Bankrupt Before 35
According to the Insolvency Department’s records, a total of 24,953 people below the age of 35 have faced bankruptcy since 2010.
Between January and April 2015, there were 107,306 cases of bankruptcies, 948 of which involved individuals under the age of 35.
The main reasons include their inability to settle car, house and personal loans or for being guarantors for other loan defaulters. The Bankruptcy Act states that an individual is subject to bankruptcy proceedings if he or she fails to settle a minimum debt of RM30,000.
The Federation of Malaysian Consumers Associations (FOMCA) has raised the necessity for a financial education policy to tackle the growing problem of young bankrupts. FOMCA is in the midst of drafting a financial education policy that they hope the Government will implement at all levels.
According to its secretary general Datuk Paul Selvaraj, this is a serious problem as those affected are young workers who are part of the nation’s future. Selvaraj believes that the rising living cost, moderate salary increments and low retirement savings would only worsen the situation if the issue was not addressed.
Based on FOMCA’s survey of 1,000 respondents in 2013, 37% of young Malaysians were found to be living beyond their means while 47% used more than one-third of their monthly income to settle various debts.
So far, FOMCA has initiated several awareness programmes and even published a monthly magazine called Ringgit, funded by Bank Negara. They are also gathering feedback from stakeholders and has initiated another survey to gauge the extent of the problem. The findings and recommendations would then be submitted to the Government by the end of this year.
Among those involved in this survey are the Credit Counselling and Debt Management Agency (AKPK), non-governmental bodies, financial institutions and insurance companies.
AKPK was set up by Bank Negara in 2006 to provide counselling, debt management and financial education to help individuals to take control of their financial situation. Individuals who are unable to manage debts can seek the advice of AKPK and undergo a debt management programme. After a confidential counselling session, personalised debt repayment plans will be worked out for the individuals through negotiations with the financial service provider. This programme is also suitable for individuals who have a positive net income and whose loans are worth less than RM2mil and taken from institutions regulated by Bank Negara.
All services by AKPK are free and available at its 11 branches and 23 credit counselling offices in major banks nationwide. For more information, log on to AKPK’s official website.