Discharge of Bankrupt with Debts Below RM50,000 – Have Creditors Lost Their Right to Object?
ARC News • June 14, 2023
During the tabling of Budget 2023 on 24 February 2023, our Prime Minister, Datuk Seri Anwar Ibrahim announced that the government would amend the Insolvency Act 1967 (“IA 1967”) to enable bankrupts to be discharged. This move is expected to release 130,000 people from bankruptcy.
Pursuant to the above, the application for discharge of bankruptcy can be made submitted to the Malaysian Department of Insolvency (“MDI”) under Section 33A of IA 1967. The eligibility criteria include the following:
(a) More than five years has elapsed since the date of the Receiving Order and Adjudication Order or the Bankruptcy Order;
(b) Admitted debt or balance of debt is lesser than RM50,000-00;
(c) Bankrupt cooperated with MDI in the administration of bankruptcy matters; and
(d) The bankrupt has provided all information and documents required by the Insolvency Officer.
In the event the application is successful, the Director General of Insolvency (“DGI”) will issue a certificate discharging the bankrupt from bankruptcy. Notwithstanding the above, it is pertinent to note that the discharge from bankruptcy is not granted automatically. There may be circumstances in which the application will be rejected by DGI. Such circumstances include:
(a) There is a court order or ongoing court proceedings against the bankrupt or in the administration of the bankruptcy under IA 1967; or
(b) Actions or investigative proceedings are being carried out under IA 1967 against the bankrupt.
Further, creditors who have filed proof of debt are also entitled to object the discharge of bankruptcy. Such objection can be submitted within 21 days from the date of the service of a notice expressing the DGI’s intention to discharge the bankrupt. However, it is pertinent to note that no objection for the discharge of bankruptcy can be made in the following categories:
(a) a bankrupt who was adjudged bankrupt by reason of him being a social guarantor;
(b) a bankrupt who is registered as a person with disability under the Persons with Disabilities Act 2008;
(c) a deceased bankrupt; and
(d) a bankrupt suffering from a serious illness certified by a Government Medical Officer.
Upon receipt of the objection from creditors, DGI shall evaluate the objection and in the event DGI rejects such objection, the creditors may file an application to court for an order prohibiting the DGI from issuing the certificate of discharge. The application shall be submitted within 21 days of being notified of the DGI’s rejection. The court may either (i) dismiss the creditor’s application; or (ii) make an order prohibiting the DGI from issuing a certificate of discharge for a period not exceeding 2 years.
Commentary
Whilst the announcement for discharge of bankruptcy for debts below RM50,000-00 is very much welcome to grant bankrupts a second chance in life, it is pertinent to note that such discharge is not automatic in nature. Creditors are entitled to object to the issuance of the certificate of discharge by way of submitting an objection to DGI and to court.
Source : Pelepasan Melalui Sijil Ketua Pengarah Insolvensi Di Bawah Seksyen 33A Akta Insolvensi 1967 [Akta 360] Bagi Kategori Bankrap Dengan Hutang Berskala Kecil. Retrieved from https://www.mdi.gov.my/index.php/home/faqs/pelepasan-melalui-sijil-ketua-pengarah-insolvensi-di-bawah-seksyen-33a-akta-insolvensi-1967-akta-360-bagi-kategori-bankrap-dengan-hutang-berskala-kecil
This Article is written by Yeo Shu Pin (Partner) of 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.
