If you can’t pay a debt of RM100,000, you can be declared a bankrupt

PETALING JAYA: What is bankruptcy and what are the restrictions imposed on a person who has been declared a bankrupt?

The Insolvency Act 1967 was amended in 2020, to raise the bankruptcy threshold from RM50,000 to RM100,000. This was the second time the bankruptcy threshold was increased within a span of a few years, after it was raised from RM30,000 to RM50,000 in 2017.

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According to the Department of Insolvency, a person can only be declared bankrupt by a court order.

A creditor may file for bankruptcy action against a debtor if the debt owed amounts to RM100,000.

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A debtor may also file a court application under Section 7 of the Insolvency Act 1967 and rule 102(1) of Insolvency Rules 2017 to be declared a bankrupt.

“All the unsecured property belonging to the bankrupt will be vested on the Director-General of Insolvency (DGI) and the DGI has the responsibility to realise all such assets.

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“The proceeds of the sale will be distributed among creditors who have filed their proof of debts and the debts have been admitted by the DGI,” according to the department.

A bankrupt is also not allowed to transfer property to a third party once a Bankruptcy Order has been issued.

There are certain restrictions imposed on a person who has been issued a bankruptcy order.

This include being disqualified from being a lawmaker; holding public office (subject to the decision of Government Disciplinary Board); holding certain positions in statutory bodies, registered societies or organisations and practising in certain professions such as a lawyer, accountant, liquidator, quantity surveyor or a director of a company.

Apart from that, a bankrupt cannot carry on with their business alone, in a partnership or by way of a company. They are also disqualified from working in the business of a relative.

That said, bankruptcy status does not prevent one from working.

“When you are declared a bankrupt, it would not deny you of your right to continue your current job or to get a new job. However, a bankrupt should check whether there is any stipulation of such in his employment contract or other company documents,” the department said.

“It is subject to your terms of contract with your current employer. For instance, where the contract requires you to inform the employer if you are declared a bankrupt, then you must do so,” it added.

Any money or gratuity received by the bankrupt must be vested on DGI to be distributed to the creditors, subject to the discretion of the DGI.

A travel ban is also imposed whereby a bankrupt is not allowed to leave Malaysia without the permission of the DGI or court.

As for the use of credit card, a bankrupt can use their existing card for up to RM1,000. If the amount is more than RM1,000, the bankrupt will be required to inform the issuing bank or finance company to allow the financial institution to decide whether they are prepared to continue to extend the credit to the bankrupt.

Failing to notify the issuing bank or finance company will be deemed as an offence under the Insolvency Act 1967.