ARC News • July 20, 2018
In March 2018, it was reported that there are more than 300,958 bankrupts in Malaysia of which more than 60% of them aged between 35 to 54 years. If you are one of the individuals that fall within this category, read on to find out how you can discharge yourself from bankruptcy.
In Malaysia, there are several methods to discharge from bankruptcy, amongst others, annulment of bankruptcy, discharge by order of court, discharge by certificate of Director General of Insolvency (“DGI”) and automatic discharge. Details are as below:
(a) Annulment of Bankruptcy
An adjudged bankrupt may consider applying to the court for an order to annul the bankruptcy if the bankrupt is able to prove that he/she ought not to have been adjudged bankrupt; or the debts have been paid in full to the creditors. Once an annulment order is granted, the effect is as if a bankruptcy order has never been made against the individual.
(b) Discharge by Order of Court
An adjudged bankrupt may at any time apply to the court for an order for discharge. On the hearing of the application, the court will take into consideration a report submitted by the DGI pertaining to the bankrupt’s conducts and affairs. An order of discharge will be granted in the event the court is satisfied with the report submitted by the DGI. Alternatively, the court may make the following order:
(i) refuse the order;
(ii) suspend the operation of the order for a specified time;
(iii) suspend the operation of the order until a dividend of at least 50% has been paid to the creditors; or
(iv) grant a conditional order for discharge.
(c) Discharge by Certificate of DGI
The DGI may in his discretion issue a certificate to discharge a bankrupt from bankruptcy provided that 5 years has lapsed since the date of the bankruptcy order. Prior to the issuance of the certificate of discharge, the DGI is imposed with the obligation to serve a notice of intention to issue the certificate on each creditor who has filed a proof of debt. Thereafter, the creditor may within 21 days from the date of service of the notice, file a notice of objection in the event the creditor wishes to object the issuance of the certificate.
However, it is pertinent to note that no objection shall be filed against:
(i) a bankrupt who was adjudged bankrupt by reason of him being a social guarantor;
(ii) a bankrupt who is registered as a person with disability under the Persons with Disabilities Act 2008;
(iii) a deceased bankrupt; and
(iv) a bankrupt suffering from a serious illness certified by a Government Medical Officer.
Upon receiving the objection from the creditor(s), the DGI shall assess and determine the merit of the objection. A notice will then be issued by the DGI to the creditors accordingly. In the event the creditor is dissatisfied with the DGI’s rejection of the objection, the creditor may file an application to the court for an order prohibiting the DGI from issuing a certificate of discharge. The application shall be filed within 21 days from the date of service of the notice. Accordingly, the court shall have the discretion either to dismiss the application; or order that a certificate of discharge shall not be issued by the DGI within a period of 2 years.
(d) Automatic Discharge
An adjudged bankrupt may be discharged from bankruptcy upon expiration of 3 years from the date of the submission of the statement of affairs if:
(i) the bankrupt has achieved the amount of targeted contribution set by the DGI; and
(ii) the bankrupt has complied with the requirement to render an account of moneys and property to the DGI.
The targeted contribution shall be determined by the DGI upon considering amongst others the following factors:
(i) total debts of the bankrupt;
(ii) current monthly income of the bankrupt;
(iii) prospective monthly income of the bankrupt;
(iv) expenses for maintenance of the bankrupt and the bankrupt’s family; and
(v) total property which may be realised.
The DGI is required to serve a notice of discharge to each creditor at least 6 months before the expiration of the 3 years. Upon receiving the notice from the DGI, the creditor may file an application to court within 21 days from the date of receipt of the notice, objecting the discharge from bankruptcy. However, the objection shall only be made on the following grounds:
(i) that the bankrupt has committed an offence under the Insolvency Act 1967 or specific provisions under the Penal Code pertaining to fraudulent deeds and dispositions of property;
(ii) the discharge would prejudice the administration of the bankrupt’s estate; or
(iii) the bankrupt has failed to co-operate in the administration of estate.
On hearing of the application for objection, the court may order the following:
(i) dismiss the application;
(ii) approve the application; or
(iii) suspend the discharge for a period of 2 years.
In the event the court made an order to suspend the discharge, the bankrupt shall continue to fulfill his obligations under the Insolvency Act 1967 and be discharged automatically at the expiry of the 2 years’ period.
In view of the limitations / restrictions imposed on an adjudged bankrupt, it is recommended for bankrupt individuals to seek proper legal opinion from legal practitioner to discharge themselves from their bankruptcy status.
Yeo Shu Pin is a Partner at Messrs. Afif Rahman & Chong
Disclaimer: Every attempt to ensure the accuracy and reliability of the information provided in this publication has been made. This publication does not constitute legal advice and is not intended to be used as a substitute for specific legal advice or opinions. Please contact the authors for a specific technical or legal advice on the information provided and related topics.