Good News! Automatic Discharge for bankrupts coming soon!

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asked on Feb 7, 2012 at 17:26
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 Feb 18, 2013 at 21:32
No more news on automatic discharge huh.
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answered on Feb 19, 2013 at 01:43
Anybody....what was the update on today's meeting?
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answered on Feb 19, 2013 at 03:17
edited Jun 20, 2016 at 08:53
I'm on TV now, watching the post-mortem of today's meeting. Most disgusting, none of Jabatan Insolvensi Malaysia (JIM) and Bank Negara Malaysia (BNM) representatives was at the forum. Both the heads should be sacked.

What happen on TV is the panels was also disappointed that the Director General (DG) of JIM was not present at the meeting. I think the Prime Minister (PM) should sack him.
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answered on Mar 18, 2013 at 19:56
Wonder how long more do we have to wait for good news !
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answered on Mar 19, 2013 at 13:50
edited Jun 21, 2016 at 03:25
I wonder what would the rest of bankrupts would do? Wait for auto discharge to take place or continue paying the monthly dues to Jabatan Insolvensi Malaysia (JIM)?

Does anyone have any thoughts on this, I for one opt to pay the monthly sum after a brief hiatus waiting for this auto discharge to take place, and nothing has ever happened, and I don't want the Malaysia Department of Insolvency (MDI) to freeze my banking accounts again. So I prefer not to take chances on this.
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answered on Mar 19, 2013 at 14:26
Hoping and Waiting ... if you still have your bank account meaning you're not a bankrupt yet. I pay a min amount monthly to JIM for more than 5 years and doesn't seem to have any benefit.
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answered on Mar 19, 2013 at 16:38
Hi Hoping & Waiting and the rest following this thread,

Just to share with all of you my own experience since becoming a bankrupt in the year 2000. I was working abroad since 1997 and came back to Malaysia in the year 2005 when my passport was held by the immigration at KLIA. That was when I found out that I was made a bankrupt in 2000. At that point, I was wondering how did I managed to pass through the immigration without any problem when I came back for holiday 4 years earlier in 2001.

To cut the long story short, I went to JIM and approached the bank to negotiate on the settlement. I owed the bank around RM37,000.00 from a defaulted housing loan and when the property went for auction, the proceeds apparently was still short to cover the outstanding balance. I offered to pay the a whole lump sum of RM25,000.00 and my offer was rejected by the bank. That was in 2005. So what happened next ?

I got so fed-up and decided to move on in life as a bankrupt. Believe it or not although a bankrupt, after the incident in 2005 I however managed to open both savings and current account for personal and business within the same year which I still maintain until today. I also have a Visa Debit Card. And in 2011, I also managed to stand as guarantor for a friend who was also a bankrupt who had to go overseas to visit a sick relative by signing the guarantor's letter required by JIM. I was so surprised that the letter went through and my friend's travel was approved by JIM. The only set back is that I no longer have the freedom to go overseas as often as I like and haven't left the country since 2005.
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answered on Mar 19, 2013 at 21:14
edited Jun 21, 2016 at 03:31

I am been bankrupt since 2009, almost same case where I came back from overseas and was halted at the immigration checkpoint. Since then, I have lost my freedom to travel abroad. I dread the day when my current management assigns me a task overseas. My current employer doesn't know my bankruptcy status.

Apart from that, life is quite normal, I even have a credit card with, somehow the credit checking didn't work when one of those card merchants insisted I take up their card offer. I sent my payslips and employer verification letter that I was employed. Next thing, I got a credit card. To avoid any hassle or trouble, I use the credit card as a cash card, meaning every month I pay in full.

My question to you would be, are you still paying your monthly dues to JIM? All this talk about auto discharge during UMNO assembly and recent event organised by UMNO youth has not meet any results thus far. Well it kept me in suspense as I thought maybe I would get auto discharged, anyway I am about to give up on that. I am paying monthly RM500, so its  a lot of savings if I didn't pay this. Do let me know if any of you in the same quandary.
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answered on Mar 19, 2013 at 22:05
edited Jun 21, 2016 at 03:33
@Hoping and Waiting

To answer your question, since the incident in 2005, when the bank refused my offer and Jabatan Insolvensi Malaysia (JIM) could not help me secure my discharge from bankruptcy in any way I decided there and then I will not pay a single penny to JIM. Till today, I am glad I have made that decision as after following this forum for sometime now and from what I have gathered so far, it has little or no benefit at all paying any instalment to JIM. Besides I get to keep everything I have earned to myself.

Like you I am also hoping and waiting that one day the Automatic Discharge for Bankrupts will be implemented so that all of us in the same boat will get a second chance.
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answered on Mar 20, 2013 at 05:17
edited Jun 22, 2016 at 03:11

I did exactly what you did about same time when I was charged in 2004. But when my kids start studying abroad I have got no choice but to pay minimum to meet Jabatan Insolvensi Malaysia (JIM) requirement for going oversea or else I won't pay a single cent. I have little confidence which ever government runs the country for the auto discharge. Very unfortunate because the banks still controls. So forget the banks and authorities, life does on and make the best out of it.
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