KUCHING: Early financial management and literacy are the key to preventing personal bankruptcy, which continues to pose serious consequences for Malaysians struggling with debt.
The Credit Counselling and Debt Management Agency (AKPK) Kuching Branch Head, Yeo Wee Kiak, explained that under the Insolvency Act 1967, bankruptcy occurs when an individual is unable to pay off matured debts and is declared bankrupt by the court.
Once this happens, he said, the individual’s assets are handed over to the Insolvency Department for liquidation.
He added that bankruptcy severely limits a person’s financial freedom, including frozen bank accounts and credit cards, restrictions on obtaining new loans, asset seizures, limitations on employment, particularly for roles requiring financial trust, and travel bans without approval from the authorities.
“Being declared bankrupt can have long-term effects on an individual’s credit rating and future financial activities.
“As such, it is crucial for individuals to understand and comply with Malaysian financial laws, and to take early preventive actions to avoid bankruptcy,” he stressed.
To assist individuals in making responsible borrowing decisions, he pointed out that AKPK recommends applying the 3Ps (Purpose, Payment Capability, and Payment History).
He stated that borrowers should question the necessity and nature of the loan, assess whether they can afford the repayment terms, and reflect on their past payment behaviours to ensure they maintain a good credit record.
Furthermore, he said that AKPK promotes the URUS financial management principles, which stand for (U) Prioritise Planning, (R) Save More, (U) Adjust Your Lifestyle, and (S) Achieve Financial Well-Being.
“By following these steps and maintaining a disciplined financial approach, individuals can improve their financial situation and avoid falling into debt,” he said.
Following this, Yeo also warned of the negative consequences of unmanaged finances, including a poor credit record, emotional and mental stress, potential loss of assets, and failure to meet financial goals.
“Prioritising proper financial management allows individuals to avoid these pitfalls, achieve financial stability, and improve their overall quality of life,” he said.
For those already in debt, he recommends taking immediate action based on its 4A Formula such as Acknowledge the problem, Analyse the financial position, Take action to restructure debts, and utilise AKPK as a financial ally.
He added that through its Credit Management Programme (PPK) and Small Loan Settlement Scheme (SPPK) for micro, small and medium enterprises (MSMEs), AKPK mediates with creditors to offer manageable solutions for borrowers.
Yeo also reminded that beyond being a mediator, AKPK also serves as a financial adviser and educator, helping Malaysians manage their assets, expenses and loans.
He believes that by gaining the right mindset and financial literacy, people can significantly improve their financial situations.
“AKPK acts as a mediator by facilitating the restructuring of loans for debtors in collaboration with creditors, taking into account the debtor’s financial situation.
“As an advisor, AKPK offers guidance on managing assets, debts and cash flow to help individuals sustain a comfortable standard of living while fulfilling their debt obligations.
“In its role as an educator, AKPK promotes financial literacy and awareness, empowering individuals to effectively manage their income, expenses and loans to prevent bankruptcy,” he said.
All in all, he assured that AKPK is always available to provide free financial advice and assistance.
“Don’t wait for financial problems to spiral out of control.
“Taking early action and maintaining responsible financial management are crucial steps toward achieving financial freedom,” he concluded.
