Help on the horizon: A total of 3,604 individuals were declared bankrupt between January and July this year. Proposed amendments to the insolvency laws will give bankrupts a helping hand.
PETALING JAYA: Insolvency laws will be amended soon to give bankrupts some leeway to get back on their feet, says Datuk Seri Dr Wan Junaidi Tuanku Jaafar.
This comes following plans by the government to modernise the nation’s ‘colonial era’ insolvency laws so that affected individuals including small and medium enterprises (SMEs) avoid being stuck in debt, said the Minister in the Prime Minister’s Department (Law and Parliament).
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“Presently, the moment you become a bankrupt, you become persona non grata in this country.
“You cannot do business, you cannot be employed while all your movement is regulated and controlled.
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“What kind of law is this just because we owe somebody (money),” he told The Star in an interview.
Wan Junaidi added that the proposed amendments would not only focus on the bankruptcy threshold but would also put in place a mechanism to lift individuals, particularly those involved in SMEs, out of their financial conundrum.
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The leeway, he said, would not absolve debtors of the responsibilities but avoid them being socially stigmatised as a bankrupt.
“If you make a mistake in managing your small business, you will still get into trouble.
“But you won’t be stigmatised by the fact that you are a bankrupt,” said Wan Junaidi.
Based on the data of the Insolvency Department, an average of 17 bankruptcy petitions are filed daily throughout the country with an equal number of individuals declared as bankrupts in a day.
A total of 3,604 individuals were declared bankrupt between January and July this year, bringing the total number of existing bankrupts in the country to 273,252.
Between 2018 and July this year, 47,042 bankrupts were registered with the department.
Some 70% of registered bankruptcy cases for the same period were for non-payment of personal loans (42.03%), hire purchase loans (14.69%) and business loans (13.68%).
A total of 86.7% of bankruptcy cases for the same period involved non-payment of loans amounting from RM50,000 to RM99,999 (26.04%), and from RM100,000 to RM499,999 (60.66%).
The Insolvency Act 1967 was amended in 2017 to raise the bankruptcy threshold from RM30,000 to RM50,000.
Another amendment was done in 2020 to raise the threshold from RM50,000 to RM100,000 in response to the Covid-19 pandemic which badly affected SMEs.
On Monday, Prime Minister Datuk Seri Ismail Sabri Yaakob hinted of the possibility of another special loan moratorium for SMEs, which accounts for 96% of the economy and almost half of the nation’s workforce.
Wan Junaidi said the Legal Affairs Division was currently looking at insolvency laws used by Britain, Canada and Australia as models for the proposed amendments.
“I will be looking at the threshold to see if we should maintain the high threshold of RM100,000 or lower it. There must be a mechanism so that people will be careful in what they are doing while at the same time not be condemned forever.
“This includes a time frame when a bankruptcy is automatically lifted without conditions.
“If you (a bankrupt) can’t work or do business to earn money, how are you going to repay your debt?” he added.
Wan Junaidi said he is targeting the Parliament meeting next month to table the proposed amendments and pass the law during the Budget session.
He added that a revamp of the insolvency laws was needed to ensure the goal achieving the National Entrepreneurship Policy 2030 (NEP 2030).
