What is Bankruptcy in Malaysia?
Bankruptcy refers to a legal process in which the court declares an individual or company unable to repay outstanding debts. This status not only affects a person’s finances but also impacts personal freedom, access to financial services, and career opportunities.
Bankruptcy is typically considered a last resort after all other debt resolution efforts have failed. It can protect the individual from continued pressure from creditors, but comes with strict limitations.
Criteria for Being Declared Bankrupt in Malaysia
Several conditions must be met for someone to be declared bankrupt in Malaysia:
- Total debt must exceed RM100,000
- The debt must be definite and identifiable
- The individual must have failed to repay the debt for at least six months
- The individual must have resided in Malaysia for at least one year
How Bankruptcy Happens
There are two main ways someone can be declared bankrupt:
1. Creditor’s Petition:
This occurs when a creditor, such as a bank, files a legal claim against an individual with debts exceeding RM100,000 who has failed to repay them for six months or more.
2. Debtor’s Petition:
The individual voluntarily files for bankruptcy, usually to protect themselves from overwhelming debt pressure. Once filed, this petition cannot be withdrawn without court approval.
Common Causes of Bankruptcy in Malaysia
Once declared bankrupt, various restrictions will be imposed, including:
- Oversight by the Director General of Insolvency (DGI), who will manage the bankrupt’s assets
- Assets such as properties and vehicles can be auctioned off to repay debts
- Bank accounts will be frozen and can only be used with DGI’s approval
These restrictions aim to ensure orderly debt management and allow the bankrupt to restructure their finances.
Consequences of Being Bankrupt
According to the statistics from the Insolvency Department, personal loans are among the leading causes of bankruptcy. Many individuals take these loans for quick cash to settle other financial issues. Other major causes include:
- Vehicle loans
- Housing loans
- Business loans
- Acting as a guarantor for other individuals
The most affected age group is those aged 35 to 44, followed by individuals aged 25 to 34, indicating that even young people are vulnerable if their financial management is poor.
What To Do If You Are Struggling with Debt
If you are facing debt problems and are concerned about the risk of bankruptcy, taking early action is crucial. Suggested steps include:
- Seek free professional help from the Credit Counselling and Debt Management Agency (AKPK)
- Negotiate with banks or creditors to restructure your payment schedule
- Review your finances and cut unnecessary spending
- Avoid borrowing to pay old debts, as this increases your burden
- Involve family in discussions so they understand your situation and can support you
- Be disciplined with payments to avoid late penalties
- Spend within your means and avoid impulse purchases influenced by social media
Preventive steps like these are crucial to avoid more serious financial problems.
Avoid Bankruptcy with Smart Financial Planning
Bankruptcy does not just involve loss of assets — it also affects your reputation, freedom of movement, and future opportunities. By understanding what bankruptcy is, its causes, and the legal framework, you can take early steps to avoid it.
If you are facing financial stress and seeking a responsible financing solution, OSK Syariah Capital offers Shariah-compliant personal financing that can help you ethically restructure your finances. Key features include:
- Fully Shariah-compliant financing
- Simple and transparent application process
- Fast approval
- Fixed profit rate with no upfront payment
Take the first step toward financial stability. Apply for trusted financing with OSK Syariah Capital today.
