I REFER to the many letters written recently to the New Straits Times calling for a review of our bankruptcy law.

It was enlightening to learn how other countries deal with their bankrupts. Although the Malaysian justice system claims that the bankruptcy law is enacted to allow a bankrupt a fresh start (refer to Malaysia Insolvency website), I fail to see how this is so.

A bankrupt in Malaysia has to give up everything and every sen he owns except for the shirt on his back, so to speak. He is not allowed any assets, any life insurance policy or any savings. He must abide by endless restrictions slapped on him; no bank accounts, no directorships, no holding office, no travel, etc.

If that is not bad enough, for the next five years he has to make a monthly pilgrimage to the bankruptcy office to give 10 per cent of his meagre salary, failing which he will NOT be considered for a discharge.

Given these heavy constraints, how can our insolvency office say that the bankruptcy law exists to help a bankrupt make a fresh start? In my opinion, it prolongs the suffering of the bankrupts.

These constraints will only allow him to sit and watch opportunities pass him by. As opposed to the more progressive countries like Australia and the United States, our bureaucracy and red tape on bankrupts make it impossible for them to rebuild their lives.

The insolvency office in Kuala Lumpur recently added one more floor to its office to cope with the increasing number of bankrupts.

So far, there are 160,000 registered bankrupts and the number is growing at an alarming rate. If nothing is done to shorten the bankruptcy term, then the statistics will show hundreds of thousands of bankrupts in the country. Foreign investors will use this as one of the barometers of the economic health of our country.

Ideally, the five-year term should be reduced to no more than two years with minimal restrictions, and first-time bankrupts should be entitled to an automatic discharge.

Many bankrupts, most of whom are guarantors of loans, are not criminals. They are innocent people who took a chance to build a better life but failed due to circumstances or due to the actions of their lenders. They should not be punished this way just because they were brave enough to take that step.

Our bankruptcy law, which is based on the Bankruptcy Act 1967, is definitely long overdue for a review. The Act was written 41 years ago and in today’s rapidly changing world, it is no longer relevant in some respects.

I call on the Ministry of Domestic Trade and Consumer Affairs to review our bankruptcy law and have a just and fair Bankruptcy Bill tabled in Parliament when the new session starts.

R.J.A. , Kuala Lumpur

Source: NST – July 25, 2008