Flow To Discharge Bankruptcy In Malaysia

Being bound by a ‘bankrupt’ status is oftentimes burdensome because bankrupts would be restricted from carrying out what a normal person could do such as travelling overseas (unless with a written permission from the Director General of Insolvency [‘DGI’] or an Order from the Court), taking on loan with the financial institution and working in certain professions. This article seeks to discuss the procedures to annul a bankruptcy order within the Malaysian jurisprudence.

Annulment application is the good alternative in order to annul the bankruptcy status of a bankrupt. Although there are other methods for a bankrupt to be discharged from his bankruptcy, the procedures are more complicated in nature and the outcome is unpredictable as there are criteria that need to be fulfilled. For instance, a discharge by the DGI under Section 33A of the Act will only apply if the period of 5 years from the date of bankruptcy order was made has lapsed and the granting of a discharge order is at the discretion of the DGI. Furthermore, an Automatic Discharge under Section 33C of the Act is time-consuming as the bankrupt would need to wait for the expiration of three years from the date of submission of the Statement of Affairs and also with certain conditions imposed.

Once a debtor has fully settled his or her debt owed to the creditors, one of the methods where the Judgment Debtor can be released from his bankrupt status is through appointing an advocate to file an annulment application to the High Court under Section 105 of Insolvency Act 1967 (‘the Act’). The annulment order granted by the High Court discharges the debtor from all debts, and the debtor is considered as if he was never a bankrupt.

Under Section 105 of the Act, the advocate in charge would need to request for the settlement letter stating the final settlement sum due and payable by the Judgment Debtor from the Malaysian Department of Insolvency (‘MDI’), also known as Jabatan Insolvensi as well as copies of Creditor’s Petition, Proof of Debt General Form, Receiving Order on Creditor’s Petition and Order of Adjudication from the Jabatan Insolvensi.

After confirming that the bankrupt (Judgment Debtor) has fully settled the amount as stated in the settlement letter issued by the Jabatan Insolvensi, the Judgment Debtor’s advocate would file the duly affirmed cause papers to the Court.

The sequence is as follows, first, a Notice of Application for Discharge (Bankruptcy) will be filed followed by an Affidavit in Support by the Judgment Debtor affirming that he or she had fully settled the amount to the Jabatan Insolvensi while exhibiting the payment receipt and the confirmation letter from Jabatan Insolvensi. Next, the Advocate will submit a Certificate of Urgency to the Court to pray for earlier hearing date from the Court. Court-sealed copies of the aforesaid cause papers would then need to be served to the officer in Unit Mahkamah of Jabatan Insolvensi as well as to the advocate acting for the Judgment Creditor along with a notice of the hearing date. In Malaysia, the officer in charge can be found at the official portal at https://apps.mdi.gov.my/direktori/utama/org/238 . Jabatan Insolvensi will credit the payment to the Judgment Creditor.

Upon the Court granting an Order to annul the Adjudication and Receiving Order of the bankrupt/Judgment Debtor, the Judgment Debtor’s advocate will serve a draft order to the advocate acting for the Judgment Creditor as well as the officer in charge from Jabatan Insolvensi for their signature and approval. Once the Order is sealed, the Judgment Debtor’s advocate will then send the sealed Order to the aforesaid parties and request the officer from Jabatan Insolvensi to update the Judgment Debtor’s bankruptcy status within 24 hours. Subsequently, the Judgment Debtor’s advocate will conduct a latest bankruptcy search on the status of the Judgment Debtor in order to ensure there is an update of his status from ‘bankrupt’ to ‘non-bankrupt’.

In conclusion, bankruptcy status can be annulled through the High Court application. A lay person is advised to appoint a lawyer to expedite the process of getting a discharge of bankruptcy and to prevent any complications.

If you have any questions or require any additional information, please contact our lawyer that you usually deal with.