Some intentionally become bankrupt to pay lower rates for loans, says Insolvency Department


PETALING JAYA: The Insolvency Department says some individuals abuse their bankrupt status to avoid burdensome loan repayments for large debts.

Its director-general, Datuk M. Bakri Abd Majid, said these individuals would intentionally declare themselves bankrupt so that their loan repayments could be lowered, reported Sinchew Daily on Saturday (Jan 18).

He said that with the bankruptcy status, the department would decide the monthly loan repayment according to the individual’s capacity.

He added that the monthly repayment of large loans, set by the department, was usually insufficient to repay the full loan amount.

Bakri gave an example of a civil servant who was RM1mi in debt. Since the borrower lost his job and declared bankruptcy, he only contributes RM200 monthly to his loan repayment.

He added that it was puzzling how a Grade 29 civil servant could be approved for a loan of more than RM700,000 and suspected that the individual may have gotten help to get the approval.

“The loan money could have been saved or invested under someone else’s name,” he said.

Bakri explains that bankruptcy does not significantly impact daily life, and the required monthly contributions are lower.

“If one meets the conditions and the period set between three and five years, they can be discharged from bankruptcy,” he said.

To solve the issue, he urged financial institutions to take more stringent loan measures to prevent similar exploitation in the future.

"Nowadays, securing personal loans is relatively easy, making it more enticing for younger individuals who may fall into debt and face bankruptcy," said Bakri.

He pointed out that bankruptcy was meant to help individuals in financial difficulties, not as a loophole to avoid debt.

He said the department is committed to protecting the interests of bankrupt individuals and creditors.

He warned that action would be taken against bankrupt individuals who hide their assets or income information.

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