Ignorance, loan ‘culture’ leading to young Malaysian bankrupts

KUALA LUMPUR — At 37, Ms Hawa Adnan is already a bankrupt and has been one for the past four years after the former teacher chalked up debts amounting to RM120,000 (S$39,537).

Ms Hawa (not her real name) decided to quit her job in 2009 following her battle with depression and family problems. She had no income and was saddled with a personal loan, credit card debts and car loan.

“After I quit, it was hard to find another job and because I had no income at all, I couldn’t afford to repay my debts,” she told The Malaysian Insight.

Three years after she quit, she received a letter from the bank stating that the interest on her debts had snowballed to RM120,000.

“When the legal letters were issued, I was still confused and didn’t know what to do, and I didn’t even turn up at court. And then, I received a letter from the Insolvency Department, and I went to their office… a month later, an official letter was released stating that I was a bankrupt.”

The number of civil servants declared bankrupt from 2013 until October this year totalled 4,062.

Last year, 1,093 civil servants were declared bankrupt, whereas from January to October this year, 719 were declared bankrupt.

Female bankrupts have also been increasing in numbers, according to the Insolvency Department.

The number of women bankrupts in 2015 totalled 5,670, a number which increased to 6,224 last year. From January to October this year, already 4,918 women have been declared bankrupts.

From 2013 until October this year, 30,220 women were declared bankrupt, while men totalled 67,459.

The department’s statistics also showed that the main cause of bankruptcy is the inability to repay personal, vehicle and home loans, followed by business loans and credit card bills.

Ms Hawa said the culture of taking personal loans is widespread among civil servants because of the ease with which they qualify for one.

She said many will take loans to repay other debts, which often leads to mounting debts that some will find they are unable to repay.

It’s an observation Ms Aina Ahmad, 30, agrees with.

Declared a bankrupt at 26, Ms Aina said personal loans are common among civil servants, many of whom are unable to make ends meet.

“If you work in the civil service, it’s like a culture to borrow money. With the cost of living, many of my friends are taking loans for their survival,” she said.

“So it’s wrong when people say you’re a bankrupt because you overspend, because the fact is many people are in debt because they just want to survive.”

Ms Aina said in her case, her ignorance and bad decision in taking a personal loan to invest in a get-rich scheme led to her current predicament.

She urged the government to provide financial education to civil servants on the repercussions of taking on too many loans, and also the process involved in being declared a bankrupt.

“I don’t want the same thing that happened to me to happen to others. At least, we should know our rights.”

For Ms Hawa, while others may feel stigmatised by bankruptcy, she said she was relieved that she did not have to manage her enormous debts on her own.

“People say being a bankrupt is the end of your life. But it’s really not that bad.”

Even though all her assets and bank accounts have been frozen, Ms Hawa said she is happy that she no longer needs to deal with debt collectors.

“Before I was declared a bankrupt, I would just tolerate it… every day I would have to answer calls from the debt collection agents, people coming to my mother’s house to knock on the doors and deliver reclamation letters.”

She also said the government needed to educate the people, especially civil servants, on the issue of bankruptcy, so many can be more aware before making decisions to take on more loans.

“Society needs to be given an understanding of the issue of bankruptcy. Many are silent because they are ashamed.” THE MALAYSIAN INSIGHT