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5 Ways To Get Yourself Into Bankruptcy

Updated 17 Nov 2021 – By Sabrina Heng & Nisya Aziz


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Is your credit bills becoming unmanageable? Are you missing payments? Having trouble saving money? Not to scare you, but you’re likely on your way to the BANKRUPTCY land!.

But, wait. What does it mean to be bankrupt in Malaysia? Based on the Bankruptcy Act 1967 and the Bankruptcy (Amendment) Act 2020, you (the debtor) will be declared bankrupt if you have not paid the minimum amount owed that is between RM50,000 to RM100,000 in 6 months. That’s a lot of monies, right?

Many are still unaware of this, but Malaysians’ current financial literacy rate isn’t A+. There’s a survey by the Credit Counselling and Debt Management Agency (AKPK) that proves this. It found that 1 out of 3 Malaysians rated themselves as having a low level of confidence about financial management. This means it’s not hard for a Malaysian to get into bankruptcy - some because of their bad financial habits, while others may be because of lack of financial planning. 
 

Let’s take a look at what are some of the top reasons why people went into bankruptcy.

 

1. Cannot maintain credit cards’s debts 

Image source:desertcart.in

According to Bank Negara Malaysia (BNM),  47% of Malaysian youth have high credit card debt primarily due to the inability to sustain debt. Doing this continuously may lead to bankruptcy. How come?

First, when you don’t pay on time, you’ll be charged a late payment fee which is usually around 1% of unpaid balances from retail transactions and cash advances. On top of that, your interest charges will also increase.

Let's say you have a Maybank 2 Gold Card with 18% APR(Annual Percentage Rate) and a credit card outstanding balance of RM10,000. Usually, your bank requires you to pay a minimum of 5 % of the outstanding balance. Imagine when you don't pay for 3 months...

 
Month  Interest (18% APR, 
1.5% per month)
 Late Charges Fee (1% of  
oustanding balance)
  Outstanding   
Balance
Minimum
 Payment (5% of  
outstanding
balance)
Within
the Month    
RM10,000.00 RM500.00
1 RM150.00 RM100.00 RM10,250.00 RM512.50
2 RM153.80 RM102.50 RM10,506.30 RM525.50
3 RM157.60 RM105.10 RM10,769 RM538.50


Looking at the table, it may seem like it’s not a huge amount of interest. So what people would do is that they pay an amount of RM500 a month over their outstanding balance but it won’t help in decreasing the bill as interest rate and late charges fee keeps on increasing. 
 

ALSO READ: Your Poor Spending Habits Don't Have to Control You, Here's How to Be Free!
 

2. Spending money like kayangan people. 

IMAGE SOURCE: Quickmeme


Many Malaysians would prolly agree that most of us like to show off, materialistically speaking. South China Morning Post news reported that Malaysians are living beyond their means and drowning in debt as they have impulse-buying behaviour. Low-income Malaysians are piling up debts and risking bankruptcy by turning to banks for loans and credit cards to support their lifestyle choices. This is because they don’t understand how to properly finance their money. 
 
Just imagine lah, your monthly income is RM4,000  but you want to buy a Gucci purse costing RM2,500. Of course lah your money won't be enough to survive in that month! And then, what if you have sudden medical bills to pay in that same month after plugging your money on unnecessary luxury? Let’s dive into further in our next point. 
 

SIDE NOTE: If you want to be in financial control again, read:  Did You Know You Can Budget but Still Have FUN - No Cheating Involved!

 

3. Unforeseen medical bills

Image Source: Zurich Malaysia
 

Do you remember Watson Nyambek? The fastest man in Malaysia? Some years back, due to financial constraints, he took a bank loan to fund his father’s medical expenses. Unfortunately, he wasn’t able to sustain the bank loan payment which was over RM100,000 and was declared bankrupt (he’s no longer now).

Nyambek was not the only one. There are many Malaysians out there that are going bankrupt due to medical bills. In 2015, the Credit Counselling and Debt Management Agency (AKPK) shared that out of 8,321 debt default cases solved, 14.3% (or 1,190 cases) was due to high medical costs.

Which is why it’s important to get yourself medical insurance because you’ll never know when large financial burdens like hospital bills or medical charges arise. With the policy in place, it can help meet the costs when needed while giving you a peace of mind. 
 

READ: Can You Afford to Fall Sick in Malaysia?
 

4. Buying a car that’s over your budget

Image source: motortrend

 

Buying a car that's over  budget is a common occurrence in Malaysia. People think buying a branded car is better than local cars and also must jaga face mah. The bigger the car, the higher you are in the social status ranking. And apparently, overspending on car loans is one of the top reasons why Malaysians go bankrupt.

Yup, that’s right. The Sun reported that according to statistics from the Insolvency Department, 1 in 4 bankruptcy cases in Malaysia is caused by defaulting on vehicle-loan repayments - about 28,374 cases (27.94%) out of the total of 101,537 cases handled by the Insolvency Department, from 2011 to 2015.

Here’s the thing, buying a car isn’t about the loan itself, it also consists of other costs like petrol, insurance, carwash, car servicing and more. You can read more about the expenses of owning a car here. If you don’t pay attention to these, you can get yourself into a financial burden.

But, how do you know if you are overspending on a car? Most financial experts would tell you to not spend more than 15% of your net income monthly for your car loan repayment. For example, if your monthly net income is RM3,000, then you can only spend about RM450 a month maximum on a car payment - anything more could jeopardise your monthly expenses. 
 

ALSO READCan You Really Afford A New Car?

 

 

So, are you concerned if you are bankrupt or not? Here’s how to check.

Before you start over thinking about this, go to MDI’s office or its e-insolvency Portal to check your bankruptcy status for a fee of RM10.00.

We also saw that MyEG let’s you make a quick online search for bankruptcy status with a minimal charge (they didn’t share how much).

You can also talk to AKPK about your financial predicament if you feel you’re struggling. They can guide you to manage your debts before you go into bankruptcy. Paling penting, kalau rasa macam korang tak boleh nak manage hutang, contact Agensi Kaunseling dan Pengurusan Kredit (AKPK).

Good luck!
 

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*The above article is intended for informational purposes only. Loanstreet accepts no responsibility for loss that may arise from reliance on information contained in the articles.
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