Are your expensive medical bills and personal loans driving you towards bankruptcy? If you already have bankruptcy status or fear that you’re heading down the road towards it, know that not all is lost!
We have a solution to help you get the cash you need to get back on your feet again. But before we get to that, let us discuss what exactly bankruptcy status is. We will also explore its impact on you so you can better navigate yourself out of this situation.
What is Bankruptcy Status
Bankruptcy is a legal status a Malaysian court assigns to you, indicating your inability to repay creditors. There are two ways one can become bankrupt: by creditor’s petition and by debtor’s petition.
The former describes the situation when a creditor commences bankruptcy proceedings towards someone by serving them with a notice for debts that are more than RM50,000. The latter is when you declare bankruptcy to shield yourself against your creditor’s claim when you know you cannot repay them.
To be officially declared bankrupt, you need to meet several criteria:
- Incapable of paying debts that amount to at least RM50,000.
- Your debts must be ascertainable (in a liquidated sum).
- A period of six months default for the debt has to pass before declaration.
- You must have resided in Malaysia for at least a year.
While it is unlikely to happen, you can also be unknowingly declared bankrupt. Here are examples of when this could happen.
- When legal documents were sent to a previous residential address.
- If the bankruptcy was served to you indirectly (to your workplace, by newspaper, or mail).
- When you failed to turn up to court.
- If you did not accept or open any legal documents sent.
Why Removing Bankruptcy Status is Important
Upon being declared bankrupt, the individual will be assigned to the Director General of Insolvency (DGI), who will manage their assets to repay outstanding debts.
Another thing that happens when you are declared bankrupt is that you won’t be able to travel to other countries without any written permission from the DGI or receiving a court order.
Your bank accounts will be deactivated, and you won’t be able to withdraw any money. Also, your credit card will have an RM1,000 limit.
Additionally, there would be an employment restriction that bars you from working as an entrepreneur, company director, lawyer, quantity surveyor, accountant, or doctor.
With all the bans and restrictions applied to bankrupts, it goes without saying that removing your bankruptcy status is essential.
How You Can Remove Your Bankruptcy Status
Previously, you could only be discharged from your bankruptcy status after being issued a certificate by the DGI. This usually occurs after five years from the date of Adjudication Order and Receiving Order of bankruptcy declaration.
However, an amendment has been made, and the proposed changes came to force in 2017. Under Section 33C of the Insolvency Act, it is stated that you can be automatically discharged from bankruptcy status after only three years.
Of course, there are requirements you’d need to meet to be free from bankruptcy. You need to have made payments towards your debts and submitted complete accounts of assets and liabilities belonging to you to the DGI.
Get Professional Help to Remove Bankruptcy Status
If you feel overwhelmed and unsure of how to manage your debts, it might be wise to seek professional help. Some people don’t realise that Bank Negara Malaysia has set up a program via Agensi Kaunseling dan Pengurusan Kredit (AKPK), which provides free debt counselling services.
You can also seek advice from reliable financial consultants to help you meet the requirements for bankruptcy status removal.
How Can Refinancing Your Mortgage Help You Recover From Bankruptcy
Now let’s talk about the solution. You may not know this, but cash-out refinancing is an excellent way to get relatively fast cash so you can get out of bankruptcy.
In a nutshell, cash-out refinancing is an option to refinance your mortgage by replacing your old mortgage with a new one that has a larger loan amount than what you currently owe. This helps you cash out and pay off some urgent debts.
Yes, you may not have control of your current assets now due to the effects of bankruptcy, but you might have potential properties and assets that you did not know you possessed.
For example, your parents may have left you some properties that you could utilise. Alternatively, you can explore the properties owned by your spouse. By refinancing the housing loans of these properties, you would be able to cash out on a significant amount of money if the property has built up enough equity.
Here’s a specific example of how that might work:
|Loan Amount||RM320,000 (80% LTV ratio)|
|Gross Cash Out||RM220,000|
In this scenario, you can refinance a home valued at RM400,000, where you still owe a remaining RM100,000. That means you have RM300,000 in equity. With an 80% loan-to-value ratio, you are eligible for a loan of RM320,000.
After deducting the unpaid amount, you can cash out RM220,000 to pay off your debts and meet the requirements for bankruptcy status removal.
However, you should take extreme care when deciding to refinance. It can be easy to fall into bigger debt if you choose to refinance without considering all the factors. These may include current property market value, interest rates, and repayment schedules.
Additionally, the bank could reject your mortgage refinancing application for many reasons. If rejected, you might be looking at a 3-6 month period before you could reapply.
How Can BlueBricks Help?
As experts in handling loan rejections, BlueBricks is aware of all the common reasons for rejected applications. BlueBricks’ professional consultants have extensive experience in helping clients out of bankruptcy and overcome financial challenges to meet the criteria for bankruptcy status removal.
Leading Loan Agency Company in Malaysia
BlueBricks has many years of experience as a loan specialist offering loan consultancy services and comprehensive loan rejected services. It is one of the leading loan agency companies in Malaysia in terms of loan approval rates.
BlueBricks offers FREE consultation and reports for CCRIS and CTOS prior to your mortgage refinancing submission. In addition, no prepayment charges for the provision of the services will be applied.
Loan Rejected Service
BlueBricks’ loan rejected service can help ensure your mortgage refinance application meets all the necessary criteria. They can also identify the reasons behind failed applications and make necessary adjustments before resubmission.
BlueBricks will utilise all strategies until your application gets the final stamp of approval. Explore BlueBrick’s refinancing housing loan rejected services and discover how you can regain control of your finances and remove your bankruptcy status.
Bankruptcy Status – FAQ
Declaring bankruptcy or getting a bankruptcy notice can be a daunting experience that leads to a challenging path. But it might help to know the answers to a few other common questions regarding bankruptcy status. Here is some information that could prove helpful in your journey towards recovery from bankruptcy.
1. How do I check my bankruptcy status?
You can conduct a search to identify your bankruptcy status through the e-insolvency portal. Do note that you need to pay RM10 for each search. Alternatively, you could visit the Insolvency Headquarters at Putrajaya to check your status.
2. When can I apply to be discharged from my bankruptcy status?
You can make an application at any time in court to discharge yourself from your bankruptcy status. However, you need to have a report from the DGI about your conduct and cooperation.
3. How can I avoid getting a bankruptcy status in Malaysia?
Under the amended laws, you can settle your debt without bankruptcy proceedings if you do so under a voluntary agreement. With this arrangement, you can negotiate with your creditors to restructure your debts and avoid bankruptcy.
This agreement requires you to fulfil the payment within the agreed period and file your pay and expenses slip statement every 6 months.