Bankruptcy proceedings

Taking bankruptcy proceedings against the judgment debtor is one of the various means or ways to enforce or execute the judgment so that the debt can be recovered. Banks sometimes resort to taking such proceedings against the judgment debtor as a last resort and after considering various factor such as :
(i) the value of the debt must be at least RM10,000; and
(ii) the cost of legal proceedings has to be weighed up against the availability of assets for distribution;

Where there are other creditors who are likely or in the process of initiating bankruptcy proceedings, the bank may not need to initiate the proceedings but instead it can later on simply prove for its debts.

However, bankruptcy proceedings may be useful if the debtor has made a number of fraudulent conveyances to defeat his or her creditors. The Official Assignee may be able to re-claim these properties under the doctrine of ‘relation back’.

Objectives

The main objectives of the law of bankruptcy are to protect the public and to help the debtor. The public is protected because bankruptcy law provides for a just and equitable distribution of the debtor’s available property among his creditors, and the debtor shall be relieved of his debts and be able to make a fresh start after being discharged by the court.

Meaning in law

Bankruptcy is a legal definition of a debtor’s inability to meet his debts as and when they become due. It is governed by the Bankruptcy Act 1967 (Revised 1988). Basically, the Act deals with the entire process by which an insolvent individual is made bankrupt, the administration of the bankrupt’s estate, and the discharge of bankrupts. Besides individuals, sole-proprietorships and partnerships can be made bankrupt. Although a deceased person cannot be made bankrupt, section 122(2) of the Bankruptcy Act 1967 provides that a petition may be presented to the Court for the administration of the deceased debtor’s estate accordingly.

Meaning

When an individual is insolvent, a trustee in bankruptcy or the Official Assignee would be appointed by the High Court to administer the bankrupt’s estate for the benefit of his or her creditors.