001 introduction to bankruptcy

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LAW 534Atifah bt Othman

[email protected]

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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001 introduction to bankruptcy

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