REHABILITATE BANKRUPT YOUTH
BUSINESS entries and exits are natural processes inherent in Malaysia’s economy. For the non-business section of society, the ordinary man is burdened with loan repayments, credit cards or the misfortune of being a guarantor. Though today’s failure holds the germ of tomorrow’s success, the legal implications and stigma of bankruptcy are not conducive for closure of business to be seen as a chance for a more reinvigorated entrepreneurship and business activity.
Businessmen can learn from their mistakes, and those who restart have lower rates of failure and experience faster growth than new companies.
But the stigma discourages talented and honest bankrupts from restarting their businesses or progressing further. This is especially so for young and single mothers who are bankrupt, and their numbers are rising. In October last year, the story of a 30year-old mother who sold her 14year-old daughter to pay her debts hit the headlines in mainstream newspapers.
Under the amended Insolvency Act 1967, besides annulment, the “second chance” opportunity of a discharge is found in Sections 33, 33A and 33C.
A “second chance” for a bankrupt to restart begins after he obtains a discharge under the act. Between the time the bankruptcy order is made and discharged, there is a “dark period” for bankrupts. In this period, a bankrupt has to pay a fixed monthly instalment to his insolvency estate, sell his property and the dividends paid to creditors. It is in this period that bankrupts cannot contribute to their insolvency estate for lack of cash.
This problem can be overcome by identifying potential bankrupts and assisting in the “postadjudication order” period.
The Credit Management and Counselling Agency, which plays an advisory role, should be given more power to help bankrupts, especially among the youth.
The agency will have to classify bankrupts into categories like credit cards, personal loans, car loans and small business loans. If a bankrupt begins to accumulate debt and is found to fall under the category of “sustainable” or “middle”, then the agency will take charge of his finances and he can be prevented from being brought to court.
If he falls under the “chronic abuser” category, he will have to go through the normal process of bankruptcy, but with a rescue mechanism. This experience will teach him to be cautious in his financial matters, but he must be reintegrated into work or business.
Youths today are future leaders, entrepreneurs and productive workforce. Some fall bankrupt due to poor discipline and failure to manage their finances.
Coupled with wrong messages from financial institutions, lack of education and peer influence, youths have been encouraged to spend beyond their ability to pay, thinking a bailout will be forthcoming, either from the government, their family or other sources.
Many can be rehabilitated and given education and guidance, and they can turn their lives around to become responsible adults and successful entrepreneurs. Raising the threshold of an amount borrowed in order for repayment to be made and to prevent youths from going bankrupt is not a solution. Instead, it will encourage them to continue increasing their debt.
Hence, we need to study areas where youth have failed in order to help them overcome their lack of financial knowledge and planning. They should be exposed to bankruptcy issues in colleges or universities. Education and knowledge are vital to prevent youths from falling prey to greed.