LETTER: I refer to the recently amended bankruptcy threshold of RM100,000 under the Insolvency Act 1967.
The act has been amended numerous times, but it has yet to solve the problems of bankrupts. Raising the threshold amount to prevent bankruptcy is only part of the solution.
There has to be a mechanism to prevent and save people from bankruptcy. Although 13 amendments have been made to the act, the law, as a whole, needs an overhaul.
Besides annulment, the "second chance" for a person to be discharged is found in Sections 33, 33A and 33C of the act. It does not differentiate or make any provision with regard to young bankrupts, especially those in the 25 to 44 age group.
There is no provision either for those who became bankrupt prior to 2017.
The second chance for a person to restart begins only after he has obtained a discharge as per the law. Between the time when the bankruptcy order is issued and the time when the bankrupt is discharged, there exists a "dark period".
During this period, a bankrupt has to pay a fixed monthly instalment to his insolvent estate, have his property sold and the dividend paid out to his creditors from his insolvent estate on a pari passu basis. It is during this period that bankrupts struggle to contribute to their insolvent estate due to their state of affairs. This dark period may last for a long time and bankrupts have to suffer.
The problem could be overcome in identifying "potential bankrupts" and also assisting in the "post-adjudication order" period. The Credit Counselling and Debt Management Agency (AKPK), which now has only an advisory role, should be given more power.
AKPK has to categorise the potential bankrupts from the specific categories like credit card, personal loan, car loan and small business loan. When the person starts accumulating debts and is at risk to repay them, AKPK must take charge of his finances so that he is prevented from being brought to court and declared a bankrupt.
For the third category, if a person falls under the "chronic abuser" category or is a bankrupt prior to the amendments, he will go through the normal process of bankruptcy but with a rescue mechanism.
This experience will perhaps teach them to be cautious in financial matters but they must be reintegrated into work or business. In this case, the second chance begins during the dark period and not after the discharge has been obtained and notably the creditor's objection is of no relevance here.
These bankrupts are identified and placed under the watchful eyes of AKPK or a government foundation to oversee this plans with the consent of the Insolvency director-general.
Jobless youth, talented young bankrupts or able bankrupts may be provided skills training or financial grants to set up small-scale businesses.
The profits earned could enable them to contribute towards their insolvent estate and to obtain their annulment. This will allow them to re-enter the job market or business sector even before their second chance under the said act begins.
It's a win-win situation for bankrupts and the creditor.
The law focuses only on settling the problems between the debtor and the creditor, but there is a wide gap in the notion of an effective and efficient method to prevent or reduce bankruptcies.
ARIFF SHAH R.K.
Penang
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times