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The Insolvency Department has revealed an average of 18 people were declared bankrupt every day in the first five months of 2022.
According to the data posted on the department’s official website, 2,694 persons were declared bankrupt between January and May 2022. This means the number of bankruptcies in the country has increased to 274,628 people.
The Star broke down the numbers and discovered that nearly 60 percent of those who declared bankruptcy from 2018 until May 2022 were between 25 and 44 years old. The newspaper also further revealed that more than 200 of those declared bankrupt since 2018 were aged 25 or younger.
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Almost half of the 46,132 persons declared bankrupt from 2018 until May this year were dragged down by personal loans while vehicle hire purchases came in second.
Since many personal loans are often used to purchase a second-hand car or a high-powered bike, this could mean that car-related purchases make up the majority of the reasons for people who declare bankruptcy.
According to the Insolvency Department’s website, the number of petitions (by debtors and creditors) filed every day in 2022 is 17 while the number of cases registered every day in 2022 stands at 18.
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However, The Star points out that the number of bankruptcies in the country has steadily decreased from over 16,000 cases per year in 2018 to about 6,500 cases in 2021.
The reduction can be attributed to the fact that the Insolvency Act was amended in September 2020 raising the bankruptcy threshold from RM 50,000 to RM 100,000.
A breakdown reveals that over 58 percent of those who were declared bankrupt in 2018 until May this year owed sums ranging from RM 100,000 to RM 499,999, while 8 percent are in the RM 500,000 to RM 999,999 bracket. About 5 percent have debts of over RM 1 million.
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Selangor has the highest number of bankruptcies with 76,608 up until May 2022, the Federal Territories follows with 46,876 and Johor trails with 32,441 cases.
While the number of bankruptcy cases has dropped, several experts still believe that having 18 people declared bankrupt a day is alarming.
Professor Dr Mohamad Fazli Sabri from the Human Ecology Faculty at Universiti Putra Malaysia is especially worried that many fell into bankruptcy due to personal loans.
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"If we multiply 18 by 365 days, we will have close to 6,600 cases a year. Although the numbers might be lower than the previous year, we need to remember that the threshold for bankruptcies was RM30,000 before it was increased to RM50,000, and now RM100,000.”
He also advises Malaysians to seek advice from experts like the Credit Counselling and Debt Management Agency (AKPK) before requesting loans to avoid the possibility of bankruptcy due to poor money management.
