QuickCheck: Is the number of bankruptcy cases going up in Malaysia?


CONSIDERING that 18 people were declared bankrupt each day in the first five months of 2022 according to Insolvency Department statistics, it looks like the number of cases has been going up as of late.

Is there any truth to this claim?

VERDICT:

FALSE

The actual truth is that the number of bankruptcies in the country has steadily decreased from over 16,000 cases per year in 2018 to about 6,500 cases last year.

The significant reduction could be attributed to the amendment to the Insolvency Act on Sept 20, 2020 that increased the bankruptcy threshold from RM50,000 to RM100,000.

Over 58% of those who were declared bankrupt in 2018 until May this year owed sums ranging from RM100,000 to RM499,999, while almost 8% are in the RM500,000 to RM999,999 bracket, and about 5% have debts of over RM1mil.

Selangor has the highest number of bankruptcies, with 72,608 cases up until May 2022, followed by the Federal Territories (46,876) and Johor (32,441) cases.

Additionally, nearly 60% of those who were declared bankrupt from 2018 until May this year were between 25 and 44 years old.

Almost half of the 46,132 persons declared bankrupt from 2018 until May this year were dragged down by personal loans, with other reasons including vehicle hire purchases, business loans, and outstanding credit card payments.

That said, experts like Prof Dr Mohamad Fazli Sabri said having 18 people declared bankrupt every day was alarming even though the number might be far lower than previous years.

"If we multiply 18 by 365 days, we will have close to 6,600 cases a year. Although the numbers might be lower than the previous year, we need to remember that the threshold for bankruptcies was RM30,000 before it was increased to RM50,000, and now RM100,000," said the dean of the Human Ecology Faculty at Universiti Putra Malaysia.

He added that it was worrying that many who fell into bankruptcy were due to personal loans.

"It is possible that these people are taking loans to pay their debts. They should have sought advice from the experts, for example, the Credit Counselling and Debt Management Agency (AKPK)," he added.

However, it should be noted that the government announced a moratorium on loan repayments in 2020, which was further extended to 2021 due to the movement control order and the Covid-19 pandemic, which could have influenced the statistics for 2021.

References:

1. https://www.thestar.com.my/news/nation/2022/06/23/18-people-declared-bankrupt-on-a-daily-basis

2. https://www.thestar.com.my/news/nation/2021/06/28/muhyiddin-six-month-loan-moratorium-to-be-granted-to-all-borrowers-regardless-of-income

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