Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. Records shows that majority of bankrupts come from the age group of 25-44 years in Malaysia.
‘Bankrupt’ is the legal status of a person who is unable to repay their debts to the creditors.
You will be declared as a bankrupt if you:
a) unable to pay debts amounting to at least RM50,000;
- defaulted in payment for a period of six months;
- resided in Malaysia for at least one year.
There are two methods in which the Bankruptcy Order may be granted :
- by a creditor commencing a bankruptcy proceeding against you (creditor’s petition); or
- you voluntarily seek a court order to be made a bankrupt (debtor’s petition).
When you are declared as a bankrupt :
- Your properties/belongings will be vested with Director General of Insolvency (DGI). The DGI will administer your assets and sell or dispose them to repay the outstanding debts.
- Your are not allowed to travel overseas as your passport will be surrendered with DGI;
- You no longer can be a director of a company or member of parliament;
- Your bank accounts will be freeze;
- You can only use credit card for RM1,000.00 (if allowed);
- You must pay certain portion from your salary to DGI as part payment.
Likely, you can still be freed from being a bankrupt.
There are two main procedures in which you can be discharged as a bankrupt:
- Application to court :
- for annulment of bankruptcy order (when fully settle the debt)
- for discharge (when DGI is satisfied to the level of
cooperation/good conduct)
- Application to DGI – upon completion of 5 years of being bankrupt (depends on various factors and discretion of the DGI)