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 Mar 20, 2013 at 17:04
by   Hoping and Waiting
edited Jun 22, 2016 at 03:11

Thank you for the frank comments. It does make sense as, discharge after 5 years is not possible as the Director-General (DG) will not bow down to the banks, hence its permanent bankruptcy for people like me, and why do I need to pay any since discharge is not going to happen in the 1st place.

The only thing that matters to me is the freedom of leaving the country for holiday etc. which is no longer possible and the prospect of any overseas assignments which my company might do. I do hope and pray that the auto discharge will take place sooner or later.
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answered on Mar 20, 2013 at 20:01
by   Victim
edited Jun 22, 2016 at 03:11

You mentioned few times about traveling overseas. How do you go about? I've checked with Jabatan Insolvensi Malaysia (JIM) that unless is for business or visit sick/dying relatives, a bankrupt is not allowed.
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answered on Mar 21, 2013 at 22:41
by   tired
edited Jun 22, 2016 at 03:12
Could not have agree more. The following was pick up from one of the post :-

I do totally agree to the the description about bankruptcy. Everyone will look at you with a very cynical eyes worst than a criminal. Yes, we make a financial mistake, we admit and we pay for it with this bankruptcy status. Question is why we can't get a Second Chance? I believed those who have been before are much better in managing their finances. Can we actually obtained this chance? Doubt so here in this country. Is like a life sentence without a possible parole. Other criminals do have their chances and a time frame that they know they will be out or free and be a better person but not a bankrupt. Even some politician or government makes mistake, and realising their error and even can have the opportunity, hereby asking the people for a Second Chance, to trust them again, vote for them and so they can be better in ruling and managing in future, why can't we, bankrupt, get that Second Chance as well. Probably they will say like the famous Hollywood phrase "Keep on dreaming".
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answered on Mar 22, 2013 at 01:12
by   Pei Pei
edited Jun 22, 2016 at 03:12
Well I guess other than writing in a letter to our "beloved", "busy" Prime Minister (PM), should we also write to those Members of Parliament (MPs) to let them know how serious we are?
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answered on Mar 22, 2013 at 02:52
by   bank slave
edited Jun 22, 2016 at 03:12
I've been following closely the forums here for quite a while. I also made financial blunders by using advance on credit cards. Due to lost of employment, I was not able to honour my financial obligation for few years. Although earlier years have been a faithful bank clients, they would not take all those into considerations. Once you are down, they will haunt you like hawks.

However, lately when I tried to contact the bankers to repay credit cards owing based upon credit limit, they wouldn't entertain but insisted on compounded interest to the tune of 200%. These manners, isn't the banks are pushing more and more people into bankruptcy? How could they squeeze genuine client who have fall down but keenly would like to honour their debts. Isn't by collecting the credit limit in lump sum is good deal rather than forcing one into bankruptcy? I am really depressed by this 'Malaysian Boleh' system of ours. Whereas elsewhere in the other parts of the world, bankruptcy law is not as hardcore as ours.
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answered on Mar 22, 2013 at 06:06
by   guarantor
edited Jun 22, 2016 at 03:12
I have heard lot of "give up hopes' here. Hey guys, for once, can you just forget about your life "A" (as bankrupt) and move on to life "B" (reality). Can we just forget about others helping us? We need to help our own-self. If I can, no reason you guys can't. Yes, you might need a close friend(s) who can understand the situation, not relative please. When I know I was deprive by the system, that was the time I think I have to be different. If you guys belief you can, then you can.
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answered on Apr 4, 2013 at 03:13
by   disgusted and fed up
edited Jun 22, 2016 at 03:11
Well, so much for the excitement that we had about auto discharge. It seems our this minority will never being looked at by the government or law maker, no matter what compassionate or lenient email that we sent. As the law or policy maker is scared of the banks and trust me I believed these banks do not do any losing business and if the auto discharge comes to light, they will lose out. That's why the new law will never be pass or table as it is not a winning situation for the policy maker and especially the banks. So even todate the saying is always true, "a proposal or a draft will always just be a draft or piece of ordinary paper sitting on the table and never see the light if it is not being table or pass."

I guess we will not see the silver lining of auto discharge ever happen and from my point of view it is another government gimmick to get us excited. They can make mistake and after "5 years" asking the people to give them a "chance" and be better in managing, why they can get it and not us. Why are we so different as I believe we will be better in managing our things in future also if we are given that chance or opportunity!
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answered on Apr 4, 2013 at 06:12
by   guarantor
edited Jun 22, 2016 at 03:11
To me whoever runs the country, we will still be bankrupt unless you yourself change it. So back to my "statement" earlier, you decide your future, not the government. Sometimes I feel better in this situation because you can run everything as a shadow, nobody knows.
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answered on Apr 9, 2013 at 03:32
by   guarantor
edited Jun 22, 2016 at 03:22
Lets not politicise this issue. Unless the government or the opposition owns all the banks then it will be easier for them to decide. Or else forget it.

We got bankrupt not because of the government, we got carried away with borrowings. Even if the opposition runs the country not much they can do. I have given up hope with any government, just do what I think is best and 'it pays'.
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answered on Apr 11, 2013 at 01:05
by   bankzzz
edited Jun 22, 2016 at 03:24
The government is at fault by allowing too easy credit so as to spur the economy. The people suffer as a result of credit spending accumulating to beyond their means. Banks got good profits but the borrowers suffer.
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