235,908 individuals declared bankrupt as of October 2011: DG
Published on: Wednesday, December 07, 2011
Kota Kinabalu: As of October this year, a total of 235,908 individuals were declared bankrupt in the country, said the Director-General of Insolvency Department Datuk Abdul Karim Abdul Jalil.
He said based on the records of the Malaysian Insolvency Department, the main causes for bankruptcy were hire-purchase agreements (26 per cent), followed by personal loans (21 per cent), housing loans (14 per cent) and other loans including business loans and corporate guarantees.
"This places Malaysia among the countries with a large number of bankruptcies compared to the other countries, with an average of 41 individuals declared bankrupt each day," he said.
Between 2005 and October this year, a total of 14,000 cases were discharged of bankruptcy at the discretion of the Director-General of the Department of Insolvency, Abdul Karim told reporters after opening the dialogue on insolvency at the Federal Administration Complex in Likas, here, Tuesday.
The discretion refers to the bankrupt individual paying back the loan on instalments continuously for more than five years and that they offered close cooperation with the Department of Insolvency.
Abdul Karim said the Government was reviewing the Malaysian Bankruptcy Act 1967 in efforts to assist those who were declared bankrupt to continue with life without the debt burden, including automatic discharge.
Datuk Abdul Karim Bin Abdul Jalil
Current Director-General of Insolvency (DGI)
From 16.04.2009 to current.
Department of Insolvency, MDI
Prime Minister's Department
PROFILE Source: www.insolvensi.gov.my/fair2011/images/stories/CV%20DATUK%20ABDUL%20KARIM%20ABDUL%20JALIL.pdf
11 December 2011
By P. Selvarani
Under proposed amendments to the law, bankrupts will soon have an opportunity to start anew after five years
Debtors will have a lot of reasons to smile once proposed amendments to the law are passed to enable bankrupts to be discharged automatically.
It is learnt that under the amendments, bankrupts may be automatically discharged after five years without having to apply to the courts or wait for the approval of the director-general of Insolvency (DGI), to be freed of the social stigma.
The Insolvency Department is seriously considering this move -- which is practised in many countries -- to give bankrupts a second chance to start anew.
The automatic discharge was proposed as the department believes making people, especially those who are honest and credible, a bankrupt for life will not benefit anyone.
"In many cases, it does not help them or their creditors as some of these people really cannot nor have the means to settle their debts.
"Some debtors are also untraceable. So what's the point of having them in our statistics? An automatic discharge will help them get back on their feet and start life afresh," DGI Datuk Abdul Karim Abdul Jalil told the New Sunday Times.
However, he said, many issues needed to be looked into.
"Should any conditions be imposed before this automatic discharge procedure is applied, especially to the dishonest and non-cooperative bankrupts? Or can the creditors or the DGI raise objections in relation to the conduct of the bankrupt? These are matters we have to thoroughly look into."
Several countries, including Thailand and New Zealand, have laws which allow for the automatic discharge of a bankrupt after three years as long as the bankrupt is not involved in fraud.
In Canada, a first-time bankrupt is automatically discharged after nine months if he fulfills all his duties and does not have any excess income. In the United Kingdom, bankrupts may be discharged after a year.
Karim said the automatic discharge was among the proposals under amendments to the existing laws to create a single Insolvency Act.
The proposed amendments have been submitted to the attorney- general.
At present, apart from paying their debts in full to qualify for a discharge, bankrupts in Malaysia can also be discharged at the discretion of the DGI.
This was made possible under amendments to the Bankruptcy Act in 2003 which gave the DGI the authority to discharge a bankrupt after five years or more.
Previously, bankrupts could only be released by the court if they paid their debts in full or if they were wrongly declared a bankrupt.
The automatic discharge proposal was mooted in 2003, but the authorities then felt that it was not the right time to introduce it.
"So, we introduced the Certificate of Insolvency instead which gave the DGI the power to discharge a person after five years or more, subject to objections from the creditor.
"And we used this certificate to save credible entrepreneurs, such as those who became bankrupt due to the economic crisis and not because of their own folly."
Since then, the department has discharged 14,174 bankrupts based on their good conduct and cooperation.
"We had also discharged extremely poor people and the sick.
"Through our outreach programme, we had personally witnessed their condition.
"Some of them were so poor or sick that they could not even make ends meet, let alone repay their debts. In such cases, we released them from bankruptcy because it would benefit no one for us to continue administering their files. Instead, it may incur us unnecessary costs."
Karim said it was necessary to streamline insolvency laws in Malaysia, such as personal insolvency (under the Bankruptcy Act 1967), corporate insolvency (which comes under the Companies Act 1965) and other related laws for a more efficient administration of insolvency cases as many of the laws now overlapped with those of other agencies.
For example, although the DGI is the official receiver and liquidator of companies, which have wound up and societies and trade unions which have been de-registered, laws pertaining to these matters are still parked under the Companies Act 1965, Societies Act 1966 and Trade Unions Act 1959, which come under the jurisdiction of the respective agencies.
"The international trend now is to put all this into one legislation to be administered by one organisation.
"We don't want the functions to overlap.
"We need a more effective and innovative insolvency administration system to create a new insolvency landscape in the country. Without doubt, an effective and innovative insolvency system will contribute tremendously to a country's financial stability."
He said on an average, 41 individuals were declared bankrupt every day.
Most of the bankrupts had defaulted on the payment of their car loans.