Malaysians saddled with heavy debt will be able to find settlements to avoid being declared bankrupt under a proposed move by the Government.
Minister in the Prime Minister’s Department Datuk Seri Azalina Othman said such an option would be introduced in the Bill to amend the Bankruptcy Act 1967.
“We want to create a special mechanism whereby if you have a lot of debt, you can volunteer yourself for this option to find a settlement using whatever income you have,” she said.
Describing it as a realistic approach to addressing bankruptcy, Azalina, who is de facto law minister, said she hoped the Bill would be tabled during the current Dewan Rakyat meeting and be read a second time during the meeting in March next year.
“The Bill will offer an ‘escape clause’ for debtors. We know creditors are upset because they are owed money but let’s be reasonable,” she said.
“If a guy can’t afford to pay up, we should find the best alternative to enable the repayment.”
Azalina added that many were unaware that a bankruptcy order had been made against them as the order papers were not delivered to them personally but through a substitute service.
Another proposal in the Bill is to shorten the period before a person can be discharged from bankruptcy from the current five years to three years.
Also, those who are above 60 or suffering chronic diseases will be automatically discharged after they have gone through a required discharge period.
The Bill also seeks to increase the minimum threshold of a person’s debt from RM30,000 to RM50,000 as the benchmark before one is declared bankrupt.
Social guarantors, like those for scholarships or loans for vehicles meant for personal use, will have protection from bankruptcy proceedings under the proposed Bill.
A total of 97,215 people were declared bankrupt between 2012 and September this year, according to the Malaysian Insolvency Department statistics, with Selangor heading the list with 27,269 cases.
Asli’s Center for Public Policy Studies chairman Tan Sri Ramon Navaratnam said the proposed special mechanism was long overdue.
“Currently, a temporary downturn or unfortunate business prospects can cause people, especially small businessmen, to get into severe debt and lose the ability to settle loans,” he said.
“As long as they have the capacity to pay, we should encourage them to settle their debts.”
Navaratnam added that the awareness to cut your coat according to your cloth should be drummed into students early in life by parents, teachers and the education system to reduce instances of bankruptcy.
Independent financial adviser Yap Ming Hui said the proposed measure would help to prevent a lot of inconvenience for would-be bankrupts.