PETALING JAYA: Close to 25,000 Malaysians from Gen Y, defined as those below age 35, have become bankrupts over the past five years.
Their inability to settle loans for cars, houses and personal loans or for being guarantors for other loan defaulters are the main reasons for the worrying trend.
A total of 24,953 people below the age of 35 had been made bankrupts since 2010, according to the Insolvency Department’s records.
Between January and April this year, there were 107,306 cases of bankruptcies, 948 of which involved people under the age of 35.
The Bankruptcy Act states that a person could be subjected to bankruptcy proceedings if he or she fails to settle a minimum debt of RM30,000.
The Federation of Malaysian Consumers Associations (Fomca) has sounded the warning bell for a financial education policy to tackle the growing problem of young bankrupts.
“It is a serious problem as those affected are young workers who are the nation’s future,” said its secretary-general Datuk Paul Selvaraj.
“Fomca is drafting a financial education policy with the hope that the Government will implement it at all levels.”
Selvaraj said based on its survey of 1,000 respondents in 2013, 37% of young Malaysians were found to be living beyond their means while 47% used more than one-third of their monthly incomes to settle debts.
He said the rising cost of living, moderate salary increments and low retirement savings would only worsen the situation if the issue was not addressed soon.
“We have initiated several awareness programmes and even published a monthly magazine called Ringgit funded by Bank Negara for the purpose,” he said.
Selvaraj said Fomca was gathering feedback from stakeholders and had started another survey to gauge the extent of the problem, adding that the findings and recommendations would be submitted to the Government by the end of the year.
Among those involved in the survey are the Credit Counselling and Debt Management Agency, known by its Bahasa Malaysia acronym of AKPK (Agensi Kaunseling dan Pengurusan Kredit), non-governmental bodies, financial institutions and insurance companies.
AKPK was set up by Bank Negara in 2006 to provide counselling, debt management and financial education to help individuals take control of their financial situation.
An agency official said that if a person seeking help was found to be unable to manage debts, he or she would be advised to undergo a debt management programme.
“After a confidential counselling session, personalised debt repayment plans will be worked out for individuals through negotiations with the financial service provider.
“The programme is also extended to those who are not bankrupt or under advanced litigation process, have a positive net income and whose loans are worth less than RM2mil and taken from institutions regulated by Bank Negara,” he said.
All services by AKPK are free and available at its 11 branches and 23 credit counselling offices in major banks nationwide. For more information, log on to www.akpk.org.my.
Lavish lifestyle, greed and love can lead to financial ruin