Social guarantors and bankruptcy…
1. When a
person takes a loan from a bank, it will usually require one or more persons to
be guarantors.
2. If the
borrower defaults on the loan, the bank may eventually proceed to take legal
action to recover the debt. If it succeeds, it will obtain a judgement order
from the courts.
3. Upon
obtaining the judgement order, the bank will proceed to enforce it against the
borrower or the guarantor or the both of them. Very often, when it is
determined that the borrower is unable to repay the loan, the bank will seek to
enforce the judgement against the guarantor.
4. There are
several ways to enforce the judgement and if the debt exceeds the minimum
amount of RM 100 000 effective 23rd October 2020 (this is expected to be a year only), (previously RM 50
000 and prior to that RM 30 000), the bank may initiate a creditor’s petition
for bankruptcy against the guarantor.
5. In the
past, many individuals were declared bankrupt because of such circumstances. However,
after 6th October 2017 when the Bankruptcy Act amendments came into
effect, creditors are prohibited from commencing bankruptcy proceedings against
“social guarantors”.
6. Social
guarantors are persons who are said not to have profited from the loans taken
by borrowers, for which they stood as guarantors including education
loans, hire purchase loans for personal or non-business uses, and housing loans
for personal dwelling.
No comments:
Post a Comment