Law minister: Malaysia recorded 11,207 bankruptcies during Covid-19 pandemic so far, full impact to be observed

In August this year, economists were reported by news outlet The Star as saying that the number of Malaysians becoming bankrupt and the number of companies closing down or winding up may increase when the current moratorium on bank loans ends. — Picture by Firdaus Latif
In August this year, economists were reported by news outlet The Star as saying that the number of Malaysians becoming bankrupt and the number of companies closing down or winding up may increase when the current moratorium on bank loans ends. — Picture by Firdaus Latif

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KUALA LUMPUR, Dec 8 — Malaysia has so far recorded 11,207 new cases of bankruptcies from March 2020 until September 2021 since the Covid-19 pandemic began in the country, minister Datuk Seri Wan Junaidi Tuanku Jaafar has said.

In a written parliamentary reply yesterday, Wan Junaidi said the breakdown of such bankruptcy cases were 6,344 from March to December 2020, and 4,863 from January to October 2021.

Wan Junaidi however appeared to indicate that the full financial impact of Covid-19 on debtors or those who owed money may take longer to be seen, as creditors or those who are owed money would have to wait at least six months — after defaults or failure to make repayments — to start action to have the debtors declared bankrupt.

“To look at the actual impact of Covid-19 on debtors, it will take at least one (1) year starting from the date of default payment, since creditors can only petition for bankruptcy action based on what had happened in the six (6) months before presenting the petition,” Wan Junaidi, who is the minister in the Prime Minister’s Department in charge of Parliament and law, said.

He said the date of default payment may possibly happen in three situations, namely after the six-month loan moratorium from April 1, 2020 to September 30, 2020 ended, after the targeted loan moratorium for a further six months ended in March 2021, or after the end of the latest additional loan moratorium of six months (starting from the application date of July 7, 2021). 

(Information previously provided on banks’ websites appeared to show that the period of the latest loan repayment assistance could depend on when borrowers apply for the moratorium, with Public Bank for example saying that the six-month duration could end in January 2022 for those who opted in July 2021 or could end by June 2022 at the latest if they applied in December 2021.)

“Therefore, the Malaysian Department of Insolvency will scrutinise the total number of bankruptcy cases that are registered in those periods stated above and will take the necessary administrative action,” he concluded, referring to the three scenarios that he had provided.

Wan Junaidi was replying to an oral question in the Dewan Rakyat by Gopeng MP Lee Boon Chye, who had yesterday asked the prime minister to state the number of Malaysians who had gone bankrupt since the Covid-19 pandemic.

In August this year, economists were reported by news outlet The Star as saying that the number of Malaysians becoming bankrupt and the number of companies closing down or winding up may increase when the current moratorium on bank loans ends.

In September, Prime Minister Datuk Seri Ismail Sabri Yaakob said that 10,317 persons had been declared bankrupt during March 2020 to July 2021, with Selangor having the highest of such numbers at 2,555, followed by the federal territory at 1,288 and Johor at 792 persons.

He had also said that 1,246 businesses had closed down during the same period.

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