How can one become a bankrupt in Malaysia?

How can one become a bankrupt in Malaysia?

I have known of a few bankruptcy cases within my circle of friends. What about you? Sometimes, it’s unavoidable. Wrong place, wrong time, wrong business, wrong person we trusted. Sometimes it’s due to some unforeseen circumstances, for example, COVID or even a global financial crisis. So, do we know how does one become a bankrupt in Malaysia? Here are just a selection of 10 things to know especially the point #10 where now one can also be automatically discharged from bankruptcy with certain requirements fulfilled.

Info Source: https://www.mdi.gov.my/index.php/home/faqs/bankruptcy

#1 – What is bankruptcy?

Bankruptcy refers to a process where a debtor will be declared a bankrupt pursuant to a court order on the creditor’s petition or the debtor’s petition. All the unsecured property belonging to the bankrupt will be vested on the Director General of Insolvency (DGI) and the DGI has the responsibility to realize all such assets. The proceeds of the sale will be distributed among creditors who have filed their proof of debts and the debts have been admitted by the DGI.

#2 – What is the minimum amount for someone to be declared a bankrupt?

Yes, the creditor may file for bankruptcy action against the debtor if the debt owing amounts to RM100,000

#3 – How do I check bankruptcy status?

Search may be conducted through e-insolvency Portal at https://e-insolvensi.mdi.gov.my. A fee of RM10.00 will be charged for every search.

#4 – Can a person declare himself a bankrupt if he is unable to pay his debts?

A person may make an application in court to declare himself a bankrupt as provided under section 7 Insolvency Act 1967 and rule 102(1) of Insolvency Rules 2017.

#5 – When a person is a bankrupt, what are the things he / she could not do?

After being given a Bankruptcy Order, the bankrupt is disqualified from:
(a) holding the office of a Member of Parliament/Member of State Legislative Assembly;
(b) holding public office (subject to the decision of Government Disciplinary Board;
(c) holding certain positions in statutory bodies, registered societies or organizations;
(d) practising in certain professions;
(e) carrying on business alone or in partnership or by way of a company;
(f) working in the business of a relative;
(g) commencing or maintaining any court action without the sanction of DGI other than an action for damages in respect of an injury to his person;
(h) leaving Malaysia without the permission of DGI or court;
(i) any money or gratuity received by the bankrupt must be vested on DGI to be distributed to the creditors (subject to the discretion of the DGI); and
(j) enforcing his rights under certain legislation.

#6 – Can a bankrupt own anything?

All the properties shall vest on the DGI except properties listed under seksyen 48(1)(a) of the Insolvency Act 1967. This includes the tools of his trade and the necessary wearing apparel and bedding and other like necessaries of himself, his wife and children to a value not exceeding RM 5,000.00. 

#7 – Can a bankrupt use his existing credit card?

A bankrupt can only use his existing credit card up to the amount of RM1000.00

#8 – Can a bankrupt travel overseas?

A bankrupt may not travel overseas unless with the obtains written permission from the DGI or court allows him to do so. The application form with supporting documents must be sent to the Branch that administers his bankruptcy case. 

#9 – How does my bankruptcy affect my current or future employment?

Bankruptcy does not prevent you from working. When you are declared a bankrupt, it would not deny you of your right to continue your current job or to get a new job. 

#10 – How can a bankrupt be released from his bankruptcy status?

There are 4 methods for a bankrupt to be discharged from his bankruptcy which are:

(a) Annulment Order under section 105 of Insolvency Act 1967;

This application is filed by the bankrupt once all debt owed debt has been paid in full by the bankrupt through DGI to all creditors that has proven their debt in bankruptcy together with the fees and cost of case administration. The court will annul a bankruptcy order once the court is satisfied that the bankrupt’s debt are paid in full.

(b) Discharge by Court Order under section 33(3) of Insolvency Act 1967;

This application is filed by the bankrupt anytime to the court at any time after a bankruptcy order has been made. The Court will scrutinize the report by DGI on the conduct of the bankrupt during the administration of the bankruptcy period. The Court will also decide whether to grant absolute discharge, conditional discharge or to reject such application for discharge.

(c) Discharge by DGI under section 33A of Bankruptcy Act 1967; and

A bankrupt may apply for discharge by DGI only if 5 years has lapsed from the date of bankruptcy order was made and upon satisfying some criterias imposed by the DGI for the exercise of his discretion. Among other factors that the DGI will take into consideration are the reason of the application, percentage of dividends that can be paid, the cooperation and the conduct of the bankrupt throughout the administration of the case and the interest of the creditors.

However, the DG may discharge four (4) categories of bankrupys without any objection from the creditors under section 33A to be read together with subsecion 33B(2A) of Act 360. The four (4) categories are-
(a) a bankrupt who was adjudged bankrupt by reason of him being a social guarantor;
(b) a bankrupt who was registered as a person with disability under the Persons with Disabilities Act 2008 [Act 685];
(c) a deceased bankrupt; and
(d) a bankrupt suffering from a serious illness certified by Government Medical Officer.
(d) Automatic Discharge under section 33C of Bankruptcy Act 1967.

This new provision has been enforced on 6.10.2017 whereby a bankrupt may apply for an automatic discharge on the expiration of three years from the date of submission of the Statement of Affairs with certain conditions imposed.

There are a lot more details here: Info Source: https://www.mdi.gov.my/index.php/home/faqs/bankruptcy

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