CHANGES IN BANKRUPTCY LAW: BANKRUPTS CAN NOW APPLY FOR

EARLY DISCHARGE

WHAT?

The Prime Minister Dato’ Seri Anwar Ibrahim had announced that three categories of
bankrupts can now make an application to the Insolvency Department to have their
bankruptcy status to be lifted.

In the recent presentation of Budget 2023, the Prime Minister has put forward a proposal for
the amendment of the Insolvency Act 1967, which enables automatic discharge of bankruptcy
cases for selected groups.

In addition, the Prime Minister stipulated that while waiting for the amendment of the
Insolvency Act, minor insolvency cases with debts amounting to less than RM50,000 and that
adhere to certain conditions will be discharged immediately taking into effect starting from 1
March 2023.

This mode of discharge will be carried out under section 33A of the Act which confers
discretion on the Director General of Insolvency (“DGI”) to issue a Certificate of the Director
General of Insolvency (“DGI’s Certificate”) to discharge a bankrupt who fulfils the
prescribed conditions.

WHY?

The implementation of the new bankruptcy discharges will benefit some 130,000 people. The
Prime Minister claimed that more than 260,000 people had been declared bankrupt where
most of whom were the young Malays who have potential in contributing to the nation’s
economy. Other than that, it is expected that the implementation of this new change in
bankruptcy charges will make the process of lifting bankruptcy status easier and more
efficient for the effected individuals.

Source: https://www.skrine.com/insights/alerts/march-2023/discharge-from-‘small-scale-
debt’-bankruptcy-by-th

The Government’s initiative to expedite the discharge of bankrupts with ‘small-scale debts’ is
well intended and will enable bankrupts who satisfy the prescribed conditions to make fresh
starts in life. However, the bankrupts will not be ‘immediately discharged’ as stated by the
Minister of Finance, but rather, be required to follow the procedures set out in sections 33A

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and 33B of the Act. Perhaps the Government’s commitment to drive this initiative will
expedite the discharge process.

WHO?

It was announced that there are three categories of bankrupts who can now apply for the early
discharge. Firstly, the bankrupts with total debts of less than RM50,000. Secondly, those with
declaration of bankruptcy passed the five-year period from the adjudication and receiving
orders date. Lastly, the bankrupts who have no court orders, court proceedings or
investigative proceedings being conducted against them under the Insolvency Act.

HOW?

This mode of bankruptcy discharge will be done through issuance of a Certificate of the
Director General of Insolvency under Section 33A of the Insolvency Act 1967 [Act 360].

Section 33A of the Insolvency Act provides for the discharge of bankrupt by Certificate of
Director General of Insolvency.

Section 33A of the Insolvency Act

(1) The Director General of Insolvency may, in his discretion but subject to section
33b, issue a certificate discharging a bankrupt from bankruptcy.

(2) The Director General of Insolvency shall not issue a certificate discharging a
bankrupt from bankruptcy under subsection (1) unless a period of five years has
lapsed since the date of the bankruptcy order.

(3) Notice of every discharge under subsection (1) shall be given by the Director
General of Insolvency to the Registrar and the Director General of Insolvency shall
advertise the notice in a local newspaper as prescribed.

(4) The Director General of Insolvency shall, upon the application of any interested
person, issue a copy of the certificate of discharge to the applicant upon payment of
the prescribed fee.

The Director General of Insolvency (DGI) will consider the bankruptcy category that meets
the following conditions:

i. a period of more than five years has elapsed since the date of the Receiving Order and
Adjudication Order or the Bankruptcy Order;

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 ii. the admitted debt or balance of such debt must not exceed RM50,000;
iii. the bankrupt has cooperated with the MDI in the administration of bankruptcy matters
concerning the bankrupt; and
iv. the bankrupt has provided all information and documents required by the Insolvency
Officer.

The issues that may prevent a bankrupt from obtaining the DGI’s Certificate are:

i. there is a Court order or ongoing Court proceedings against the bankrupt or

bankruptcy administration under Act 360; or
ii. actions or investigative proceedings under Act 360 are being carried out under the Act
against the bankrupt.

Said the Law and Institutional Reform Minister Dato’ Sri Azalina Othman Said, those who
fulfill the said conditions can make their applications at the Insolvency Department’s
branches or by email to check on their respective cases.

