Ending up as ‘prey’ or ‘innocent victim’ in bankruptcy proceedings often stems from a lack of control over one’s financial situation.

AS we emerged from the court room, Alex asked nervously: “What do you think? Can we win?”

It was an important day, as we had just concluded the hearing of his application to discharge himself as a bankrupt. The decision was fixed for two weeks’ time.

His application had been opposed by several creditors, the reason being that he had not substantially paid off his debts.

Under Section 33A of the Bankruptcy Act, 1967, the Director-General of Insolvency may issue a certificate discharging a bankrupt from bankruptcy provided five years have lapsed since the individual was made a bankrupt.

Alternatively, the bankrupt may also apply to court to be discharged as a bankrupt, as Alex had done.

Alex’s concern is understandable. The social stigma attached to being labelled a bankrupt can be very damaging to a person’s reputation and esteem.

A list of restrictions is imposed upon a bankrupt, including not being able to leave the country without the permission of the Director-General or of the court, as well as not being able to carry on any business either alone or in partnership or becoming a director of any company except with the permission of the Director-General or of the court.

His name will also be blacklisted by banks.

Even though there may be less social stigma attached to being a bankrupt these days, Alex will still constantly be judged.

If he is unable to manage his own affairs, how can he then manage other people’s affairs?

So how does one avoid the possibility of being made a bankrupt? Well, in the majority of cases, the obvious answer is not to owe money.

As such, the Credit Counselling and Debt Management Agency was set up by Bank Negara Malaysia in April 2006.

Its purpose is to provide financial counselling and debt management to individuals as well as financial education to help individuals take control of their financial situation in relation to the use of credit.

Its website www.akpk.org.my is user friendly and has a “Financial Fitness” self test.

However, there are various instances where the debts incurred by individuals are not through their own acts of defaulting on repayments of loans, but rather their error of judgment in agreeing to become guarantors of loans granted to third parties.

Mary fell into such a category. She had signed a personal guarantee to secure a margin security facility for a family member. When the family member defaulted, a judgment from the court was obtained against them both and subsequently bankruptcy proceedings were commenced.

Mary had signed the guarantee without fully realising the repercussions despite being advised on the matter. She had firmly believed the old adage that blood is thicker than water and had only signed the guarantee to help the family member obtain the facility.

She has since regretted ever signing that guarantee. She laments how unfair the law is and says the law should be used against murderers and robbers, not against innocent people like her.

Time and again I explained to her that she had signed the guarantee well knowing the repercussions. She scoffs at such explanations and repeats that she is just an innocent person.

Going back to Alex’s earlier questions, it was impossible to give him a definite answer as the decision was not in a lawyer’s hands.

“I don’t know why they (the creditors) want to oppose my application. They have enough money as it is. Yet they still want more,” he commented.

More often than not, the creditors (especially banks) get a bad reputation for “preying” on “innocent” individuals.

I have had people come up to me accusing me of not caring about the plight of others. Some would not even talk to me and would look at me in anger and contempt.

It is certainly easier to sympathise with an individual than a company. A corporation has no face to it, and the public sees it as a mere entity with a logo and unlimited finances.

For individuals, however, there is a face, and there is a story to their predicament, like Alex and Mary.

There are also individuals who understand the nature of the bankruptcy proceedings against them and that such proceedings are not initiated as a personal agenda against them.

They know that, at the end of the day, the creditors and their lawyers are merely doing a job entrusted upon them.

In fact, there is actually no prey or victim in such a situation. Creditors are merely exercising their right to recover money that is due to them.

And the decision to commence bankruptcy proceedings is only taken when there is no other solution.

If an individual has the right to apply to be discharged as a bankrupt, a creditor similarly has the right to adjudicate an individual as a bankrupt.

This does not mean that the creditor is uncaring and cold, as accused by others.

Was Alex successful in his application? Well, let’s just say he will be more wary of his finances in the future.