KUALA LUMPUR (May 23): There has yet to be a successful case of automatic discharge from bankruptcy under the current provisions of the Insolvency Act 1967, according to Minister in the Prime Minister’s Department (Law and Institutional Reforms) Datuk Seri Azalina Othman Said.

In tabling proposed amendments to the Act for second reading in the Dewan Rakyat on Tuesday (May 23), the law minister said existing provisions under Section 33c entail the automatic discharge of bankrupt individuals three years from the bankruptcy’s submission date, if they successfully meet target contributions as determined by the Director General of Insolvency (DGI).

“However, so far, no case of automatic discharge has been successfully recorded due to the difficulty in complying with the terms of paying the target contribution of their provable debt,” she noted.

Therefore, Azalina said an amendment to the Act proposes to replace the target contribution with a “sum of money determined by the DGI” in regard to the bankrupt’s financial ability — relating to their monthly income and amount of provable debt.

She said a new provision is also to be added to enable the DGI to request further information on the bankrupt’s current and expected income, as well as assets. 

“The proposed amendment to Section 33c of the Act can ensure bankruptcy administration is carried out effectively by taking into account the interests of the public, bankrupts, and creditors,” Azalina said.

“In accordance with the [Madani government’s] ‘second chance’ policy, the amended Section 33c is applicable retrospectively to provide an opportunity for relief to bankrupts who have filed a statement of affairs before the effective date of the amended Act and meet the conditions for automatic discharge,” she added.

Other provisions proposed to be introduced to the Section include giving the DGI the power to suspend automatic discharge for a period not exceeding two years if the bankrupts do not comply with their duties and obligations under the Act.

Besides the proposed changes to automatic discharge provisions, Azalina said the Bill also intends to add two categories of bankrupts that can be discharged by the DGI without objections from creditors  — individuals over 70 years old who are incapable of contributing to the administration of their estate, and those incapable of managing themselves due to any mental disorder.

“Based on data from the Malaysian Department of Insolvency (MDI), a total of 19,913 bankrupts aged 70 years and above are eligible to be considered for discharge through a certificate from the DGI, if they meet the prescribed conditions,” she said.

Another proposed amendment is allowing insolvency administration matters — including creditor meetings — to be held virtually, and bankruptcy notices and other related documents to be delivered through electronic means. The Bill also proposes to repeal the requirement to hold a “first meeting of creditors”, as well as other amendments aimed to provide more effective administration of insolvency estates. 

In illustrating the scale of insolvency in Malaysia, Azalina said that a total of 264,127 bankruptcy cases are under the administration of the MDI as at April 2023.

She noted that lengthy periods of bankruptcy not only burden the bankrupt individual but also impact the government, as the individual is unable to fully contribute to the economy’s development.

“Therefore, the unity government has adopted the ‘second chance’ policy approach to help individuals get out of bankruptcy,” she said, continuing on from past bankruptcy reduction initiatives introduced.

According to the Pengerang member of Parliament (MP), the government amended the Insolvency Act by raising the bankruptcy threshold from RM30,000 to RM50,000 in 2017, and subsequently to RM100,000 in 2020.

She noted that in 2022, the number of bankruptcies stood lower at 5,695 cases versus 16,482 in 2019. “However, statistics show that there are still many more bankrupt individuals who have yet to come out of bankruptcy,” she said in tabling the proposed amendments to the Act.

During the debate session, Kota Melaka MP Khoo Poay Tiong highlighted that 49% of bankruptcies are a result of individuals failing to pay personal loans, followed by business loans at 17%, and hire purchases at 11%. Meanwhile, Bangi MP Syahredzan Johan underlined that the majority of bankruptcy cases involve those in the 25- to 44 years old age category. The duo, joined by five other MPs, debated in support of the Bill. 

Read also:
Lawmakers to debate Bill allowing individuals to discharge from bankruptcy status quicker this week

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