KUALA LUMPUR: The government intends to introduce an alternative provision for debtors to have a voluntary arrangement with the lenders to pay-up their debts prior to being declared bankrupt by the court.
Minister in the Prime Minister's Department Datuk Seri Azalina Othman Said (pix) said this alternative provision, known as the Individual Voluntary Arrangement (IVA) will reduce the number of bankruptcy cases in Malaysia.
"There are a total of 95,799 people have been declared bankrupt by the insolvency Department from 2012 to August 2016. From the total, some 23,366 are youths aged below 34.
"The government is aware of this phenomenon, which is caused by poor financial planning and lack of financial management knowledge, which are the main factors to the burden of debts among youths," she said in a written reply to Datuk Shabudin Yahaya (BN-Tasek Gelugor).
Currently, Azalina said, the Act has allocated four methods for a bankrupt to come out of bankruptcy.
The methods are, to be discharged in court under Section 33 of the Act, discharged by the Insolvency DG through a certificate under Section 33A, cancellation under Section 105 and composition and debt arrangement scheme under Section 26 of Act 360.
"The government intends to introduce several alternative provisions through the proposed amendments to the Act, in which prior to the declaration of bankruptcy, the debtor is given a chance to rearrange the debts with the bank or financial institution institutions," Azalina said.
Meanwhile in a written reply to William Leong (PKR-Selayang), she said the Malaysian Insolvency Department is in the midst of making amendments to the Act, which among others involves the position of social guarantors, automatic discharge and second chance for bankrupts.
She said the Insolvency Department is reviewing a change in policy to create an absolute protection for social guarantors from bankruptcy proceedings.
"This means no bankruptcy proceedings can be taken against social guarantors. Nevertheless, other implementation and enforcement on social guarantors will be done accordingly.
"Section 33A of Act 360, has placed a restriction that only bankruptcy cases, which has been administered for five years and above can be brought to the review of the Insolvency director-general for discharging," Azalina said.
Thus, she said the department is considering a change in policy to allow an automatic discharge after three years of bankruptcy from the date the bankrupt individual files the Debt Affair Statement in court and it is subject to the lenders' objection.
Based on the automatic discharge proposal in the amendments and the upgrading of composition and current arrangement scheme under the Act, a bankrupt has a second chance to come out of bankruptcy to redevelop his or her life and revive the business.