Wednesday, March 23, 2011

Bankruptcy issues in Malaysia

Many don't know that bankruptcy is not the end of the world. Many people still carry on with their life despite their run of bad luck as many in Malaysia are made bankrupt due to silly mistakes like bad car accidents or being a co-signer (guarantor) to car loans.

Of more than 1.7 Million bankrupts in Malaysia, there are more than 90,000 civil servants of the Malaysian government that are made bankrupt just because they failed to pay on their car loans or being a guarantor to one.

This is especially sad as there are no discharge from bankruptcy even after many years in Malaysia and for just RM30,000 , one can be made a bankrupt for that small matter. That amount works fine 20 years ago, but now anyone having an income of RM1,500 earmarked as the living below poverty line, it does not make much sense when cars are sold for RM90,000 for a Proton Inspira compared to RM20,000 when the Saga made debut.

What I propose is for the amount to be raised to RM100,000 as even that is insufficient to buy a small house being that a low cost home is valued at RM220,000!! In itself, that does not solve the stigma and problems of the borrower and creditor.

Chapter 13 of the Bankruptcy Act in the US Legal Code states that if someone declares under this Chapter, then he is to be stopped from being harassed so that he can catch up on payments and with no interest charged. This is inline with the Individual Voluntary Agreement (IVA) rulings in the UK where a debt can be written off, or heavily discounted to the extent of the creditor of getting some sort of capital back from the debtor.

Many businessmen and women operate out of the concept of law in Malaysia when they are already made bankrupt. They use proxies, fake documents or even secondary identification documents to leave the country such as Indonesian Passports or the such. Using proxies are a thing of common doing where someone else lends their name to act on the Cash & Carry business, Signing Cheques and stuff for the company.
Some even use OFFSHORE ACCOUNTS such as Gibraltar , Cayman Islands and along those lines to launder their funds. It's a lose-lose situation for the debtor and creditor as no money will ever be paid.
Chapter 7 is where one has the whole slate wiped clean upon satisfactory regular payments to the Official Receiver / Assignees. Singapore practices this system where you get a wipe down after 3 or 7 years, depending on your debt. Many countries such as UK practice this method and is not a burden to the creditor too as they get some sort of payment back.

Since doing work on oDesk , I came across many technical knowledge on Chapter 7 which gives me insights to the business Legal Issues. So do check these sites out and learn how you can get your finances back on track. What we need to do is to learn from our mistakes and not to make the same thing again.

24 comments:

  1. Bankruptcy is a major concern in Malaysia. Business firms need to find ways to get back on track.

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  2. "Of more than 1.7 Million bankrupts in Malaysia, there are more than 90,000 civil servants of the Malaysian government that are made bankrupt just because they failed to pay on their car loans or being a guarantor to one." This is a fundamental difference in the laws of the US and Malaysia, where debtors can choose to file either Chapter 7 or Chapter 13 bankruptcy.

    ReplyDelete
  3. It's sad to hear people going bankrupt because of auto loans, and government workers at that. There are institutions out there that can help. Some even take bad credit auto loans.

    ReplyDelete
  4. Speaking in a micro economic standpoint, the micro and small enterprises are flexible enough. Medium scale and other large enterprises are in danger.

    ReplyDelete
  5. Did you say 1.7 million bankrupts....that's like 20% of our workforce...!!!!!

    What is the government doing ....!!!!!

    ReplyDelete
  6. how do you go about with the Indonesian passport ? i am serious.

    ReplyDelete
    Replies
    1. Me too..How do you do the Indonesian passport thingy..come on help out here.....our JIM is completely useless.....

      Delete
  7. It is a very unfortunate situation indeed. It's sad to hear that people in this country experience bankruptcy because of car loan payment failure. However, these individuals are the only people to be blamed of. From the start, they should have known that they are responsible in paying their debts. Responsibility is the only key to be a successful debtor.

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