Good News! Automatic Discharge for bankrupts coming soon!

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asked on Feb 7, 2012 at 17:26
by   Sharimah
edited on Aug 1, 2016 at 23:21
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

Second chance

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.

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answered on Oct 1, 2012 at 19:06
by   guarantor
edited Jun 20, 2016 at 07:08
I'll be away for sometime (haj) from mid October to early November. I try to be online if possible. I wish to share things that we can do, not things that we cannot do.
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answered on Oct 1, 2012 at 20:28
by   Waiting

You're going for Haj ... how do you apply to leave the country? Do you need to put a deposit (refundable) and also some that is not refundable?
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answered on Oct 1, 2012 at 21:18
by   guarantor
edited Jun 20, 2016 at 07:22
Well as in previous postings, I did mention the hassle of leaving the country. You are right with some of the procedures we need to follow. That is why I propose an equal amount of money that I owed the bank as guarantor, to Jabatan Insolvensi Malaysia (JIM) (3rd party guarantee) as security. Then I don't have to follow the procedures. Even that JIM cannot decide. Reason is I do go abroad quite often, 3 kids there.
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answered on Oct 2, 2012 at 01:27
by   Waiting
edited Jun 20, 2016 at 07:43

I'm sorry, can you define this:

That is why I propose an equal amount of money that I owed the bank as guarantor, to Jabatan Insolvensi Malaysia (JIM) (3rd party guarantee) as security.
I can't understand.
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answered on Oct 2, 2012 at 03:54
by   guarantor
edited Jun 20, 2016 at 08:18
I owed RMX as a guarantor. Rather than going thru' the tedious procedures of going abroad, I propose a 3rd party to put RMX in terms of any form of guarantee to Jabatan Insolvensi Malaysia (JIM). When I come back return back the RMX to my 3rd party. By doing this if I default JIM can liquidate the RMX. So what else does JIM needs. I always challenge JIM of their procedures. They always undermind people like us. When the borrower borrow money I guarantee. When cannot pay, I become bankrupt. So if go oversea and default in my promise take the money lah!
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answered on Oct 2, 2012 at 13:51
by   Waiting
edited Jun 20, 2016 at 08:22

Thank you for the explanation. I would understand is easier to get permit to leave for Haj than for holidays. Because I am also a bankrupt guarantor and wanted to bring my kids overseas - even not able to go to Singapore. Jabatan Insolvensi Malaysia (JIM) said no holidays abroad is allowed! Hope you'll be able to enlighten me on how to apply when you go visit your children abroad. Which JIM office did you go to?

Do have a good & safe Haj.
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answered on Oct 2, 2012 at 18:48
by   confused
edited Jun 20, 2016 at 08:24
If my accumulated debt reached RM50,000 and I am declared a bankrupt, then after 5 years, I am FREE! Does it mean after 5 years, I DON'T NEED to re-pay my debt anymore! Can someone please let me know if this is real? Thank you.
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answered on Oct 2, 2012 at 21:08
by   Life
edited Jun 20, 2016 at 08:26

You better browse through this forum. You are still a bankrupt after 5 years if you still have not settle the debt. You may negotiate with your bank to bring down the debt settlement amount may be not RM50,000.
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answered on Oct 2, 2012 at 21:40
by   confused
edited Jun 20, 2016 at 08:28

Thanks. My mistake. My English is not that good. I thought a new proposed law says "automatic discharge from bankruptcy", so I thought that after 5 years we are no longer bankrupts and free from paying the loan debts. Hehehe... maybe I was dreaming!
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answered on Oct 3, 2012 at 02:40
by   guarantor
edited Jun 20, 2016 at 08:31
Thanks for wishing me. I try my best to share what I can. I'm sorry if I say this because I have the means to pay since mine is small amount, but I refuse because I don't agree with the system, be it bank or Jabatan Insolvensi Malaysia (JIM) and they know it. That's why I always challenge their system. I never feel like a bankrupt except when getting approval leaving the country. They are many ways to beat the system. I will share bit by bit because I know the JIM guys are here too.
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