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Saturday 27 May 2023

Reversing bankruptcy trend

Amendments to Insolvency Act passed unanimously

Two new categories for bankruptcy discharge under Insolvency Act...

Insolvency Act amendment allows two new categories of ...

Debt trap: Azalina disclosing that 40% of those who were declared bankrupt are between the ages of 35 and 44. — Bernama

CLOSE to 40% of those who were declared bankrupt are between the ages of 35 and 44, says Minister in the Prime Minister’s Department Datuk Seri Azalina Othman Said.

They made up 37.38% or 17,917 individuals who were declared bankrupt as of December last year.

She said a total of 47,929 individuals were declared bankrupt during the same period, of whom 10,378 were under 34 years old.

Personal loans are the main cause of bankruptcy at 49.22% compared to other loans.

“Urgent intervention must be done to address the rising number of bankrupts in the country,” she said when tabling the Insolvency (Amendment) Bill 2023.

The minister said gender-wise, more men were declared bankrupt compared to women.

“A total of 25,104 men were declared bankrupt compared to 8,912 women from 2019 to date,” she added.

Azalina said the department had initiated measures, including extensive outreach programmes to increase financial awareness, including among secondary and university students. Following the passing of the amendments to the Insolvency Act, individuals aged 70 and above will be considered for discharge from bankruptcy.

They will not be bankrupt if the Insolvency director-general determines that they no longer have the ability to contribute to or pay for the administration of their estate.

This is among the salient points of the amendment, which was passed by the Lower House unanimously by a voice vote.

According to Insolvency Department records, 19,913 bankrupts aged 70 and above are eligible for relief through certification from the director-general, if they meet conditions.

With the passing of the amendment, another category of individuals will be discharged from bankruptcy – those unable to manage themselves due to mental illness that has been verified by a psychiatrist at a government hospital.

“The amendment is in line with the government’s intention to preserve the welfare of bankrupts. They no longer have the means to cooperate and contribute to the bankruptcy administration,” said Azalina.

During the debate session, lawmakers from both sides requested more awareness of financial literacy among the youth to prevent the rise of bankrupts in the country as well as urgent assistance for those facing financial crises.

Former prime minister Tan Sri Muhyiddin Yassin urged the government to provide more flexibility in the conditional discharges offered to those who have been declared bankrupt.

During the Perikatan administration, the threshold for bankruptcy was raised to RM100,000 from RM50,000 under the Covid-19 Act to prevent Malaysians from facing financial crises during the three-year pandemic.

Jelebu MP Datuk Seri Jalaluddin Alias also called for an improved and updated syllabus on financial management to be introduced at secondary schools.

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Tuesday 12 December 2017

High life of the young, carefree and broke Malaysians hit a new low

Younger set not living within their means and are bankrupt before they are 30

"When they start their own lives, they are not financially stable. Some want to get married." - Datuk Abdul Rahman Putra Taha

They are young and carefree to the point of being careles, and have expensive tastes. Branded handbags, holidays to exotic places, fancy cars and lavish weddings all lead them into huge debts. By the age of 30, they are bankrupt. Some as young as 25 are among the shocking 60% of the 94,400 people declared bankrupt in the last four years.

PETALING JAYA: They lived the fast life, a life of Pradas and Guccis. When the cash is out, they max out on their credit cards.

Some even go as far as taking up personal loans to finance overseas trips, buying the latest expensive gadgets and holding lavish weddings.

And before they even turn 30, they are bankrupt.

Malaysia’s youth are seeing a worrying trend with those aged between 25 and 44 forming the biggest group classified as bankrupt.

They constituted almost 60% of the 94,408 cases reported from 2013 to August, according to the Insolvency Department.

Director-general Datuk Abdul Rahman Putra Taha said there were multiple factors that contributed to the trend, but singled out that many of them just wanted to “start their own life”.

“When they start their own lives, they are not financially stable. Some want to get married, but if the in-laws ask for hantaran gifts such as cars or a house, they need the money.

“Their pay can be considered low but they need expensive gifts. Where else can they go other than applying for personal loans?” he said in an interview recently.

Abdul Rahman also listed the top four reasons why a borrower was declared a bankrupt.

“Car loans took up 26.63%, personal loans (25.48%), housing loans (16.87%), and business loans (10.24%),” he said.

He revealed that the total number of people declared bankrupt from 2013 stood at 296,712 as of August, with Selangor having the most at 72,114, followed by the Federal Territories (46,377), Johor Baru (41,179) and Penang (22,136).

He urged the public to manage their finances prudently to ensure they would not be burdened by debt.

At the same time, Abdul Rahman said Bank Negara Malaysia (BNM) was making huge efforts to ensure it would not be so easy for the young to obtain credit cards.

In response, he said the department was committed to ensuring that the Government meets its target, especially with the Voluntary Arrangement under the Insolvency Act 1967.

Almost 58,000 bankrupts have been cleared or had their bankruptcy annulled by the courts in about the last five years, marking the first phase of the Government’s efforts to reduce bankruptcy cases following amendments to several bankruptcy laws.

From 2013 to August 2017, the courts have cleared 1,356 cases while another 11,627 cases have been terminated upon annulment of the bankruptcy order.

A total of 44,950 cases were discharged via Insolvency Certificate from the director-general.

However, the Government is pushing to slash the number of people being declared bankrupt to just about 4,000 to 5,000 cases per year.

“The enforcement of the newly amended bankruptcy law began this year. If they meet our criteria, qualified borrowers will be automatically discharged as bankrupts three years from the date of filing of the Statement of Affairs (Penyata Hal Ehwal),” said Abdul Rahman

Under the amended laws, someone at risk of being declared a bankrupt can settle his debt without bankruptcy proceedings with a voluntary agreement.

“Our intention is to ensure that borrowers will be able to pay back their loans without undue suffering and creditors will get their money back, too.”

He said debtors must adhere to the agreed sum of contribution paid to the creditors and they must also file their pay and expenses slip statement every six months throughout the three-year period.

“As long as they fulfil the payment within the period, we will release their names,” said Abdul Rahman.

Under the new amendments of the Bankruptcy Act 1967, the Government has introduced a rescue mechanism with a single bankruptcy order to replace the receiving order and adjudication order from the courts as practised previously.

“This move ensures that creditors are also protected under the amended laws,” he said.

The Act has also paved the way for the setting up of the Insolvency Assistance Fund and a release from bankruptcy without objection by the creditors for certain groups of people.

These include social guarantors made bankrupt under the Bankruptcy Act 1967, those who have died, those categorised as people with disabilities (OKU) by the Welfare Department and those certified by government medical officers as suffering from chronic or serious diseases.

The Star Malaysia by RAHIMY RAHIM rahimyr@thestar.com.my