Selangor records the highest rate of bankruptcy in Malaysia, with many cases involving civil servants, particularly teachers, according to data from the Malaysian Insolvency Department (MDI).
Director-General Datuk Ishak Bakri attributed the trend to high personal loan liabilities among salaried employees, who, while having stable incomes, are at risk of financial distress without careful management.
“Individuals with fixed salaries, such as teachers, often get approved for loans easily, but this financial accessibility can become a risk if debts are mismanaged,” Ishak said during the launch of an MDI financial literacy programme at Politeknik Merlimau Melaka.
He explained that the very stability of their income, which enables borrowing, can contribute to prolonged financial difficulties when debt obligations accumulate.
In a positive note, Ishak reported that 200,000 individuals were discharged from bankruptcy last year, surpassing the government’s Key Performance Indicator target.
The national insolvency system has shifted focus from punishment to welfare and rehabilitation, in line with the government’s second chance policy. A 2023 amendment to the Insolvency Act now allows the director-general to grant a discharge without a court order for applicants meeting certain criteria.
Current eligibility includes individuals over 70, those in long-term bankruptcy, and persons formally diagnosed with mental health conditions. Ishak highlighted that Malaysia is a pioneer in recognising mental health as a valid reason for discharge, allowing immediate release upon confidential medical certification.
Looking ahead, MDI plans to introduce fast-track discharge criteria for single mothers, victims of financial fraud, and micro-borrowers to provide timely relief to vulnerable groups.
