LETTERS: The Malaysian Association of Borrowers and Consumers Solution warned that many Malaysians aged between 30 and 45 risk bankruptcy by next year.
Bankruptcy is when individuals cannot meet their debt obligations of at least RM50,000.
Due to Covid-19, the Malaysian Department of Insolvency (MDI) increased the bankruptcy threshold to RM100,000.
The Insolvency (Amendment) Act (2017) and the Companies Act (2016) allow for corporate voluntary arrangement (CVA) running alongside Sections 397 and 398, to be read together with Section 366 and the Eighth Schedule, a pre-bankruptcy rescue mechanism allowing a debtor to negotiate a debt settlement proposal.
The increase of the bankruptcy definition threshold and CVA should be extended in time or duration for up to two years and one year, to allow affected individuals and businesses to rebuild their finances.
In other words, what is being proposed is for a bankruptcy moratorium to take place. To further contain the problem, EMIR Research proposes the following:
NO more additional Employees Provident Fund special withdrawal scheme(s). Generally, the EPF will consider requests and respond with the appropriate facilities that meet the needs of the members concerned.
However, the three EPF special withdrawal schemes (i-Sinar, i-Lestari and i-Citra) have led to a situation whereby the risk of bankruptcy has worsened.
The EPF should also disallow members with critically low savings from withdrawing for any (emergency) purposes.
PROVIDE incentives to encourage members to continue working beyond 60 years old. The EPF has indicated that members will need to continue working for an extra four to six years to rebuild savings.
The EPF can encourage them to extend their working age by providing incentives by maintaining the zero per cent statutory contribution rate for employees aged 60 and above, but increase the minimum employers' share of contribution rate from four to six per cent.
The government then should provide tax incentives for this purpose in the form of deductibles and allowances and claims.
The EPF should also expand the i-Saraan programme to members above 60 years old because some elderly employees could end up earning irregular income as they might not be able to secure a full-time job.
And the post-60-year-old members can also enjoy a 15 per cent government "top up" subject to a maximum of RM250 per year.
The gig economy is one area that can readily absorb the elderly as we transition steadily to an ageing society.
Furthermore, the post-60 who are eligible to pay tax should be exempted so that the amount payable can be transferred into their EPF savings, instead.
SET mandatory "Minimum Savings Amount". The recommended minimum savings amount at age 55 by the EPF is RM240,000, but many members are unable to meet the recommended threshold.
So the EPF can mandatorily require them to reach a minimum of RM240,000 in their accounts before finally withdrawing the funds. The withdrawal requirements should be tiered or structured according to the outstanding sum available.
BANKRUPTCY moratorium. In general, a debtor can only be declared bankrupt if that person defaults for up to six months after receiving the creditor's notice — under Section 5(1)(c) of the Insolvency Act (1967).
As stated before, this period of six months should be extended to two years (if individual or one year if it's a business) as a matter of ("unprecedented") emergency.
Overall, this will pre-empt a possible bankruptcy crisis from brewing.
JASON LOH SEONG WEI
TAN TZE YONG
EMIR Research, Kuala Lumpur
The views expressed in this article are the author's own and do not necessarily reflect those of the New Straits Times