001 introduction to bankruptcy
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LAW 534Atifah bt Othman
013 3365241
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` Introduction
` Objective
` Parties
` Procedures
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` It is common for creditors faced with debtors who
have reached the stage of unable to meet their
obligations or pay their debts, to obtain judgment
and execute it against the latter by commencingbankruptcy proceedings sometimes in tandem
with other modes of enforcement
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` Bankruptcy proceedings have always been and
will continue to be a popular mode of enforcement
of a debt, whether as a first or last resort
` Debtor too can resort to this proceeding to seek
for protection under the law
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` Bankruptcy is a legal process by which the
debtors asset by an order of court are taken by
the Director General Of Insolvency whose duty is
to distribute the assets among his creditors.
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` To secure a just and equitable distribution of thedebtors available property among his creditors.
` ii) To relieve the debtor from his debts and to
enable him to make a fresh start as soon as heis discharged by the court
` iii)To investigate into the reasons for the debtorsinsolvency so that the interests of the creditorsand the public are protected.
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`Bankruptcy jurisdiction in Malaysia is
vested in the High Court in Malaya
& High Court in Sabah and
Sarawak.
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` Debtors
` Creditor
` Director General of Insolvency
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` See section 3(3) of Bankruptcy Act` Include any person who either personally
present in Malaysia; or` Ordinarily resided or had a place of residence in
Msia; or` Have been carrying on business
(personally/through agent) or have been amember of a firm or partnership which carriedbusiness in Msia
At the time the act of bankruptcy was committed
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` Section 5(1)(d) : Where a debtor is subject to
the bankruptcy jurisdiction of the court, no
creditor can present a petition against him
unless the debtor:-
` (1) is domiciled in Malaysia; or within one year
before the date of the presentation of the
petition has:-(a) ordinarily resided in Malaysia
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` (b) had a dwelling house in Malaysia; or
` (c) had a place of business in Malaysia; or
` (d) carried on business in Malaysia
personally or by means of an agent; oris, or has been within one year before the date of
the presentation of the petition, a member of a firm orpartnership which has carried on business in
Malaysia by means of a partner or partners or an
agent or manager.
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` Does not invalidate the proceedings if the petitionhas been presented and served, in which case thebankruptcy proceedings may continue as if thedebtor is still alive (Sec 122(2) of Bankruptcy Act
` Proceedings may be stayed if debtor dies beforethe service of the petition.
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` Foreignerprovided he falls within the definition of debtor and
is domiciled in Msia or has a place or residence or
business links in Msiasee also section 5(1)(d) of Bankruptcy Act
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` Married womensubject to the same law as those who are single(section 120 ofBankruptcy Act)
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` Minors or infantsdebts legally enforced against him
the court is not precluded from inquiring into an
alleged act of bankruptcy of that party acting
through a guardian or guardian ad litem
Re Davenport; ex parte the bankrupt v Eric
Street & Anor [1963] 1 WLR 817
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` Members of Diplomatic Corps
R v Madan [1961] 2 QB 1
waiver/immunity under the Diplomatic Privileges
(Vienna Convention) Act 1966` Members of Parliament
Article 48(1)(b) of Federal Constitution
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` Lunatics, persons of unsound mind and
mental patients
Mental Disorder Ordinance 1952Proceedings cannot be taken against such
persons without conference with the committee
appointed to represent them
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Social guarantor
Section 5(3): A social guarantor is immune from
bankruptcy proceedings so long as the creditor
has not exhausted all revenues to recover debtsowed to him by the debtor.
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` Section 2: A social guarantor is a person whoprovides guarantee, not for the purpose of making profit, with regard to:-
` (1) a loan, scholarship or grant for educationalor research purposes;
` (2) a hire purchase transaction of a vehicle forpersonal use; or non business use; and
` (3) a housing loan transaction solely for personal dwelling.
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` Types:-
Preferential creditors
Secured creditors
Unsecured creditors
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` One who has priority over other creditors in thedistribution of the bankrupts property whichincludes claims in the nature of local rates andland tax, income tax, wage claims against the
bankrupt, amount owing to employment providentfund, all workmen compensation etc
(Section 43 of Bankruptcy Act)
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` One who holds a charge, lien or mortgage overland or property of a debtor
` He may proceed to realise or deal with his security
` Options available Schedule C;i) Realise his security, if the proceeds is not enough lodged
proof of debts (ranks as unsecured creditor) OR
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ii) Surrender the security to the DG for the benefit of the
creditors and become an ordinary creditor
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` A person who is not entitled to any priority towards
settlement of the debt owing to him and may
include a judgment creditor
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` The receiver of the property of the debtor upon the
making of the Receiving Order (RO)
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` Section 40
a) Debts barred by Limitation Act 1953
b) Debts under illegal transactions, or
unenforceable debts such as those arising fromgambling, card games etc
c) Money claimed under pending proceedings or
contingent situations because there is
uncertainty and no finality in the claim
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d)generally, demand in the nature of
unliquidated damages. E.g claims arising
from running down cases, accidents,
unquantified claims, action in damagese) Debts incurred on or after the commission of
bankruptcy
f) Claims for non payment of alimony
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` Precondition
The minimum debt owing by the debtor is
RM30,000 or more (section 5 of
Bankruptcy Act) An office copy of the Judgment
The debtor must have committed an act
of bankruptcy (section 3 ofBankruptcyAct)
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