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 Apr 11, 2013 at 03:45
edited Jun 22, 2016 at 03:25
Don't blame anybody for the borrowings we did. I don't even borrow but got stuck. Its the financial system that the banks followed. Just look at US how their mortgage system got the people into trouble. So 'any government' won't change anything. If we can change the financial system then okay but I doubt Malaysia can. Someone try to be smart years back by bringing down the non-performing loan (NPL) period from 6 to 3 months. Many got bankrupt till today. So not the government at fault but people in the government.
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answered on Apr 13, 2013 at 01:19
edited Jun 22, 2016 at 03:31
So its people in the government and the government is its people who made decisions.
Borrow to purchase got many people into trouble. One card can become few more cards and with even higher limits. Where is the prudence in lending? People got bankrupt because of easy credit and spending over their means and owing billions in the market. Bank Negara Malaysia (BNM) should be blamed? Then set up Agensi Kaunseling Dan Pengurusan Kredit (AKPK) to deal with the situation.
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answered on Apr 13, 2013 at 06:04
edited Jun 22, 2016 at 03:32
I didn't even borrow but got bankrupt. The bank made me a bankrupt thru' the government authority i.e. Jabatan Insolvensi Malaysia (JIM).
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answered on Apr 17, 2013 at 03:31
edited Jun 22, 2016 at 03:36
Prime Minister Najib is the first to politicise the issue. In case people forget, have a look at the following news article:

The Star/Asia News Network

Sunday, Dec 02, 2012

Reprieve for bankrupts

KUALA LUMPUR: Laws will be reviewed to help those declared bankrupts through no fault of theirs to get back on their feet again.

Prime Minister Datuk Seri Najib Tun Razak said the procedures used in declaring one a bankrupt would be changed to prevent innocent people from being victimised.

"Sometimes, people are declared bankrupt although it is not their fault; like when they become guarantors to others who take up loans," he said in his winding-up speech at the Umno general assembly here.

"In many cases, the loans involved are not even large, not even in the millions."

Umno Youth chief Khairy Jamaluddin, in his policy speech at its general assembly on Wednesday, called on the Government to give those declared a bankrupt, especially young entrepreneurs, a second chance.

Najib said the Government was always receptive to positive suggestions, including from the young.

"We listen to the people."

So, we have every right to hold PM Najib to his promise. If you think that we are politicising the issue, so be it.
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answered on Apr 17, 2013 at 03:37
To those who think that the government must first own the banks in the country before automatic discharge can be implemented please take note that countries like Australia and England already have automatic discharge for their bankrupts after a stipulated period of time.

The government of Australia and England do not own all the banks in the respective countries and yet they could implement the automatic discharge system. So, it's a matter of whether the Malaysian government really wants to give bankrupts a second chance or are they just trying to fool the bankrupts with just mere empty promises.
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answered on Apr 17, 2013 at 04:47
edited Jun 22, 2016 at 03:42
The government is controlled by person who can change the laws... and they just talk and do nothing.
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answered on May 29, 2013 at 14:26
edited Jun 22, 2016 at 03:44
The proposed amendments submitted to the Attorney-General should be implemented soon especially those involving the banking & financial institution as most of the debt amount is actually due to the interest charged on the outstanding principal amount. 

Based on my friend personal experience, when he agreed to settle his outstanding debt on a monthly fixed amount he noted that most of the amount he paid is off set against the interest & only a small portion of the amount was offset against the principal amount. With this he will end up paying off his debt for life as interest will still be charged for the remaining principal amount.
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answered on May 30, 2013 at 02:19
edited Jun 22, 2016 at 03:44
As a guarantor, the principal amount outstanding from the borrower was more than RM100,000. By the time they charge me it was over RM140,000. So I gave up and change my mind set. But it pays off. Now if there is an easy way out I will try. Or else I don't bother.
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answered on May 30, 2013 at 16:36
edited Jun 22, 2016 at 03:47
Meaning that even we pay monthly to the bank, we end up paying the interest only haha... that's funny. Why can't the interest stop? Maybe life will be easier after become bankrupt... but my debt is more than RM40,000. Will I be bankrupt soon?
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answered on May 30, 2013 at 21:13
edited Jun 22, 2016 at 03:49
Seemed many of us in same boat in our 'Boleh Land'. Myself only owed credit cards debt of RM93,000 but proposal to repay at lump sum rejected by banks demanding 3-4 times original amount. Its clearly fishing in troubled water and they're no different from loan sharks. Only fools will pay them or money drop from sky able to please their blood thirst right. That explains why so many genuine bankruptcies in 'Boleh Land' of ours.
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