all payment correspondence and records.
- Send a letter of demand with a clear deadline, or have lawyers send it.
- Run basic searches on the debtor’s solvency and assets before committing to proceedings.
- Choose the route: court claim for disputed debts; statutory demand for undisputed corporate debts of more than S$15,000; or negotiate a settlement for debtors who are willing to talk.
- Take note of when payment fell due – claims for unpaid debts are generally time-barred six years from that date, although a written acknowledgment of the debt or a part payment can restart the clock.
Frequently asked questions
Can I claim my legal costs from the debtor?
A successful party is usually awarded costs, but the amount is fixed by the court (usually by reference to published costs guidelines) and rarely covers the full amount actually spent. With this in mind, you should consider whether settlement is more financially viable.
The debtor is in another country. Can I still recover?
Yes, but you will usually need to take enforcement action where the debtor’s assets are, which adds cost. Where the contract has an arbitration clause, an award is often easier to enforce abroad than a court judgment.