How much debt counts as bankruptcy?

How much debt counts as bankruptcy?

Under the Bankruptcy Act of 1967, when an individual owes at least RM 100,000 in debt and is unable to repay their debts or have insufficient assets to cover their liabilities, creditors or the debtor themselves can apply to the court to declare the debtor bankrupt.

What are the consequences of bankruptcy?

1. The bankrupt individual cannot own any movable or immovable property, and any assets previously belonging to the bankrupt will be seized by the government (i.e., the Insolvency Department).

2. The bankrupt individual cannot leave the country, and their information will be shared with the Immigration Department.

3. The bankrupt individual cannot purchase any luxury goods.

4. If the bankrupt individual has a job, the Insolvency Department will withhold a portion of their income for debt repayment purposes (the amount withheld will vary depending on the case) and leave a portion for the bankrupt individual’s basic living expenses.

5. The bankrupt individual will not have the right to sign any contracts, and even if they do, it will be considered invalid.

6. The bankrupt individual’s existing bank accounts will be frozen and turned over to the Insolvency Department, and they cannot open new bank accounts.

7. If the bankrupt individual wishes to pursue civil litigation, they must obtain the Insolvency Practitioner’s consent.

Under what circumstances can one apply to be discharged from bankruptcy?

1. If the individual is over 60 years old and has no means to repay their debts due to lack of income.

2. If the individual is seriously ill, such as being diagnosed with a terminal illness, and unable to work and repay their debts.

3. If the bankrupt individual reaches an agreement with their creditors (e.g., owes RM 100,000 but can only repay RM 50,000, and the creditor agrees to accept it), they can apply for discharge with the creditor’s approval.


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