Selangor has the highest bankruptcy rate in Malaysia, with teachers and civil servants forming a significant proportion of cases, says Insolvency Department
JASIN: Selangor records the highest incidence of bankruptcy in Malaysia, with a significant proportion of cases involving civil servants, particularly teachers.
Director-General of the Malaysian Insolvency Department (MDI) Datuk Ishak Bakri said the pattern stems from substantial personal loan liabilities.
He stated that salaried employees are disproportionately vulnerable to insolvency despite their stable incomes.
“Individuals with fixed incomes, such as teachers, are often approved for loans more readily, yet they carry greater financial peril without prudent management,” he said.
Ishak added that this very stability can lead to protracted financial difficulty when debt obligations spiral.
He was speaking after launching an MDI financial literacy programme at Politeknik Merlimau Melaka.
In a positive development, Ishak reported that 200,000 individuals were successfully discharged from bankruptcy last year.
This figure surpassed the government’s Key Performance Indicator target.
He outlined a fundamental shift in the national insolvency system towards welfare and rehabilitation.
The change aligns with the government’s second chance policy, moving away from a punitive approach.
“A 2023 amendment to the Insolvency Act empowers the director-general to grant a discharge without a court order,” he explained.
Applicants must meet specific criteria under this policy to be eligible.
Current eligibility includes individuals aged over 70 and those in prolonged bankruptcy.
It also covers persons formally diagnosed with mental health conditions.
“Malaysia is a pioneer in recognising mental health as grounds for discharge,” Ishak noted.
He said a confidential medical certification can lead to an immediate release from bankruptcy.
Looking ahead, Ishak said MDI plans to introduce new fast-track criteria for several groups.
These will include single mothers, victims of financial fraud and micro-borrowers.
