The bankruptcy rate in Malaysia currently stands at less than 1% of the overall population. This figure looks kind of healthy to be honest. The fewer people being declared bankrupt, the more productivity Malaysia can generate. More wealth to the nation it will become. A good sign isn’t it?
Definition of Bankruptcy
What is bankruptcy? Bankruptcy is a process where a debtor is declared bankrupt pursuant to an Adjudication Order made by the High Court against the debtor if he is unable to pay his debts of at least RM100,000.00 [1]. To date, the bankruptcy ceiling has been increased 4 times since 1967.
Starting from 1992, 2003, 2017 and the most recent one during the pandemic era, 2020.
- RM 2,000 – 1967
- RM 10,000 – 1992
- RM 30,000 – 2003
- RM 50,000 – 2017
- RM 100,000 – 2020
How To Declare Bankruptcy?
The High Court makes a Receiving Order and Adjudication Order after a bankruptcy petition has been presented. It is usually presented either through:
- By creditor’s petition
- Within 6 months prior to the presentation. To present a creditor’s petition the debtor must be owing the petitioning creditor a debt of not less than RM100,000.
- By debtor’s petition
- Unlike the creditor’s petition, there is no requirement that a minimum amount of debt must be owed before a debtor’s petition can be presented. After its presentation, a debtor’s petition cannot be withdrawn without the leave of the court.
Impact of Bankruptcy
Please note that bankruptcy is a serious matter and should be considered as a last resort. There are many restrictions imposed on bankrupts such as:
- Restriction to going abroad
- Restriction to act as a director
- Carrying on business
- The requirement to contribute to your bankruptcy estate regularly for the benefit of the creditors
You will also have to give up your assets including your home and cars. There is no automatic discharge from bankruptcy in Malaysia. You may be discharged from bankruptcy by the Court or the Director General of Insolvency, DGI subject to any creditor’s objection. You can refer to more here.
Current Situation
Bankruptcy level and demographic can be broken down into so many ways. Here is something for you to look at. Hopefully, we may have dissected it into your flavour.
It seems that men are more prone to fall into the bankruptcy trap. Perhaps due to the majority of breadwinners in the household mainly representing men.
For the age part, 35 to 44 years old represent the biggest group that is vulnerable to bankruptcy.
Meanwhile, for the race segment, Bumiputera represents the biggest numbers. This is due to the fact that they represent 69.5% of Malaysian. While Chinese and Indian at 23.2% and 6.7% respectively[2]. However, if you are basing these figures on population, you will get a different perspective. Bumiputera represents the lowest figure here.
The financial instrument that made Malaysian bankrupt the most is:
- Personal loan
- Business loan [3]
- Hire purchase
- Mortgage
- Credit card
Education Level
So far, based on my experience serving all kinds of clients, I have seen that education level was found to have no influence on financial literacy and personal finance. There is no correlation at all. Most likely we do not have direct exposure in school. That is the contributing factor.
Conclusion
Regardless of any educational background. Most Malaysians need to have financial literacy program. At least by attending a Webinar. This is to expose them to all disciplines with regard to Personal Finance. From income to estate point of view. A holistic approach.
Based on this finding men from Bumiputera and Chinese backgrounds aged 35 to 44 years old need to equip themselves with proper and holistic financial planning. If they intend to avoid the valley of bankruptcy. By doing so they may keep themselves from engaging in Debt Management Programme, DMP by AKPK [4][5]
Source
- Malaysia Department of Insolvency – Personal Bankruptcy
- DOSM Open Data – Population
- MyGovernment – Individual Bankruptcy /Winding Up of Company
- MyGovernment – Debt Management Programme
- BFM – A Look At Bankruptcy Among Youth