Fairer system for guarantors

KUALA LUMPUR: Social guarantors will no longer be declared bankrupt if borrowers fail to repay their debts. However, this does not absolve the social guarantors from other forms of legal debt recovery.

This was one of the key points in the Bankruptcy (Amendment) Bill 2016 which was passed in the Dewan Rakyat yesterday.

Social guarantors are defined as those who do not profit and essentially provide a guarantee for an education loan, hire-purchase transactions for personal or non-business use, or a housing loan for personal dwellings.

“Social guarantors cannot be declared bankrupt but other action can be taken by creditors.

“For example, they could freeze an account or seize the property (of the social guarantor),” said Minister in the Prime Minister’s Department Datuk Seri Azalina Othman Said when winding up the debate on the Bill.

“In previous cases, many social guarantors were made bankrupt. We want to bring new changes in the process and a system which is fairer to social guarantors,” added Azalina.

She, however, noted that the changes in the bankruptcy law will not absolve borrowers from their legal duties to repay their loans.

Azalina said social guarantors have always been the victims and are declared bankrupts, so the amendments will ensure they are better protected.

She also said the creditors must prove to the court that they have taken all steps to recover the loan from the borrowers.

Among other changes include raising the minimum threshold of a person’s debt from RM30,000 to RM50,000 before they can be declared bankrupt.

Azalina also said the term “bankrupt” will also be substituted in future proceedings with the word “insolvent”.

A person can also be automatically discharged as a bankrupt after three years from the date of filing of the Statement of Affairs (Penyata Hal Ehwal).

“There will also be priority on serving the bankruptcy notice and petition through personal service or registered posts with the acknowledgement of the receiver,” said Azalina.

She said the Government was also looking into setting up a Rescue Mechanism and introducing a single bankruptcy order to replace the present receiving order and adjudication order.

The proposed Bill is also looking into creating an Insolvency Assistance Fund and the release from bankruptcy without objection by the creditors for certain groups of people.

This group includes 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.

Earlier, Azalina said that according to the Malaysian Department of Insolvency, there had been 169,927 cases of bankruptcy from 2008.

As of November 2016, the Credit Counselling and Debt Management Agency (AKPK) has helped resolve 11,935 cases involving debts totalling RM488mil.