Gov't should help bankrupts to recover

LETTER | According to statistics, the number of bankruptcies in Malaysia has exceeded 300,000 and the number is still rising by more than 20,000 per year.

Such bankruptcy numbers may not be the largest in the world, but in terms of per capita ratio, there is about one bankrupt person per hundred people. This is definitely a world record. Malaysian politicians like to create world records. Is this what they like? But what is at least certain is that they are more concerned about the benefits for rich and powerful people. These bankrupts are certainly not what the government wants to care about and resolve. Because the ministers and officials in the government did not try to solve the problem of such a large group of people.

First, we need to understand the causes of the bankruptcy event. These people borrow money from a certain lender. Usually, the lender is a bank. Now there are many people who borrow money from the Higher Education Fund (PTPTN) as well. Then, for some reason, these people can’t repay the money, and the lender can’t recover the debt. An application was filed with the court to determine the bankruptcy of the borrower. Then there is a bankrupt.

It must be noted that in the process of borrowing money, the borrower wants to borrow, and the lender also wants to lend because they want to get interest income. In some cases, borrowers take up a loan after the lenders have promoted them, and this is proven by the many advertisements and harassing calls we often receive. In the process of lending, the lenders also conduct detailed investigations. They were satisfied that the money was borrowed and used in places they recognised, so they agreed to lend.

But things are not as smooth sailing as the two sides expected. Borrowers can't afford to repay the money, and lenders can't get their money back. Therefore, the borrowers were declared bankrupt by the court. This insolvency proceeding was done under the bankruptcy law drafted by the government and passed by Parliament. 

This is why the politicians and the government are involved in the situation mentioned above. They made details of the bankruptcy law causing many people to become bankrupts and then let them continue to stay in bankruptcy. Isn’t it so incompetent of them to have so many bankruptcies? Unless they like this situation where the proportion of bankrupts is making world records. Or they are just more concerned about how to help those rich lenders to recover money.

Let us look at the original intention of the worldwide bankruptcy law. Modern social and economic development depends on many people who are motivated but not financially capable. The rich also want to earn interest by lending their savings. Such behaviour was originally an act between the borrower and the lender. But society needs to encourage such economic behaviour in order to promote economic development. 

However, for obvious reasons, some of the lending practices will become non-performing loans. Lenders will have to collect debts, borrowers can't afford to repay them and they may hide property to avoid repayment. This requires the intervention of public institutions to ensure that the process is done in an orderly manner. The government has also set up a department i.e. Insolvency Department to manage these events so that the incident can be carried out legally. The lender can recover the property permitted by the law from the borrower, and at the same time protect the reasonable living space of the borrower, such as ensuring that the bankrupt has at least a place to live.

But the bankruptcy laws of countries around the world usually recognise the following facts:

1. Borrowing money is also a must to encourage because this behaviour promotes economic development, especially as many young entrepreneurs need to borrow money to start their careers, and at the same time promote economic development.

2. Lenders have an option in the process of lending money and they can investigate the borrower. Unless they accept the risk of the loan, they can choose not to lend. Therefore, lenders are also partly responsible when a loan goes sour. They have already conducted investigations and also want to get a return on interest after lending. Therefore, when a borrower becomes a non-performing loan, the lender also bears the responsibility for making a wrong judgment. The lender should bear part of the responsibility together.

3. After considering the above and following the insolvency procedure, it is common practice in advanced countries to deal fairly with the consequences of this contract breach. The borrower must hand over all the property at the time to pay off the debt, but they can retain a portion for their basic needs. Then they will become bankrupts, subject to many restrictions within a certain period of time such as the inability to own property, part of the income to pay off debts, and many other restrictions, such as opening bank accounts. But a bankrupt should not be restricted to being a bankrupt his whole life and should have a deadline. 

Usually this period is five to seven years from the date of judgement. Such a period of time is a punishment for the bankrupt. The restriction during this period of time is akin to imprisonment for a crime. It is hoped that the bankrupt will learn a lesson and change his imprudent behaviour of money management later. Such an arrangement is also based on the fact that a borrowing contract is the result of both borrower and lender willingly walking into a contract, problems should not just be for borrowers. It should not be for them only to bear all the consequences of not being able to afford the money. At the same time, borrowers need to work hard again for their own living and not become a burden to society. This is the rule that modern society needs.

When we have a better understanding of the causes of bankruptcy, we can see how our politicians do not do anything or act, especially those in the government. The number of more than 20,000 bankruptcies a year should now be higher than before due to the economic realities and how can it build up to more than 300,000 bankruptcies? Simple mathematics will show that many bankrupts have been more in the boat for more than ten years. 

What good is it for the country for them to stay in the bankruptcy stage? How big is their impact on society? Will the punishment for them exceed those who have obtained millions or more from corruption? Does the government’s act turn it into a debt collector siding only with the lenders? Is this good for the country? Why not let these people out of bankruptcy after a certain time and they can work themselves out of poverty and continue to contribute to society and at least take care of themselves and their families and reduce the burden on the country and society.

Malaysia’s politics is full of chaos and fighting but I hope that in the face of such a large group facing this problem, the government and the opposition parties can reach a consensus and follow the footsteps of advanced countries. Especially when it comes to so many people, they can also help to improve the country’s economic output when letting them out of bankruptcy restrictions. This is the way to solve the problems of such a large group of people, to avoid burdening without end the families of these people. Instead of just helping those rich borrowers to chase money. That group should be the least helped in my view.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.