Bankruptcy law outdated

  • Letters
  • Monday, 25 Jun 2018

THE bankruptcy law of Malaysia is long overdue for a proper overhaul to make the rules fairer to bankrupts. Despite the amendments in 2017, the current law remains outdated and punitive.

The Barisan Nasional government had been promising to amend the law for many years but when change came in the form of the Bankruptcy Amendment Act 2017, it provided little or no relief to the nearly 300,000 bankrupts in the country. The reason for this is that the Barisan government was heavily influenced by the powerful banks, corporations and financial institutions.

If one reads Section 60(1) of the Bankruptcy Amendment Act 2017, it’s clear that these amendments do not apply to an individual who was made a bankrupt before this new Act comes into force. This simply means that for the nearly 300,000 or so existing bankrupts, this act affords no relief whatsoever.

The previous government lacked the political will to bring in real reform simply because of the pressure and lobbying from the banks and financial institutions.

The promise made by the then minister in the Prime Minister’s Department Datuk Seri Azalina Othman Said that the amendments were intended to make the law more humane and that she wanted to slash down the number of bankrupts substantially (with more than 60% between the ages of 25 and 44) was an empty one.

It’s strange how we live in a country where inanimate entities like corporations are given protection under the law to wind up and start again afresh but the same second chance is not given to people. Bankruptcy in Malaysia for many is a death sentence. Even criminal offenders are released after they have served their sentence and given a chance to rehabilitate. This is not the case with bankruptcy; once you are declared a bankrupt, you are forever at the mercy of your creditor(s).

While the Bankruptcy Amendment Act 2017 changes the law in this regard for people who were made bankrupt after 2017 by allowing for an automatic discharge after a few years, this reprieve does not apply to those declared bankrupt prior to this amendment.

If the new Pakatan Harapan government really believes in giving people a second chance, it should act now to correct this miscarriage of justice. Our lawmakers should have the courage to change the law for all bankrupts.

In Australia, bankruptcies normally end after three years. In Canada, a debtor can file a consumer proposal as an alternative to bankruptcy. This is a negotiated settlement to make monthly payments for a maximum of five years.

In England, a bankruptcy usually does not last longer than one year.

Singapore has passed its bankruptcy law wherein a first-time bankrupt can be discharged in three years. His name will also be removed from public records five years from the date of his discharge.

I’m not saying that people who are indebted should not be made accountable for their debts but there is a need to strike a balance between the need to hold bankrupts accountable and allowing them to have the opportunity to make a fresh start in their financial affairs after a reasonable period of time.

Furthermore, the law as it is currently is discriminatory and contravenes Article 8(1) of the Federal Constitution which states, “All persons are equal before the law and entitled to the equal protection of the law.”

Section 60(1) of the Bankruptcy Amendment Act 2017 creates two classes of bankrupts, those who became bankrupt before the Act came into force and those declared bankrupt after the Act, and it does not accord both groups equal protection under the law. This is discriminatory and unconstitutional.

The new government should stand by their promise of equal treatment for all Malaysians and act immediately to remedy this situation and abolish Section 60 of the Bankruptcy Amendment Act 2017. This will result in the new law being applicable to all Malaysians and provide equal protection and relief to all bankrupts.


Kuala Lumpur

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Opinion , Letters; Bankruptcy; Law


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