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Bankruptcy: The usual Questions and Answers

Posted in Personal Finance

Many people asked me if auction properties are usually because the owner became a bankrupt. Simple answer is, NO. It is not necessary the case. In fact these days Public Auction for Owners (PAO) are slowly becoming common. We will visit this in future. Coming back to a bankrupt. How does one become a bankrupt in Malaysia? How soon that they could be declared a bankrupt by the court? Could they ‘unbankrupt’ themselves after a certain number of years? Can creditors follow the bankrupt person everywhere so as to make his life very difficult? For example, to take any money he has on him since the bankrupt should not have any money or credit cards on him. After all, if he has money, it should be used to pay the creditor! Below would be actual answers from our Malaysian Department of Insolvency on the many questions we may have. DGI is the Director General of Insolvency.

 

1. Is there a minimum amount owed for a person to be a bankrupt?

Yes, the creditor may file for bankruptcy action against you if the debt owing is more than RM 50,000.

 

2. Can a bankrupt continue using his existing credit card?

YES. A bankrupt can only use his existing credit card up to the amount of RM1000.00. Any higher amount and he has to notify the issuing bank or finance company as to the status of his bankruptcy. The decision is up to the bank or finance company. If the bankrupt fails to notify the issuing bank or finance company, he will be deemed to have committed an offence under the Insolvency Act 1967.

 

3. Can a bankrupt transfer his property?

A bankrupt is not allowed to transfer his property to a third party once a Receiving and Adjudication Order has been entered against him. As soon as a person is declared bankrupt, any of his property shall be automatically vested upon the DGI.

 

4.  Can a bankrupt travel overseas?

Generally, NO.   YES, he could IF he is approved to do so by the DGI or the court.  A bankrupt may not travel overseas unless with the written permission from the DGI or after obtaining a court order allowing him to do so.

 

5. Can a person declare himself/herself a bankrupt if he is unable to pay his debts?

YES! (Yes, I can think of a few reasons why a person would want to declare themselves a bankrupt. Sigh…)  A person can make an application in court to declare himself/herself a bankrupt as allowed under section 7, Bankruptcy Act 1967. The person is required to file a petition in a High Court stating his inability to pay his debt. The procedures required to be followed are stated specifically in the Bankruptcy Act 1967 and Rules, and one can consult a solicitor to take further actions. For further information, one can contact the nearest MdI’s branch for advice or MdI’s Complaints Unit directly.

 

6. How can a bankrupt be released from his bankruptcy status?

There are three main ways as to how a bankrupt can have his bankruptcy terminated:

(a) Making an application in court at any time for the bankruptcy order to be annulled on grounds ie debt has been paid in full or that he ought not to be made a bankrupt on some technical grounds;

(b) Making an application in court at any time for a court discharge. This is subject to a stringent requirement and the Insolvency Department has to put a report emphasizing among others the conduct and cooperation of the bankrupt with the department.

(c) Making an application to the DGI for a discharge under section 33A of Bankruptcy Act 1967. Such application can only be made only if 5 years has lapsed from the date order was made upon satisfying some criteria imposed by the DGI for the exercise of his discretion. Among the factors that the DGI will take into consideration are the conduct of the bankrupt, the extent of his cooperation with us, the cause for bankruptcy, old age and infirmities etc.

 

7. Could a bankrupt get a loan from financial institutions?

Technically, YES!

 

8. What are the risks taken by financial institutions if they decide to give loan to a person who has already been made a bankrupt?

If the lender is aware of the bankruptcy status of the borrower and decides to approve the loan nonetheless, the risk will be upon the lender. The lender must bear all risks in the event the borrower i.e. the bankrupt fails to service the loan.

 

9. Why are there instances where a person is unaware that he/she has been declared bankrupt by the Court?

There are few reasons why a bankrupt is unaware of his bankruptcy status, among others is when the service of Bankruptcy Notice and Creditor’s Petition was made by way of substituted service. Substituted service is made via an advertisement in local newspaper or posted on the notice board in court. A bankrupt may not be aware that a bankruptcy proceeding has been initiated against him. Substituted service is done when the bankrupt cannot be located mainly due to a change of address.

 

There are even more of these question and answers in mdi.gov.my   Let’s hope everyone pays their debts instead of being served a bankruptcy notice yeah. (Including PTPTN borrowers since our Deputy Education Minister Teo Nie Ching said that all PTPTN borrowers who fail to pay will be made a bankrupt before they can be blacklisted under the No-Travel rule. As at today, any PTPTN borrowers, regardless of how much they owe could travel freely. It is their RIGHT… Oh yeah, earlier article here: Intriguing. Understanding bankruptcy, PTPTN borrowers and blacklisting

Written on 24 July 2018

Next suggested article:  Malls, household debts and banckruptcy?

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