KUALA LUMPUR: As of July, there are 159,781 unresolved bankruptcy cases in Malaysia, according to the Malaysian Department of Insolvency (MDI).
MDI director-general M. Bakri Abd Majid attributed the delays primarily to individuals' failure to cooperate by submitting essential documents.
According to a Malay daily, these include lists of liabilities, completed statutory forms like the Statement of Affairs (PHE), and the Income and Expenditure Statement for six months.
Bakri said that when considering discharge applications, several factors were evaluated, including the reasons for the application, the percentage of dividends payable, and the bankrupt individual's cooperation and attitude throughout the case administration.
"The failure of bankrupt individuals to provide good cooperation to this department grants creditors the right to object to the discharge application, not only during the consideration stage by the director-general of Insolvency but also during court proceedings.
"In this regard, it is appropriate for a person declared bankrupt to appear at this department to fulfil the statutory duties as a bankrupt," he said.
A person can be declared bankrupt if they fail to settle debts amounting to RM100,000 or more, with creditors initiating bankruptcy proceedings in the High Court.
This often results from poor financial management, reckless spending, or acting as a guarantor, although social guarantors are now protected under the amended Insolvency Act 1967.
Despite this, individuals have an opportunity to be released under the government's Second Chance Policy, which aims to help them reintegrate into society and contribute to the national economy.
Bakri said that under the Second Chance Policy, announced by Prime Minister Datuk Seri Anwar Ibrahim in the 2024 Budget, 142,510 individuals had already been discharged from bankruptcy.
"It seeks to release up to 130,000 individuals from bankruptcy within one year of the Insolvency Act (Amendment) 2023 or Act A1695 taking effect. This initiative reflects the government's commitment to ensuring no citizen is left behind in the nation's progress," he said.
He said that the discharge of each bankruptcy case meant that individuals were released from all debts that could be proven in the bankruptcy.
However, Bakri said that MDI did not have the authority to permit or prevent those who were discharged from bankruptcy from taking on new loans, as this depended on the policies of the financial institutions or banks themselves.
He also said that not all individuals declared bankrupt were due to poor financial management and reckless spending, but some were due to their status as guarantors.
In such cases, creditors can initiate bankruptcy proceedings against the guarantor if the debt is not settled.
However, Bakri said that bankruptcy actions against guarantors occurred before the amendment to the Insolvency Act 1967 in 2017, which provided absolute protection for social guarantors.
Under Section 2 of Act 360, a social guarantor is defined as someone who guarantees a loan not for profit, such as for loans, scholarships, or grants for education or research, as well as guarantees for hire-purchase transactions of vehicles or housing loans for personal use only.
However, guarantors for business loans are not categorised as social guarantors.