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Question:
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“Hello Lawyer Yeo, I have been declared bankrupt for more than 5 years. Now, I want to repay all my debts to my creditors.”
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“A friend of mine told me that once I pay off all the debts, I can apply to the court for an annulment order to remove my bankruptcy record as if I had never been declared bankrupt before.”
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“Could you please advise me whether such an application exists under the Malaysian insolvency laws? If so, could you guide me through the procedure?”
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Introduction:
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Under Section 5(1)(a) of the Insolvency Act 1967 (amended in the year 2020), when a person is unable to repay a debt exceeding RM100,000, his creditor can initiate insolvency proceedings to bankrupt the debtor.
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After being declared insolvent, the bankrupt must repay a specified amount in monthly installments, as determined by the Malaysian Department of Insolvency (“MDI”), until all debts are fully settled.
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If the bankrupt fails to make these monthly installment payments, the outstanding debt will increase due to accumulating interest or administration fees imposed by the MDI. This will be taken into account and make it more difficult for the bankrupt to apply for various approvals from the MDI later, such as a discharge from bankruptcy, permission to travel abroad, opening a bank account, etc.
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Generally, there are 4 legal methods to apply for a discharge from bankruptcy. To learn more about these 4 methods, you can refer to the FAQs published by the MDI.
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In today’s legal article, we will explain in detail the procedure for the first method: the Application for an Annulment Order of Bankruptcy Order.
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Answer:
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1. According to Section 105 of the Insolvency Act 1967, when a bankrupt can prove to the court that he/she has repaid all debts and administrative fees through the Director General of Insolvency, the court will approve the application for the annulment of the bankruptcy order.
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2. Before filing the annulment application, the bankrupt must, either personally or through his legal representative, contact the officer managing their file at the MDI to verify the total number of creditors, the total amount of debt owed, and the administrative fees payable to the MDI.
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3. If the bankrupt is able to pay the full outstanding amount, he can request the officer in charge to issue a confirmation letter (Surat Pengesahan Hutang) to confirm the total amount payable.
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4. If the bankrupt is unable to pay the full outstanding amount, he may consider negotiating with the creditor, either personally or through a legal representative, to see if the creditor is willing to accept a reduced sum.
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5. If the creditor agrees, they must issue a letter to inform the MDI of their acceptance. Only then will the MDI issue a new confirmation letter, specifying the revised amount the bankrupt needs to pay before applying for annulment.
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6. It is important to note that after obtaining the confirmation letter, the bankrupt cannot make direct payments to their creditor(s). The payment must be made to the Director General of Insolvency (DGI) via a banker’s cheque. Once the receipt is obtained from the MDI, only then can the bankrupt proceed with the annulment application through their lawyer.
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7. According to Section 139 of the Insolvency Rules 2017, a bankrupt can file an application to annul the bankruptcy order in the High Court. Once the hearing date is set, the bankrupt’s lawyer must serve the cause papers to the DGI and the creditor(s) at least 14 days before the hearing date.
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8. On the hearing date, an officer from the Department of Insolvency will inform the court whether the DGI has any objection to the annulment application. If the bankrupt previously failed to provide sufficient documentation to the DGI (e.g., a statement of affairs), the MDI’s representative may oppose the application.
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9. In such cases, the hearing may be postponed until the bankrupt provides the required documents to the MDI.
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10. If the court is satisfied that all debts have been repaid and there is no opposition from the MDI, the court will approve the annulment application on the hearing date. Once the annulment order is issued, the applicant will be treated as though they had never been bankrupt. They will be able to borrow from banks and travel abroad without needing the MDI’s approval.
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11. It is important to note that after the annulment order is issued, it may take some time for government departments to update their records. If the applicant needs to travel urgently, they may instruct their lawyer to submit the court order to the Immigration Department to request an immediate update of their records.
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The above is the legal information we would like to share with our readers today with regard to the legal process of applying order to annul bankruptcy order in Malaysia. If you have any legal questions about this legal process, you can contact us via WhatsApp: https://wa.link/q3kmv5
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