Reaching out to debtors
by Edwin Chandra, email@example.com. Posted on September 9, 2012, Sunday
IT is sad to note the annual hike in bankruptcy cases in Malaysia even though household income is on the rise.
Last year alone, 19,167 individuals went bankrupt with motor vehicle hire purchase defaulters topping the list at 5,137.
More than 50 people in the country are declared bankrupt everyday and the figure is alarming in view of the rapid economic growth Malaysia is experiencing and the higher spending power the people are now enjoying.
There is no definite solution to the problem because debtors come from all walks of life, including even professionals and prominent businessmen.
The setting up of the Credit Counselling and Debt Management Agency (AKPK) in 2006 by Bank Negara is a blessing, particularly to those heavily in debt.
“We are here to help,” said AKPK Sarawak regional head Marlene Margaret Nichol.
She explained the agency’s role is primarily to assist its target group and educate the public on the importance of prudent financial planning and spending.
“You have the moral and legal responsibility to pay whatever you owe or you will be liable to go to court and even be declared a bankrupt,” Marlene said on the why people must repay their debts.
“Many Malaysians are declared bankrupt everyday and most cases are due to credit card debts. This is one of the most common reasons why people approach AKPK for help,” she added.
According to her, those eligible for the agency’s programme will be placed under its debt restructuring and management scheme to help them repay unsecured debts due to credit cards, personal loans, car loans and the like at a level affordable to them every month.
“We look into their debts and outstanding balances — we have this industrial group working with the banks which help us find the best solution for those who approach us for help,” she explained.
Personal financial crisis
Statistics released recently by the Malaysian Insolvency Department revealed a shocking record of 116,379 bankruptcy cases between 2005 and April this year.
About 20 per cent of cases involved individuals aged 35 and below, 32 per cent between 35 and 44 and 18 per cent between 45 and 54.
Most people got in heavy debts because of poor money management and poor budgetting skills.
Whether they like it or not, working adults must have a proper monthly budget because without one, they are unable to track their expenses. Most times, they won’t know exactly whether they could afford things like a fancy car, the latest electronic gadgets or expensive accessories for their vehicles.
Being self-disciplined and prudent in spending is one of the best ways to acquire sound financial management skills whereby unnecessary spending is avoided to stay out of debts.
Prevention better than cure
Being heavily in debt can ruin people’s lives because it slowly (but surely) causes them to lose their assets and suffer from mental stress and can even strain the relationships between married couples or family members.
There are many causes for getting into debt although most people are not aware of them.
Working adults should try to avoid being consumed by debts so that they do not take over their lives, and for AKPK, financial education has become a priority, especially for students and working adults
“We are trying to get the root of the matter and even parents can play a big role in educating their children on the importance of good financial management before they get their first credit card or loan,” Marlene said.
“Always set aside some money for savings. Working adults need to cultivate the saving habit and live within their means.”
Marlene, seconded from Bank Negara to head AKPK in Kuching, said response to the agency’s counselling services had been encouraging although slow at first.
She added that the services were also provided in Miri and Sibu.
On the whole, cases of people badly in debt are still low here compared to bigger cities like Kuala Lumpur. Perhaps, the living costs locally are still affordable and the temptation to overspend manageable.
Marlene said as long as people were willing to follow the agency’s programme and abide by the terms and conditions, AKPK could arrange for repayment of their restructured debts up to a maximum of 10 years.
“They can just bank in the monthly repayment to AKPK — they don’t have to deal with the banks,” she said on how debtors could enrol in the agency’s programme to resolve their predicament.
People will always have unlimited desires and wants but the painful truth is that most only have a limited source of income.
“We have to make the right choices in life and learn to have proper financial planning in order to continue enjoy living within our means,” she advised.