What is bankruptcy?

Bankruptcy is a process where a debtor is declared a bankrupt pursuant to an Adjudication Order made by the High Court against the debtor if he is unable to pay his debts of at least RM30,000.00.

Who is a debtor?

A debtor is a person subject to the bankruptcy jurisdiction of the court within the definition of section 3(3) of the Bankruptcy Act 1967, and at the time the act of bankruptcy is committed:


• Was personally present in Malaysia; or
• Ordinarily resided or had a place of residence in Malaysia; or
• Was carrying on business in Malaysia either personally or by means of an agent; or
• Was a member of a firm of partnership which was carrying on business in Malaysia.


How are you made bankrupt?


The High Court makes a Receiving Order and Adjudication Order after a bankruptcy petition has been presented. It is usually presented either:


• By creditor’s petition. A creditor’s petition may be presented only upon the commission of an act of bankruptcy (section 3(1) of the Bankruptcy Act 1967) by the debtor which must have taken place within six months prior to the presentation. No creditor can present a bankruptcy petition against him unless the debtor:

  • Is domiciled in Malaysia; or
  • Within one year before the date of the presentation of the petition has:
    • Ordinarily resided in Malaysia; or
    • Had a dwelling house in Malaysia; or
    • Had a place of business in Malaysia; or
    • Carried on business in Malaysia personally or by means of an agent; or
  • Is, or has been within one year before the date of the presentation of the petition, a member of a firm or partnership which has carried on business in Malaysia by means of a partner or partners or an agent or manager.

To present a creditor’s petition the debtor must be owing the petitioning creditor a debt of not less than RM30,000.00.

  • By debtor’s petition. A debtor’s petition is by itself an act of bankruptcy. The debtor’s petition is presented by the debtor to make himself a bankrupt in order to protect himself from his creditors’ claim that he knows he cannot satisfy. Unlike the creditor’s petition, there is no requirement that a minimum amount of debt must be owed before a debtor’s petition can be presented. After its presentation, a debtor’s petition cannot be withdrawn without the leave of the court.

The petition (Form 3 of Bankruptcy Rules 1969) is to be filed at the court of the State in which the debtor resides. Prior to the filing of the debtor’s petition, the debtor must first deposit with the DGI a sum of RM1,500.00 to cover the costs of administering your bankruptcy. The court will not accept the petition for filing unless the receipt of the DGI for the deposit is produced. A sealed copy of the debtor’s petition must then be served on the DGI by post or otherwise. On the hearing of the debtor’s petition, the Court will make a Receiving Order as well as an Adjudication Order. However, if you are absent at the hearing, the petition may be dismissed.

Please note that bankruptcy is a serious matter and should be considered as a last resort. There are many restrictions imposed on bankrupts such as restriction to go abroad, acting as a director, carrying on business and requirement to contribute to your bankruptcy estate regularly for the benefit of the creditors. You will also have to give up your assets including your home and cars. There is no automatic discharge from bankruptcy in Malaysia. You may be discharged from bankruptcy by the Court or the DGI subject to any creditor’s objection.