May 2, 2017
If you are one of the unfortunate bankrupts in Malaysia, this is not the end of the world. Some even find relief from declaring bankruptcy since they can get proper help from the authorities such as The Credit Counselling and Debt Management Agency (AKPK) and own up the responsibilities to repay their debts under the governance of Director General of Insolvency (DGI).
There are a few questions you might be asking when you are declared bankrupt. For starters, what will happen to your assets and property if you become a bankrupt?
Well, when a person becomes bankrupt, his/her assets will be placed in the hands of the DGI. The DGI will then administer the bankrupt’s assets and sell or dispose them to repay the outstanding debts.
Before going into details on how to survive bankruptcy, let’s get one thing clear. A bankrupt business and bankrupt individual are two entirely different things.
A private limited company (Syarikat Sendirian Berhad) is by definition, a separate legal entity from the owner of the company. This means the debts incurred by the company are completely not liable on the owner of the company and does not even affect the owner’s credit score.
For example, say you own 100% of Kaki Lima Sdn. Bhd., a logistics company. After 15 years of business, things went downhill and the company owes a whopping RM12 million. If you declare the company bankrupt, the banks that loaned money to the company, and the investors who bought S$3 million worth of corporate bonds won’t be getting their repayments, the airline companies that provided the planes won’t be paid, and so forth.
However, this does not affect the owner at all. This is why some infamous rich people (no fingers pointed) have cheated their way out of this mess: they set up a company using borrowed money, pay themselves a high salary, and then allow the company to go bankrupt.
Some may ask that if he or she inherited an amount of money after they were declared bankrupt, will they be able to make direct payment to settle the debt. The answer is, a bankrupt is not allowed to make direct payment to the creditor and all payment has to be made through the DGI.
With that, the payment made by the bankrupt will be credited into the estate account by the DGI and distributed to the creditors who have filed in Proof of Debt according to priority.
Some people may even try to transfer their property to spouses or family members to save their assets. However, under the Bankruptcy Act, any settlement or transfer of property shall be void against the DGI if the settler becomes a bankrupt within 2 years after the date of settlement.
This means if the settler becomes bankrupt within 5 years after the date of settlement, the settlement or transfer of property will be void unless the parties can show that the settler was able to pay all his debts at the time of making the settlement without the aid of the property.
Nonetheless, there are two exceptions to this situation where:
According to Malaysia Financial Planning Council (MFPC)’s certified trainer, Desmond Chong, each bankrupt is subjected to submit annual account details to the DGI and the latter will advise the former on expenses, income, and debt repayment accordingly.
Though it may differ accordingly across cases, there are some ground rules you need to comply with during the entire period under bankrupt status.
Since Malaysian law doesn’t allow automatic discharge of bankruptcy, bankrupt has to make an application to be discharged. However, it is still the best option for you to avoid bankruptcy in the first place by recognising the red flags and also leverage on the best debt consolidation personal loan.