More help for bankrupts
8 February 2018 - HARDLY a day passes without newspapers publishing classifieds on bankruptcy cases.
Between 2013 and 2017, over 100,000 individuals were made bankrupts. The statistics become grimmer if we take into account that 34% of them were between 35 and 44 years old.
We are not talking about people who failed to pay loans running into millions but youth as young as 21 or just starting out in life. Daily an average of 41 young people aged between 21 and 40 are declared bankrupt.
And all mainly for bad debts due to hire purchase loans for cars, houses or credit cards worth as low as RM30,000.
Things would have been worse if not for Bank Negara Malaysia's foresight in setting up the Credit Counselling and Debt Management Agency (AKPK) 11 years ago.
AKPK has helped tens of thousands of people. It counsels and gets to the root cause – usually poor financial planning – for young wage earners, who can hardly make ends meet especially in urban areas.
These are the people who are battling with the high cost of living, failure or slowdown in business, high medical expenses and job loss.
We have more reasons to worry with a revelation by the Malaysian Employers Federation that some 50,000 workers are expected to be retrenched this year.
Regular news reports about young bankrupts and advertisements by creditors led to the timely political will by the government with the passage in Parliament late last year of major amendments to the Bankruptcy Act 1967, now renamed the Insolvency Act.
The AKPK will be in the forefront of enforcing the spirit of eight policy changes under the Act that came into force last October.
Its CEO Azaddin Ngah Tasir said one policy change now gives the agency the right to intervene on behalf of debtors by stalling bankruptcy action and bringing banks to the negotiation table.
Under the Voluntary Arrangement mechanism, AKPK will act as a nominee for the debtor; this involves an application to the court for an interim order whereby during its effective period, no bankruptcy petition and other legal process may be commenced or continued against the debtor without the court's permission.
AKPK will be given 90 days from the interim order to assist the debtor to prepare a debt repayment plan.
"The borrowers can come to us and we will evaluate whether they are eligible for us to represent them as a nominee. We will look into their affairs and see how best they can make payments. We will then talk to the creditors and restructure the loans for them, once we've got the approvals from the court," said Azaddin.
Other changes to the Act include the setting up of the Insolvency Assistance Fund to ease the administration of bankruptcy cases and a release from bankruptcy without objection by the creditors for certain groups of people.
They include "social guarantors" made bankrupt under the previous Bankruptcy Act 1967 such as those who have died, people categorised with disabilities by the Welfare Department as well as those certified by government doctors as suffering from chronic medical conditions.
Another important amendment is raising the debt threshold to RM50,000 at least for bankruptcy declarations from RM30,000 previously, a clause that caught many people especially friends and relatives who stood as guarantors.
Over the past four years, the courts cleared over 1,400 bankruptcy cases while some 12,400 more cases were annulled and another 46,000 discharged from bankruptcy.
As of last December the agency has helped resolve about 15,000 cases involving debts worth RM617.4 million.
Banks have been over-zealous in issuing credit cards even to new wage earners resulting in many of them having multiple cards when they can hardly afford even one after paying their car loans and other commitments.
And many of them get into financial woes with their first huge commitment, their car instalment, as the majority with a salary of around RM2,000 having to fork the bulk of it just to service their car loans.
Malaysia is perhaps the most obvious car society in the world due to us being late starters in providing seamless mass transit transport systems.
Most of the bankruptcy cases relating to non-payment of car loans could be avoided if more young people opt to buy good second-hand vehicles that are cheaper than new ones.
I know nothing like the thrill of driving a new car out of a showroom but this pleasure is short-lived and disappears once the car owner can't service his or her loans.
It's time for all industry players to start thinking of making more affordable cars.
Let's hope more efforts are put into improving our image as a country with one of the world's highest household debts and we need to do more to save people especially the young from the bankruptcy trap.
Well done AKPK and keep up your noble work.