What Will Happen After You Are Declared Bankrupt?
There are two ways in which a person can be made a bankrupt:
- Creditor’s Petition – A creditor may commence bankruptcy proceedings against an individual by serving them with a bankruptcy notice. (for debts exceeding RM50,000 arising from a final judgment)
- Debtor’s Petition – An individual may voluntarily seek a court order to be made bankrupt. (No minimum amount of debt required)
What will happen after I am declared bankrupt?
- Assets Taken Away:
Your assets will be vested with the Director General of Insolvency (DGI), and the DGI will administer your assets and sell them to repay the outstanding debts. The DGI will also trace and monitor your conduct. You will need to submit an account of your income and expenditure once every six months, and report all monies or property exceeding RM500 that comes into your possession. You may also need to pay part of your income to the DGI.
- Travel Ban:
You will need to surrender your passport and will be unable to travel overseas, unless with the approval of DGI or a court order. This travel ban will last for 3 years, and you will be automatically discharged from bankruptcy if you meet the requirements laid out in Section 33C of the Insolvency Act 1967 (elaborated further below).
- Employment Restrictions:
You will be disqualified from being a director of a company and you cannot manage any business run by your spouse, children or relatives. You also cannot work in professions such as lawyer, doctor, accountant and quantity surveyor.
- Limited Credit Use:
You can only use your credit card up to a value of RM1,000.
- Restricted Legal Rights:
You cannot commence any legal proceedings (apart from personal injury claim) without sanction from the DGI.
When will I be discharged from bankruptcy?
You may be automatically discharged after three years being made a bankrupt, provided that:
- You achieve the amount of target contribution of his provable debt; and
- You duly comply with the requirement to render an account of moneys and property to the Director General of Insolvency ……..(33C of the Insolvency Act 1967)
Is it possible that I can be made bankrupt without my knowledge?
As a general rule, you have to be personally served with the relevant court papers to be made a bankrupt. A “substituted service” (advertising the court papers in the newspaper, leaving the documents at your workplace/family member/friend etc.) can be used if the creditors can prove that you are trying to avoid getting served. In such situations, the creditors will apply to the Court for a “substituted service” and it will be deemed as if you received the court papers personally.
If you like to find out more about the recent changes to Malaysia bankruptcy law, read more here.
