Importance of a Bankrupt to honour agreed payments & file monthly returns

Being a bankrupt is hard, but it is not the end of the road. A bankrupt can be discharged via an order of discharge by the Court under Section 33 of the Insolvency Act 1967. However, such discharge is subject to the condition that the bankrupt keeping to his or her end of the agreement with creditors and the Director General of Insolvency ('DGI'). The two common mistakes that may bar bankrupts from obtaining a discharge are as follows:

1. Failure to Make the Agreed Monthly Payment to the Creditors

During a public examination of the bankrupt's files, the Court may order the bankrupt to make a monthly payment to his/her creditors.[1]  It is of paramount importance for the bankrupt to adhere to the order to make such monthly payments.

Courts have viewed the making of such payment as a sign of good conduct, for example in the case of Ng Kok Wah v Umw Industries (1985) Sdn. Bhd. [1995] 2 CLJ 284, the Court held that the bankrupt has “redeemed himself by obtaining employment and making payment of RM50 per mensem.” Courts have considered the making of such payment in deciding whether a bankrupt should be discharged.[2] 

2. Failure to Render to the Director General of Insolvency an Account of all Moneys and Property Every 6 months

Under Section 38(1)(b) of the Insolvency Act 1967, a bankrupt must, once in every six months, render to the DGI an account of all moneys and property which have come to his or her hands for his or her own use during the preceding six months. 

If a bankrupt fails to do so, he or she shall be deemed guilty of a contempt of court, and shall be punished accordingly on the application of the Director General of Insolvency under Section 38(2) of the Insolvency Act 1967. Should a bankrupt be found guilty of the above offence, the Courts will refuse his or her discharge unless a dividend of not less than 50% has been paid to the creditors.[3] 

In a nutshell, it is highly advisable for bankrupts to make monthly payments to their creditors in accordance to the Court orders and to provide the DGI an account of all monies and properties as aforementioned to avoid potential hurdles to their discharge from bankruptcy.