7 Effective Ways to Avoid Bankruptcy

Bankruptcy

According to the president of the Federation of Malaysian Consumers Associations (Fomca), Datuk N. Marimuthu, half of those declared bankrupt because of credit card debts are below the age of 30. How do you avoid being declared bankrupt?

1.      Financial Education: it is essential to start young to learn about personal finance. Getting more information about savings, household budget, net worth, proper use of credit cards, good and bad debt, insurance, and estate planning are necessary to be more knowledgeable about managing money.

2.      Budget: The key is to plan your budget and work your budget diligently.  The main objective is to match your expenses including regular savings, housing, and hire-purchase loans within your take-home pay. The outcome is to avoid overspending and falling into the debt trap.

3.      Emergency Fund: The beauty of an emergency fund is like a first aid kit. It is to address unexpected happenings such as getting retrenched or incurring expenses due to an accident or an illness.  The money will tide you over the critical period to meet all your normal monthly expenses for a couple of months until the situation is back to normal.

4.      Avoid bad habits and more wants in life: Gambling is the fastest route to be bankrupt.  Avoid it at all costs. Do not spend more than what you have. Self-discipline and self- control are required to curb the urge to get more wants. If it is beyond your control, you will get into debt and likely to be bankrupt.

5.      Avoid using credit cards: This is especially true for those young graduates who have just entered the job market. The smart way is to use a debit card to get the feel of using a plastic card. When you use a debit card, the amount that you charge to your card is directly deducted from your bank account. The amount that you can spend on your card is limited by the fund available in your account. There is no way to overspend and get into unmanageable debt.

6.      Pay in cash: Instead of getting a personal loan,   save for the amount to buy big-ticket items you need.

7.     Increase your earning power: When you want to spend more just earn more. Learn and equip yourself with more marketable skills. Utilize your expertise such as writing skills to create part-time earnings. Write articles for newspapers and magazines. Turn your hobby like photography into a source of income as a photographer. Invest wisely and create  passive income streams 

Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give.

Source: 7 Effective Ways to Avoid Bankruptcy

Image source: https://www.moneycrashers.com/declare-file-bankruptcy-process/

10 Tips to Avoid a Default on a Car Loan and Bankruptcy

According to a news item in The Star, there were more than 500 bankruptcy cases every month due to the failure of people to service loans for their hire-purchase of motor vehicles during the past five months this year. How can you prevent such a thing from happening to you? 


1. Factor the monthly repayment amount into your monthly budget: The big question is: Do you think there is room to accommodate the monthly installment in your monthly budget? If the total cash outlay including the car installment is more than your inflow, you can forget about getting a new car, bankruptcy will be the only outcome.

2. Hold on to your gratification: Don’t follow others just because one of your friends has got a new car. Exercise self-discipline to live within your means.

3. Get a smaller c.c. car: Opt for a smaller cc car so that you are comfortable with your monthly budget. Don’t overstretch. 

4. Save more for a bigger down payment and a smaller monthly installment: This is the most sensible thing to do so that the monthly amount fits nicely into your monthly budget.

5. Wait for the next pay increment to buy a new car: Perhaps now you are not in a position to get a new car. How about the next pay increment? Can you hold on to it? 

6. Wait for your next bonus to make the down payment: Bonus time is a good time to consider making a down payment for a new car.

7. A used car: What do you think of a used car? It should not be more than three years old and free from accident.

8. A shorter installment period: Just imagine an interest rate of 3% for a loan of 50,000 the amount of interest for one year is 1500, for 2 years it is 3000, for 3 years it is 4500, for 4 years the amount will be 6000 and for five years it will be 7500. Go for a shorter duration. Besides, the future is unpredictable; the sooner you complete the installments the better it is 

9. Get the basic model: Get the basic model with manual transmission minus the leather seats and wood paneling. It costs very much less. 

10. A need or a want: In a country like Singapore with an effective public transportation system such as MRT and buses, going from one place to another is a breeze. You don’t really need a car. Ask yourself: Is it a want or a need? It is easy to purchase a car, but maintaining a car is a different story. The cost of petrol, parking fee, maintenance cost, insurance and not to mention depreciation and accidents, will burn a big hole in your pocket.


You get a good feeling to show off your new car among your friends, but if you fail to catch up with the monthly installments just for three consecutive months your car will be repossessed. If you still owe more than RM30, 000 after disposing of your car, the bank will make you bankrupt. Where are you going to hide your face?

Source: 10 Tips to Avoid a Default on a Car Loan and Bankruptcy

Quick and Easy Ways to Become a Bankrupt

Spending money can be a fun and easy thing to do but building up debt is even easier by just carrying a few credit cards. Here are the fastest ways to ruin your personal finance:


1. Don’t track your spending: Don’t care about the formula and the budget that income = expenses + savings. All you want is just to spend as you wish. without considering your limited income

2. Just pay the minimum amount for your credit cards: Credit cards give you extra spending power. Just charge and charge to your heart’s content. When you receive the money statements just pay the minimum sum or any other smaller amount depending on the fund available in your checking account. You are not bothered to make prompt payment and you let the bank charge late payment fees and interest on outstanding balances.

3. Credit card advances: You get cash advances against your cards and buy what you want or to meet your day-to-day expenses when you run out of cash.

4. Follow your neighbors: Your neighbor has just bought a new car. You are thinking that if he can afford it you can too. You go ahead and trade-in your old car which is less than three years old.

