Discharge of bankruptcy under small-scale debts
07 March 2023
At the recent budget presentation of the Belanjawan 2023 initiative, the Prime Minister announced that bankruptcy cases with debts of less than RM50,000.00 will be discharged immediately with effect from 1.3.2023.
Based on the Guidelines issued by the Malaysian Department of Insolvency for the discharge of bankruptcy under small-scale debts (w.e.f 1.3.2023), the following are to be noted:
What is a small-scale debt?
A small-scale debt is where the total debt of the bankrupt is RM50,000 or less.
What are the conditions to be fulfilled by the bankrupt under such an initiative?
The bankrupt is required to fulfil the following conditions:
(i) the declaration of bankruptcy has surpassed 5 years from the date of Receiving Order and Adjudication Order / Bankruptcy Order;
(ii) the outstanding debt does not exceed RM50,000.00;
(iii) the individual bankrupt has been co-operative with the Department of Insolvency for the administration and dealing of the bankrupt’s affairs;
(iV) there is no court order, court proceeding and/or investigation proceeding being conducted on the individual bankrupt under the Insolvency Act 1967 (“the Act”) which will prevent the release of the individual bankrupt from bankruptcy.
How would the discharge be effected?
The discharge of bankrupt would be effected pursuant to section 33A of the Act. The Director General of Insolvency (“DGI”) may, in the DGI’s discretion issue a certificate discharging a bankrupt from bankruptcy.
How would the discharge process be kickstarted?
An individual bankrupt who fulfils the conditions for discharge is required to submit an application for the issuance of a certificate of discharge by the DGI, for the DGI’s consideration.
Subject to the fulfilment of the conditions by the bankrupt, the DGI would then issue a notice of intention to issue the certificate of discharge (“the Notice of Intention”) to the creditors.
Can a creditor object to the discharge of the bankrupt?
A creditor who has been served with the Notice of Intention and wishes to object to the issuance of the certificate discharging the bankrupt, shall within 21 days from the date of service of the said notice, lodge a notice of objection stating the creditor’s grounds of objection.
A creditor who does not lodge a notice of objection and the grounds of objection in accordance to the prescribed timeline (i.e. 21 days from the date of service of the Notice of Intention), shall be deemed to have no objection to the discharge.
Notwithstanding the above, no objection can be made by the creditor for the issuance of the certificate discharging the bankrupt by the DGI under the following 4 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.
What happens if a creditor does not object to the discharge of the bankrupt?
A certificate discharging a bankrupt from bankruptcy would be issued by the DGI, releasing the bankrupt from all his debts provable in the bankruptcy.
Notwithstanding the discharge of the bankrupt, the discharged bankrupt:
a) shall continue to give such assistance as the DGI requires in the realisation and distribution of such of his property as is vested in the DGI; and
b) shall not be released from any debt, due to the Government / of any state.
What happens if a creditor objects to the discharge of the bankrupt?
A creditor who has lodged a notice of his objection with the grounds of his objection would be considered by the DGI. The DGI may allow or reject the creditor’s objection to the discharge and the creditor would be notified of the DGI’s decision thereof.
If the creditor’s objection to the discharge is rejected by the DGI, the creditor may, within 21 days of being informed by the DGI, make an application to the court for an order prohibiting the DGI from issuing a certificate of discharge.
What happens if the creditor files an application for an order prohibiting the DGI from issuing a certificate of discharge?
The Court may, if it thinks it is just and expedient:
a) dismiss the application; or
b) make an order that for a period not exceeding 2 years a certificate of discharge shall not be issued by the DGI.
This article is intended for general information of the clients of our Firm. It should not be regarded as legal professional advice. If you need advice based on specific facts, please do contact our firm.
|Megan Phang Yuet Yee