INTERACTIVE: A ‘second chance’ for bankrupts

By SHYAFIQ DZULKIFLI

 

PETALING JAYA: Nearly 90,000 bankrupt individuals have been granted relief since the introduction of the Second Chance Policy.

Deputy director-general of the Malaysian Department of Insolvency (MDI) Azwarnida Affandi said 87,088 individuals who had been declared bankrupt were granted a discharge since the policy came into effect in October last year.

“It has provided relief to many individuals who would otherwise be vulnerable to bankruptcy due to small-scale debts,” she said in a recent interview.

Azwarnida said the department was on track to meet the government’s target of discharging at least 130,000 individuals from bankruptcy by October this year.

The Second Chance Policy was first announced on October 13 last year during the tabling of Budget 2024 by the Prime Minister.

The policy is a government initiative designed to protect the welfare of individuals burdened by small-scale debts and to provide a pathway out of bankruptcy under specific conditions.

The policy includes an amendment to Insolvency Act 1967.

During the tabling of Budget 2023 on February 24 last year, Datuk Seri Anwar Ibrahim said that while waiting for the amendments to be passed by Parliament, bankrupts with debts below RM50,000 could be discharged if they met certain conditions.

Subsequently, the Prime Minister when tabling Budget 2024 said that almost 14,000 cases with debts below RM50,000 had been discharged from bankruptcy as of July 2023.

 

 

“Other than individuals with small-scale debts, there are also a few new categories of bankrupt individuals that are eligible for bankruptcy discharge under the new amendments of the Insolvency Act that applies retrospectively and in line with the Second Chance Policy,” Azwarnida said.

The Insolvency (Amendment) Act 2023 (A1695) was enforced on October 6, 2023, and the amendments include provisions related to bankruptcy discharge under Section 33(C) of the law.

The main change to Section 33(C) is to enable the automatic discharge of bankrupt individuals within three to five years from the date they submit their statement, regardless of their total outstanding debts, subject to conditions.

Under sub-section 33B (2A), two new categories of individuals are now eligible for discharge without needing to go through the creditor’s objection procedure.

The new categories include bankrupt individuals aged 70 and above, as well as those who cannot manage their personal affairs due to mental illness, as defined in the Mental Health Act 2001 (Act 615).

Azwarnida said the Prime Minister also announced in Budget 2024 that the category of people who qualify for help under the Second Chance Policy would be expanded.

“The Second Chance Policy will be expanded this year to cover bankrupts aged 40 and below with debts not exceeding RM200,000.

 

Bankruptcy cases in 2024

Azwarnida said the number of individuals declared bankrupt has been decreasing following amendments to the Insolvency Act.

“Previously, the minimum debt threshold for creditors to take bankruptcy action towards the debtors was RM50,000, effective on October 6, 2017.

“The minimum debt threshold was subsequently raised to RM100,000 on Sept 01, 2021,” Azwarnida said.

Figures from the department shows that 2,402 individuals were declared bankrupt from January to May this year.

The main reason for these bankruptcies was personal loans, with a total of 1,135 cases (47.3%), followed by business loans with 484 cases (20.1%) and other types of loans with 351 cases (14.6%).

 

 

In terms of age, individuals between 35 to 44 years old made up the biggest group declared bankrupt with 960 cases.

Individuals between the ages of 45 and 54 years were the second largest at 722 cases followed by those aged 55 years with 376.

 

 

Azwarnida said males consistently have higher bankruptcy cases than females.

“Most of the bankruptcy cases this year involve male individuals, comprising over 70% of the total.

“This demographic insight highlights the need for targeted financial education and support mechanisms to prevent insolvency among the economically active population,” she added.

 

MDI Deputy Director General, Azwarnida Affandi

Azwarnida said people need to realise the importance of financial literacy and prudent financial management.

"Always 'cut your coat according to your cloth' to avoid serious debt and do not be easily swayed by the latest trends and lifestyles," she said.

The department also encouraged to those affected by bankruptcy to visit the department’s offices immediately and cooperate fully.

“It is important to seek accurate information and not rely on third parties or unauthorised sources, which can lead to misunderstandings and further complications.

“There are a lot of cases where bankrupts avoid coming forward to the department due to false information.

"By engaging with us, you open the door to a second chance for your case to be resolved in the future," Azwarnida added.

According to the department’s records, there are 185,558 unresolved bankruptcy cases as of May this year.