5. Skip your loan instalment payments: By now you are unable to make ends meet. You have reached your limit for all your credit cards
and you have no choice but to skip a few loan repayments.


Your spending pattern will not last long because your financial resources are limited and your debt is attracting more and more interest and it is no longer manageable. Very soon, financial institutions where you have obtained your credit cards and loans will file bankruptcy proceedings against you.

Car Loans and Bankruptcy in Malaysia

According to a report in The Star, more than 500 people, mostly aged between 35 and 44 years, were declared bankrupt every month from January to May this year because they failed to service their motor vehicle loans

Once a person is declared bankrupt he will be restricted from, among others, traveling overseas, holding the post of a company director, and will have to give up his assets, including property and cars. He must contribute to the bankruptcy estate, and will only be discharged once the sum owed is settled.

Under the hire purchase agreement, the bank repossesses the car if the borrower defaults the monthly installments for three consecutive months.

It will sell off the car to recover the sum owed and if the amount still owed is more than RM30000 the bank will file a bankruptcy petition in the High court.

In the case where the sum owed is below RM30000 the bank will wait until the amount, with accumulated interest, balloons to RM30000 before filing the petition

How do you avoid a default in car loans and bankruptcy? Read 10 Tips to Avoid a Default on a Car Loan and Bankruptcy.

Bankruptcy and the Management of Debtors and Creditors in Malaysia

According to a recent news item in the New Straits Times, creditors will not be able to present bankruptcy petitions against debtors unless they can prove that all avenues were made to trace the latter for repayments, and delivery of any notices actually reached them. This is under a planned reform of the Bankruptcy Act 1967.

Currently, under the act, only social guarantors are given this sort of protection as it required creditors to exhaust all avenues to recover debts owed to them by debtors.

Insolvency Department deputy director-general Haini Hassan said the reform would also see the end of creditors easily passing the bulk of work to the department to do retrieval of monies from debtors by liquidating their assets. “There is also a proposal for creditors to be given two to three years to do that before filing the petition,” she said in an interview.

The department is also planning to make it a punishable offence (in addition to the current citation for contempt of court) for bankrupts, who failed to file their Statement of Affairs to the department within 21 days after being declared so.

Haini said these reform plans would not only enable better management by both creditors and the department but would also keep the number of bankrupts in the country under control.

Haini also said it was worrying that out of the 218,561 bankrupts in the country, 60 percent were not even aware that they had been declared bankrupt.

Bankruptcy Trend in Malaysia

According to a recent newspaper report, there were 38357 bankrupts in the last five and a half years between the age of 25 and 44. The trend is that people who declared bankruptcy are getting younger. Here is the breakdown of those who declared bankruptcy from 2005 until May 2010:

Take-home messages


• A business venture can be successful or end in failure. The most important thing is not to put all the eggs in one basket. An emergency fund lasting three to six months to cover your normal expenses is a must.

• You can obtain a loan but it has to be included in your monthly cash outflow. If it is not within your budget. Don’t go for a loan to buy a car or a house. Save for a bigger down payment.

• You are not obligated to stand as a guarantor. You cannot control how another person manages his or her finance so you cannot be sure that the person who gets the loan will honor the loan repayments fully. Do you like to pay for something you don’t own every month? This will happen when the borrower defaulted and he or she is nowhere to be found.

• Credit card is not for getting credit (The bank will be very happy if you do): The right way to use a credit card is to back up a dollar your charge to your card with a dollar in your bank account. At the end of the month, you pay the amount due promptly and fully. The fact is that getting credit and incurring debt is easy but getting out of debt is very difficult.

• There are two things in life you cannot escape; that is death and tax. It is necessary to set aside an amount every month to cover tax payable.

Credit Card and Bankruptcy in Malaysia

According to the Malaysian law, you can become bankrupt when the outstanding sum involved is RM30000 (previously it was RM10000) or more with a default period of six months or more. Defaulting on credit card payment is among one of the ways to be bankrupt.

Among others, being bankrupt, you cannot


• Hold any public office without the approval of the Director-General of Insolvency Malaysia (DGI)
• Pursue and court action without the DGI’s permission
• Leave the country without the court’s or DGI’s permission. The DGI will hold your passport.
• Be a company director or carry out your own business or be involved in the management of a company without the court’s or the DGI’s approval.
• Be involved in the management of a company or be an employee of a company that is owned by your spouse or close relatives and their spouses
• Be a committee member of any registered body.
• Open a bank account without the approval of the DGI


A bankrupt can work but he or she has to leave a certain percentage of his or her income to the DGI to repay debts. A person can be discharged from "bankruptcy" when he or she has settled debts in full.

The sensible way to avoid being bankrupt is to pay your credit card bills fully and promptly every month upon receiving their statements.

The following is an extract from MyPF:

Malaysia Bankruptcy Law Updates

Malaysia’s bankruptcy laws receive an update in March 2017. Here are the key updates.

• The minimum to be declared bankrupt is raised to RM50,000 (from RM30,000).
• Social guarantors can no longer be declared bankrupt. Social guarantors provide guarantees to loans such as educational loans, hire-purchase loans, and housing loans which they are not beneficiaries of.
• Automatic discharge of bankruptcy after three years, subject to good behavior including making payments towards your debt and submitting a full accounting of your monies and properties (previously 5 years and subject to Director General of Insolvency’s approval).
• A debtor may propose a voluntary arrangement to his creditors any time before he is adjudged bankrupt.
• A bankruptcy notice needs to be served personally to a debtor.