Bankruptcy is a legal process to deal with debts that you are unable to settle as and when they fall due.
The bankruptcy proceedings provide relief from excessive debts and pressures of creditors allowing you to make a fresh start subject to some restrictions and, at the same time, ensure that your assets or properties are shared out to repay creditors.
A person who has been judged by a law-court to be unable to pay his debts as they fall due is a bankrupt.
Any individual debtor can go bankrupt, including members of a partnership.
Bankruptcy proceedings cannot be taken against insolvent corporate entities such as a company or institution. However, an insolvent company can be liquidated or wound-up.
Bankruptcy is imposed by a court order and in Malaysia, it is often initiated by the creditor.
A bankruptcy case normally begins when the debtor or creditor files a petition with the High Court. A bankruptcy petition may be filed by an individual or together with spouse, or by a corporation or other legal entity.
Creditors may file a creditor's petition to make a debtor a bankrupt.
What can't a bankrupt do? What are the restrictions during bankruptcy?
A bankrupt is not allowed to:
borrow more than RM1,000, alone or jointly, without telling the lender that you are a bankrupt;
engage in trade or business, or enter into trade or business contract, without telling the person that you are a bankrupt;
open a bank account or continue using the existing bank account without the permission of the Director General of Insolvency;
Once you are declared a bankrupt, all your existing bank accounts will be frozen and withdrawal transactions will be refused. All the money in savings will become part of your bankruptcy estate and be used to pay towards your creditors.
You'll have to apply for permission to:
activate an existing bank account or
open a new bank account
for the purposes of receiving payments including salary, wages or any profit gained from the Malaysia Department of Insolvency branch where your bankruptcy case is being administered.
Malaysia Department of Insolvency may claim some or any extra money to pay towards your creditors.
The bank that activates your existing account or allows you to open an account may impose certain conditions or limits.
act as a directory of a company without the permission of the Director General of Insolvency or court;
operate a business as a sole proprietorship or partnership without the permission of the Director General of Insolvency or court;
manage or control any business on behalf of a relative without the permission of the Director General of Insolvency or court;
be in the employment of a relative without the permission of the Director General of Insolvency or court;
be elected or hold the office of a Member of Parliament;
be appointed or hold public office;
be appointed or hold certain positions in statutory bodies, registered societies or organisations;
practise in some professions;
commence civil proceeding by writ or in such manner as is prescribed by Rules of Court without the sanction of the Director General of Insolvency excluding criminal proceeding;
leave Malaysia or travel overseas without the permission of the Director General of Insolvency or court;
receive pension or other gratuity; and
enforce his rights under certain legislation.
If you break the restrictions, you might be guilty of contempt of court and be punishable by fine or imprisonment or both on the application of the Director General of Insolvency. Generally, you face imprisonment if it is proven that you have intent to defraud.
How long do the restrictions last?
Bankruptcy restrictions will be removed when your bankruptcy ends. This will happen if you: