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Crucial to identify 'potential' bankrupts By ARIFF SHAH R.K.

Publish date: Thu, 30 Jun 2022, 09:32 AM

LETTERTS: I refer to the report "Government to review bankruptcy threshold, says PM" last Sunday.

Prime Minister Datuk Seri Ismail Sabri Yaakob stated that the government would review the threshold as he was concerned about the spike in the number of youths being declared bankrupt this year.

Increasing the threshold may provide a short-term solution but is not therapeutic in nature.

The threshold had been raised before and yet, according to reports, the number of cases registered daily in 2022 stands at 18. This problem is how to prevent bankruptcy and rescue bankrupts. 

The problem could be overcome by identifying "potential bankrupts" and assisting them in the "post-adjudication order" period.

Agensi Kaunseling dan Pengurusan Kredit (AKPK), which currently plays only an advisory role, should be given more power.

Potential bankrupts must be categorised as follows:

SUSTAINABLE — Rehabilitate;

MIDDLE — Rehabilitate; and,

UNSUSTAINABLE (chronic abuser) — Bankrupts prior to the amendment to Insolvency Act 1967, normal process of bankruptcy with rescue mechanism.

AKPK will have to categorise potential bankrupts according to specific categories like credit cards, personal loans, car loans and small business loans.

If they've just begun accumulating debts and fall under the Sustainable or Middle category, AKPK will take charge of their finances to prevent them from being taken to court and declared a bankrupt.

If the youths are chronic abusers or are bankrupts prior to the amendment to Insolvency Act 1967, then they will go through the normal process of bankruptcy, but with a rescue mechanism.

This experience will perhaps teach them to be cautious in financial matters, but they must be reintegrated into work or business.

Under the act, the "second chance" for the bankrupts to re-start begins only after they have been discharged.

Between the time when the bankruptcy order is made and the time when bankrupts are discharged, there is a "dark period" for the bankrupts.

During this period, a bankrupt has to pay a fixed monthly instalment to his insolvency estate, have his property sold and the dividend paid out to creditors from his insolvency estate on a pari passu basis.

It is during this period that bankrupts are unable to contribute to their insolvency estate due to their state of affairs.

It is difficult for them to get jobs as many employers demand non-bankrupt status. This "dark period" or "living hell", as the bankrupts term it, may last a long time.

Here, the second chance must begin during the dark period and not after the discharge has been obtained.

These bankrupts are identified and under the watchful eyes of AKPK or a government foundation to oversee this plan and with the consent of the director-general of insolvency, jobless youths or talented young bankrupts or able bankrupts will be given skills training or financial grants to begin small-scale businesses to earn and contribute towards their insolvency estate.

Also, to obtain their discharge or annulment and place the bankrupts back into the world of work and business even before their second chance under the said act begins.

It's a win-win situation for the bankrupts and creditors. The current law is designed only to settle the problem between the debtor and the creditor but there is a wide gap in the notion of an effective and efficient method to prevent or reduce bankruptcies.



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