What is bankruptcy?
Bankruptcy is a legal status where a person is unable to repay his or her debts owes to the creditors. A person is made bankrupt when he or she was judged so by the Court of Malaysia.
How can a person be sued for bankruptcy?
There are two ways in which a petition for bankruptcy could be presented to the court:
1. Creditor’s petition
A creditor may commence bankruptcy proceedings against an individual by serving the debtor with a bankruptcy notice. To present a bankruptcy notice the debt must exceed RM30,000 and arising from a judgment debt granted by the court.
2. Debtor’s petition
A Debtor may voluntarily presents a petition himself to the court in order to make himself a bankrupt. Unlike creditor’s petition, there is no minimum amount of debt required for the debtor to be made a bankrupt.
How do I determine whether someone is a bankrupt/how do I know whether I am a bankrupt?
One can conduct a bankruptcy search through the Malaysia Department of Insolvency (Jabatan Insolvensi Malaysia) in order to determine on whether someone has been made a bankrupt.
What is a debtor?
Under Section 3(3) of the Insolvency Act 1967, debtor is defined as a person:
- Was personally present in Malaysia; or
- Ordinarily resided or had a place of residence in Malaysia; or
- Was carrying on business in Malaysia either personally or by means of an agent; or
- Was a member of a firm of partnership which was carrying on business in Malaysia.
At the time the act of bankruptcy is commited.
What is the minimum amount of debt owed by a person before he/she can be made bankrupt?
The minimum amount of debt is RM50,000.00
What are the procedures for bankruptcy proceeding?
In general, a person can only be made a bankrupt if they have first committed an act of bankruptcy. The most common situation is when a person has a final judgment ordered against him but he has failed to comply with the judgment.
In this case, the person would be serve with a bankruptcy notice demanding him to settle the judgment debt within 7 days from service of the bankruptcy notice. In the event the debtor has failed to do so, he would then be said to have committed an act of bankruptcy. In such event, a creditor may present a petition to the court and the court would then grant a bankruptcy order against the debtor which means the debtor is officially adjudged a bankrupt. This would also mean that the Director General of Insolvency (DGI) would now take over the administration of the property and assets of the bankrupt.
I am a bankrupt, can I make an application to the DGI reduce the amount of my debt?
No. The DGI has no authority to reduce the amount of the bankrupt’s debts. If the bankruptcy wishes to do so, he should write in to the creditors or the bank to negotiate the amount of the debt should he intends to make full settlement of the debt. Once the bank has approved the new amount, the bankrupt may then settle the payment with the DGI.
What is the difference between secured creditors ad unsecured creditors?
A secured creditor is someone who holds some special monetary assurance of payment of a debt owed to him or her under the law. For example, the bank.
An unsecured creditor is someone whom money is owed without anything being obtained as collateral. These usually include normal trade creditors and judgment creditors eg. supplier.
When a person is made a bankrupt, the secured creditors would get the first priority over the unsecured creditors.