Amendment To Bankruptcy Discharge Act

Many Malaysian extended a helping hand to spouses, relatives or friends in need of money, they willingly and trustingly sign up as guarantors. Unfortunately, many of these guarantors later end up in a tight situation when the loans are not repaid, leading to some even being declared bankrupt or, worse, a few developing suicidal tendencies.

Consumer and Borrower Settlement Association of Malaysia claimed an average of about 10 people walking in to seek assistance. They are guarantors seeking help and were not even aware of the actual amount they supposedly owed. They kept paying for years because some of these loans were ‘sold’ to debt collectors, but nothing is ever given in black and white.

Guarantor - As at February this year, there were 268,744 bankruptcy cases administered by the Insolvency Department. Of this number, 634 cases involved individuals who had been declared bankrupt for being corporate guarantors while 17 cases were social guarantors.

Many people who acted as guarantors were often tricked by debt collectors or credit control officers. Generally, most Malaysians lack legal knowledge on matters related to debt settlement and repayments.

Lack Of Knowledge - Most Malaysians are not knowledgeable on banking matters and loans, and the laws that are in place such as the Limitation Act, Insolvency Act and Personal Data Protection Act. Some develop a suicidal tendency. They are unable to handle the pressure of having to deal with the debts not caused by them personally.

Bankruptcy Discharge & Second Chance - Following an announcement by Prime Minister Datuk Seri Anwar Ibrahim during the tabling of the revised Budget 2023, bankrupts are now given a second chance to rebuild their lives, with the government having taken several initiatives.

These include bankruptcies with debts proved not to have exceeded RM50,000 and those who satisfy the required conditions being eligible for a discharge by the Certificate of Director of Insolvency (DGI), starting March 1.

Certain provisions in the Insolvency Act would also be amended to improve the administration of bankruptcy cases. A bankrupt is eligible for a discharge by the certificate of the DGI if his proven debt in the bankruptcy does not exceed RM50,000.

It is estimated that at least 130,000 people of the total 260,000 bankruptcy cases recorded as of early this year would be freed from bankruptcy with the passing of the amendments.