A bankrupt is someone who has officially declared that he cannot pay what he owes. In Malaysia, the minimum amount outstanding debt amount to initiate bankruptcy is RM30,000.
How Does a Person Become a Bankrupt?
1. Taking Up a Loan - There are various loans available to cater for different needs and wants. These loans can be personal loans, study or education loans, housing loans and even buying a car under a hire-purchase scheme.
2. Acting As a Guarantor - A guarantor can be a social guarantor or a corporate guarantor. A person who stood as a guarantor for loans like education, house, car hire purchase, scholarship and also third-party loans is known as a social guarantor. A corporate guarantor is a person who stood for loans relating to business loans, for example in a business partnership. A guarantor is also liable to face bankruptcy when summoned by the creditors. The creditors will go after the borrower first and if that fails to recover the amount owed, they will go after the guarantor to settle the debts.
3. Defaulting On Credit Card Payment - The inability to pay up the amount owed in the credit card account is also one reason to go bankrupt.
What Does It Mean To Be a Bankrupt?
1. He had to give up all his belongings and assets.
2. He is not allowed to open a bank account without the approval of the Director General of Insolvency (DGI).
3. He is not allowed to travel outside from the country without first getting approval from the DGI or the court. The DGI will hold his passport.
4. He is not allowed to do any business nor become a company director nor even be part of the company's management.
5. He has to sacrifice a certain percentage of his monthly income to the DGI to repay his debts.