PUTRAJAYA: The rising trend of people declaring themselves bankrupt is a concern as it shows many are struggling with severe financial difficulties, says the Insolvency Department director-general Datuk M. Bakri Abd Majid.
In recent years, more people have opted to declare themselves bankrupt through a Debtor's Petition, a legal process to protect themselves from excessive creditor claims.
Expressing concern over this trend, the Insolvency DG said there were 330 self-declared bankruptcy cases recorded in 2024, compared to 181 in 2023 and 116 in 2022.
"We're seeing a rise in individuals declaring bankruptcy because they feel that they cannot repay their debts.
"Some borrowers may also choose this route to reduce their financial burden. For instance, if their monthly debt repayment is RM2,000, they might expect it to drop to just RM200 after being declared bankrupt," he told Bernama recently.
The Insolvency Department is taking this rising trend seriously and is currently reviewing the Debtor's Petition process to prevent potential misuse, as it does not have a set debt threshold.
ALSO READ: Over 5,000 youths declared bankrupt since 2020, mostly due to personal loans
"With a Debtor's Petition, an individual can apply for a court order to declare bankruptcy without any minimum debt threshold. They simply need to complete the required documents and pay a deposit.
"In contrast, a Creditor's Petition only applies when the debt exceeds RM100,000, allowing creditors to initiate bankruptcy proceedings," he said.
M. Bakri also cautioned that the Second Chance Policy, introduced by the government to help individuals regain financial stability, could be exploited if self-declared bankruptcies continue unchecked.
"I'm concerned that some individuals may take advantage of the system. They could file a Debtor's Petition, declare bankruptcy, and then, knowing they can be discharged within three years by making minimal payments, use the Second Chance Policy to clear their status," he said.
The Second Chance Policy is a government initiative aimed at helping individuals with small-scale debts secure bankruptcy discharge under specific conditions.
M. Bakri noted that 176,851 bankruptcy discharges were granted under this policy between March 2023 and December 2024, surpassing the initial target of 130,000 cases.
"The department is now working on extending the Second Chance Policy to bankrupt companies. We are identifying eligible businesses to be included in the initiative," he said.
Previously, Prime Minister Datuk Seri Anwar Ibrahim announced that the government would expand the Second Chance Policy to assist bankrupt companies in recovering from financial distress. – Bernama
