Amendments to Bankruptcy Act gives more leeway to bankrupt individuals, social guarantors
Last updated on 30 March 2017 - 01:04am
KUALA LUMPUR: Bankrupt individuals will be given leeway while social guarantors will not be declared bankrupts following amendments to the Bankruptcy Act 1967.
Two major provisions the government is seeking to amend are to reduce the number of years before a bankrupt could apply for a court discharge from five years to three years and to increase the maximum threshold from RM30,000 to RM50,000.
Currently the law allows a bankrupt to apply for a court discharge only if five years have lapsed from the date the bankruptcy order was made and that too is subject to the creditors' objection.
Minister in the Prime Minister's Department Datuk Seri Azalina Othman Said said the amendments will provide for an automatic discharge after three years of being declared bankrupt, upon filing the statement of affairs.
This is because the Insolvency Department does not want the cases to be administered for too long as it will not serve any purpose or benefit any parties.
She said the government's proposal takes into consideration the use of public funds wisely in the cost of administering the cases while saving the human resources in the department.
She also added that there will not be an abuse of power in discharging bankrupts because the decision lies in the hands of the director-general of Insolvency and the courts.
Explaining the definition of a social guarantor, Azalina said they are people who do not gain any profit and provide a guarantee for an education loan, hire-purchase transaction for personal or non-business use, or a housing loan for personal dwelling.
The law will now be an absolute prohibition in commencing any bankruptcy action against a social guarantor.
The law also introduces a rescue mechanism of voluntary arrangement between creditor and debtor for a compromise or discount for the debts.
This is where a debtor can file a court application for an interim order to grant protection against bankruptcy and legal proceedings.
Azalina said that as of February this year, Insolvency Department is still administrating 292,086 cases of bankruptcy that are active and have not been discharged.
From the total cases of bankruptcy, Selangor has the highest number of cases with 70,817 cases of which, more than 58.5% of cases involve those aged between 25 and 44 years.