PETALING JAYA: Raising the bankruptcy threshold may offer greater protection to financially distressed individuals, but it will not resolve their underlying debt problems without effective rehabilitation measures, say financial experts.
Bank Muamalat chief economist Dr Mohd Afzanizam Abdul Rashid said the policy’s success should not be measured solely by a reduction in bankruptcy cases.
“We must also recognise that raising the threshold does not necessarily eliminate the underlying debt.
“Ultimately, the success of this policy should not be measured merely by fewer bankruptcy cases, but by how many financially distressed individuals successfully rehabilitate their finances and regain their economic independence.
“In this respect, it is about ensuring our society is financially literate and inculcating financial discipline,” he said.
Mohd Afzanizam suggests complementing the policy with effective debt restructuring, financial counselling and responsible lending practices, alongside support from the Credit Counselling and Debt Management Agency, to prevent borrowers from falling into financial distress.
While raising the threshold has merits, he said bankruptcy should ideally be a last resort rather than a first response to financial difficulties.
On Oct 9, Prime Minister Datuk Seri Anwar Ibrahim announced in Budget 2027 that the bankruptcy threshold would be raised from RM100,000 to RM150,000.
Under the previous RM100,000 threshold, a debt had to meet the minimum amount for a creditor to initiate bankruptcy proceedings, subject to the applicable legal requirements.
Anwar said the measure would provide better protection for financially distressed individuals against bankruptcy proceedings, particularly amid rising costs.
Social and Economic Research Initiative managing director Rashaad Ali described the policy as a positive step towards preventing struggling Malaysians from falling deeper into debt.
While raising the threshold might entail economic costs or disadvantages, he said these were justified if the policy provided meaningful relief to those who needed it most.
“It is a good move to ensure vulnerable households are not caught in a debt trap easily, especially considering the rising cost of living.
“Malaysia has managed its inflation fairly well, especially compared to other Asean nations,” he said, adding that external global factors could easily destabilise the country’s current economic position.
He stressed that protecting vulnerable people should remain a priority even when difficult economic trade-offs arise.
