PETALING JAYA: Mandatory financial literacy training should be held for those seeking discharge from bankruptcy to better prepare themselves for the future, says Financial Planning Association of Malaysia (FPAM) president Alvin Tan.
He pointed out that those who had been discharged from bankruptcy may still be at risk of repeating the same mistakes they made previously.
“The government should make it mandatory for those wanting to be discharged as a bankrupt to attend financial literacy training. Working adults taking on loans for the first time should also be made to calculate their monthly budget first so that they are better prepared in paying their monthly installments,” said Tan.
He said many lack financial literacy when taking on debts such as car loans and that there was a need for a deeper understanding of the associated risks.
He also raised concerns about individuals who acted as guarantors for family or friends without fully comprehending the potential risks involved.
Additionally, Tan said individuals with monthly incomes below RM2,500 frequently struggle to cover essential expenses, leaving limited room for investments or retirement savings.
He advised those who are struggling to embark on personal development through upskilling to increase income while controlling monthly expenses.
“The first step will be to invest in yourself by upskilling to earn more.
“Malaysians must also learn to control their monthly expenses so that whatever additional income they make is not absorbed by new expenses,” he added.
He encouraged Malaysians to seek guidance from licensed financial planners to effectively navigate their financial landscape, preventing costly financial mistakes and fostering financial security.
Meanwhile, the Insolvency Act (Amended) 2023 (A1695) came into force last Friday.
Datuk Seri Azalina Othman Said said the main amendment strengthened the provision on bankruptcy release under Section 33C Act 360.
“It helps bankrupts to be released from insolvency within three to five years from submitting their details,” said the Minister in the Prime Minister’s Department (Law and Institutional Reform).
She said Section 33C applied retrospectively and was in line with the second chance policy.
“The second chance policy aims to release 130,000 bankrupts a year after the amendment to Act A1695 comes into force.
“This is half of the cases presently managed by the Insolvency Department.
“With the amendment, the requirement for the creditor to meet with the Insolvency Department director-general has been abolished to simplify the administration process,” she said.
Lawyer Marcus Tan explained that only individuals could be declared bankrupt, while companies would go through insolvency and winding-up processes when they can’t meet their financial obligations.
To initiate the bankruptcy process, he said, the creditors typically take legal action to recover the money owed.
“If they obtain a court order, they can proceed with bankruptcy proceedings, asking the court to declare the debtor bankrupt.
“In complex cases, creditors and debtors often engage lawyers to handle debt recovery and defence, “ he said.
Many netizens expressed delight on social media over their automatic release from bankruptcy, which allowed them to apply for passports.
An anonymous netizen said he had been consistently paying off his debts and frequently contacted the Insolvency Department to inquire about his release from bankruptcy.
“I feel like I have a fresh start. My debt now stands at less than RM10,000.”
