Can I maintain car loan account after declared bankrupt?

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asked on Oct 12, 2018 at 22:47
edited on Oct 17, 2018 at 20:20
I will be adjudicated a bankrupt in October 2018 due to failure to repay bank loans. I still got an active 5-year car loan and still paying it. If according to info, when I'm bankrupt, any loan or account will be frozen and to unfreeze I need to go to Jabatan Insolvensi Malaysia (JIM) and request for permission to maintain a salary account. My question is how about car loan account? Will the bank repossess it and auction ("lelong") it or can I negotiate with them?
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6 Answers

answered on Oct 12, 2018 at 22:48
edited Oct 17, 2018 at 20:21
@jeff005, can I request some input from you on this matter?
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answered on Oct 12, 2018 at 23:38
edited Oct 17, 2018 at 20:24
According to Insolvency Law, the hire purchase bank will repossess it and lelong it. Any balance will be remitted to Jabatan Insolvensi Malaysia (JIM). Case to case basis.

Even if you have completed it (settled the loan) down the road, the hire purchase bank will surrender it to JIM, not to you.
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answered on Oct 13, 2018 at 00:44
edited Oct 17, 2018 at 20:25
@jeff005, thanks for your advice but what do you mean by "case to case basis"?
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answered on Oct 13, 2018 at 08:42
By law, all banks must recall all loans including hire purchase loans within 6 months of bankruptcy.
In real life however, some banks pretend to not know about your bankruptcy and continue to collect your installments for years.  This is because they gain financially by doing this.

If you like your car very much, you can also buat bodoh and continue to pay your installments promptly.
If you do this, i would advice you to lock your gates at all times and park far away from your office so your car cannot be easily taken by re-possessors.
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answered on Oct 13, 2018 at 19:56
edited Oct 17, 2018 at 20:53

Just personal views, interpretation, comments...

what do you mean by "case to case basis"
There are 2 laws affecting a bankrupt for assets:
1. Insolvency Laws (IL)
2. Hire Purchase Laws (HPL)

For assets still under bank loans:
Within 6 months of being adjudicated a bankrupt, the banks have the right to auction and liquidate those assets to recoup their loans. Failing which, the banks' legal rights to do so will be forfeited. After any auction, the banks have to remit the balance money, if any, to JIM for the bankrupt's estate. 

What happens if the amount of money generated from the auction sale of the assets (usually even 50% below the market value) is not even enough to cover the outstanding loan? JIM does not want to take, the bank does not want to lelong, money is spend upfront. JIM and the Bank will buat bodoh also. Just wait until you have completed all the installments, then transfer it to JIM. Simple solution.

Another complication sets in for hire purchase creditor. Under hire purchase laws, once a borrower has exceeded payments of 70%, the bank cannot simply repossess the motor vehicle without going thru a tedious process thru court (additional moneys spend). So, the hire purchase bank would rather let the debtor fully settle the loan and then transfer the ownership to JIM. Jabatan Pengankutan Jalan (JPJ) (transfer of ownership) is already online with Jabatan Insolvensi Malaysia (JIM).

A bankrupt has posted @Remy's thread that JIM will allow 1 house and 1 car without specifying any reasons. Is there such a law inside Insolvency Law? It is not even inside JIM Policies. It may have happened to him because of the scenarios I have stated above, but it is not the same situation as with every bankrupt.

The only solution is to make a successful discharge from bankruptcy after the 3 years  Case Management. The car is yours..!!

Remy's car and yours are different cases. His has 5 months more to go (within the 6 months limitation period), yours is 5 years.

Hope you can understand my explanation.
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answered on Feb 7, 2019 at 21:19
Corrections to an error above. 

once a borrower has exceeded payments of 70%
The correct % is 75%

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