These are the emails for each branch: -

Unit Pelepasan Ibu Pejabat g.pelepasan.melaka@mdi.gov.my

g.pelepasan@mdi.gov.my Unit Pelepasan Miri
Unit Pelepasan Ipoh g.pelepasan.miri@mdi.gov.my
g.pelepasan.ipoh@mdi.gov.my Unit Pelepasan Muar
Unit Pelepasan Johor Bharu g.pelepasan.muar@mdi.gov.my
g.pelepasan.jb@mdi.gov.my Unit Pelepasan Negeri Sembilan
Unit Pelepasan Kedah g.pelepasan.ns@mdi.gov.my
g.pelepasan.kedah@mdi.gov.my Unit Pelepasan Perlis
Unit Pelepasan Kelantan g.pelepasan.perlis@mdi.gov.my
g.pelepasan.kelantan@mdi.gov.my Unit Pelepasan Pulau Pinang
Unit Pelepasan Kota Kinabalu g.pelepasan.pp@mdi.gov.my
g.pelepasan.kk@mdi.gov.my Unit Pelepasan Sandakan
Unit Pelepasan Kuantan g.pelepasan.sandakan@mdi.gov.my
g.pelepasan.kuantan@mdi.gov.my Unit Pelepasan Selangor
Unit Pelepasan Kuching g.pelepasan.selangor@mdi.gov.my
g.pelepasan.kuching@mdi.gov.my Unit Pelepasan Sibu
Unit Pelepasan Melaka g.pelepasan.sibu@mdi.gov.my

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Unit Pelepasan Taiping g.pelepasan.temerloh@mdi.gov.my
g.pelepasan.taiping@mdi.gov.my Unit Pelepasan Terengganu
Unit Pelepasan Tawau g.pelepasan.terengganu@mdi.gov.my
g.pelepasan.tawau@mdi.gov.my Unit Pelepasan WPKL
Unit Pelepasan Temerloh g.pelepasan.wpkl@mdi.gov.my

A bankrupt must go to the branch that administers his bankruptcy case or contact by letter or
email to obtain information related to the amount of debt and check the status of his
bankruptcy case. If the bankrupt has never previously appeared or contacted the branch that
administers his bankruptcy case, the bankrupts are still eligible to apply for discharge.
However, the bankrupt must provide full cooperation and information so that the Insolvency
Officer can carry out the bankruptcy administration and process the bankruptcy discharge
application.

Below are the procedures to be taken to apply for the bankruptcy discharge:

i. Bankrupts can appear physically or contact by letter, email or fill out the Application
Form for the Discharge by Certificate of the Director General of Insolvency Under
Section 33A of the Insolvency Act 1967 [Act 360] which can be found on the website
https://www.mdi.gov.my and submit to the branch that administers the bankruptcy
case;
ii. The Insolvency Officer will review the application, the status of the administrative
documents and all information related to bankruptcy administration; and
iii. The bankrupt must cooperate by providing the information and documents required
by the Insolvency Officer.
iv. The DGI will issue a “Notice to Creditors of Intention to Issue a Certificate of
Discharge under section 33A” (“Form 96”) [Rule 194 of the Insolvency Rules 2017]
to the creditors of the bankrupt.

The creditors may object to the DGI’s intention to discharge the bankrupt by furnishing a
“Notice of Creditor's Objection under Section 33B” (“Form 97”) [Rule 195 of the Insolvency
Rules 2017], stating his grounds of objection, unless the bankrupt falls within one of the four
categories of exempted bankrupts.

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Form 97 must be furnished to the DGI within 21 days after the date of service of Form 96 on
the creditor.

The four categories of bankrupts against whom no objection shall be made are:

i. a bankrupt who was adjudged bankrupt by reason of his being a social guarantor;
ii. a bankrupt who is registered as a person with disability under the Persons with
Disabilities Act 2008;
iii. a deceased bankrupt; and
iv. a bankrupt suffering from a serious illness certified by a Government Medical Officer.

If an objection is received from a creditor, the DGI will decide on the objection and inform
the creditor. If the DGI rejects the objection, the creditor may within 21 days of being
informed of the DGI’s rejection apply to Court for an order to prohibit the DGI from issuing
a certificate of discharge. After hearing the parties involved, the Court will:

i. dismiss the creditor’s application; or

ii. make an order prohibiting the DGI from issuing a certificate of discharge for a period
not exceeding two years.

If there are no objections raised by the creditors, the bankrupt will be discharged from his
bankruptcy by the DGI’s Certificate. However, the bankrupt must still cooperate with the
DGI if the bankruptcy administration has not been completed (section 35A of the Act). The
discharge does not release the bankrupt from government debts, if any (section 35 of the
Act).

Source: https://alexchanglaw.com/index.php/documents-discharge-bankruptcy/

General documents required for the application of bankruptcy discharge:

i. Statement of Claim, Judgment; These documents are required to find out who has
made the debtor a bankrupt and under what circumstances;

ii. Bankruptcy Orders: Receiving Order and Adjudicating Order (Perintah Penerimaan
dan Perintah Penghukuman)

iii. List of creditors, if any, this list will determine how many creditors are there to be
paid;

iv. Age; health condition (medical report if you have any);

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 v. History of payment(s) to Official Assignee (Pegawai Pemegang Harta);

vi. Other documents requested by the Insolvency Officer in regards to your case

Source: https://budget.mof.gov.my/manfaat/faq/pelepasankebankrapan.html

Below is the application form for the bankruptcy discharge by DGI Certificate:

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