28th October 2026 - 6 min read
A bank or other lender that wins a court case against you over a debt can ask the court to make you bankrupt. It can only do this if the debt is at least a set minimum, called the bankruptcy threshold. That minimum is RM100,000, and it will go up to RM150,000 in 2027.
Prime Minister Datuk Seri Anwar Ibrahim announced the change when he tabled Budget 2027 on 9 October. There’s no start date yet, because the RM100,000 is written into the Insolvency Act 1967 and Parliament has to change the Act first. The government also hasn’t said whether the new threshold will apply to cases filed before 2027. The threshold has risen twice before, from RM30,000 to RM50,000 in 2017 and to RM100,000 in 2020. Since 2017, a lender also can’t make you bankrupt just because you signed as a guarantor on someone else’s loan. This covers education loans, car loans for personal use, and home loans.
Say a bank has won a court case against you over RM120,000 and you haven’t paid. Under the RM100,000 threshold, the bank can ask the court to make you bankrupt. Once the new threshold starts, it can’t. You still owe the money, though, and the bank can take other legal action to get it back. If you owe more than RM150,000, the change doesn’t affect you.
New bankruptcy figures show 4,301 new cases from January to July 2026, up from 3,679 in the same months last year. Personal loans were the biggest cause, at 1,653 cases. Most of the people made bankrupt, 2,932 of them, were aged 35 to 54. Of the 4,301 cases, 3,490 involved debts between RM100,000 and RM499,999, or about eight in ten. It isn’t known how many of them owe less than RM150,000.
Being made bankrupt limits what you can do until you’re released. According to the Insolvency Department, you need its permission before you can:
If you’re working, you can ask the Insolvency Department for permission to open a salary account so your employer can still pay you. You also have to tell a lender that you’re bankrupt before you borrow more than RM1,000. Bankruptcy also stops you from holding some public posts, such as Member of Parliament or local councillor.
There are three ways to be released from bankruptcy without going to court. You can check with the Insolvency Department at 03-8885 1000, or with the branch handling your case.
Automatic release means you don’t have to apply, but you still have conditions to meet. You’re released three years after you submit your statement of affairs, which is a full list of what you own and what you owe. By then, you need to have paid the amount the Insolvency Department set for you. You also need to send the Insolvency Department a report of your income and spending every six months. Your lenders can still object, which can delay your release.
If you’ve been bankrupt for at least five years, the Director General of Insolvency, who heads the Insolvency Department, can release you with a certificate. You can apply for one, or the Director General can decide to release you without an application. The decision depends on things like how much you’ve paid your lenders and how well you’ve worked with the Insolvency Department.
The Second Chance Policy uses this certificate to release more people. It started in 2023 for people with debts of no more than RM50,000 who’d been bankrupt for at least five years. They also couldn’t have any court or investigation proceedings against them. Budget 2024 then widened it to people with debts under RM200,000. Azalina Othman Said, the minister in charge of law reform, told the Dewan Rakyat the latest count on 26 October. Between 2023 and September 2026, 253,457 bankruptcy cases ended with the person being released.
Budget 2027 will widen the Second Chance Policy to the main carers of elderly family members, or family members with disabilities or long-term illnesses. Gig workers and others whose income changes from month to month are included too. The government hasn’t said yet whether that means a shorter wait, a higher debt limit, or something else.
The fast track is a quicker way to get the Director General’s certificate. It’s for single parents, people who borrowed for a micro, small, or medium business, fraud victims, and buyers of homes in abandoned housing projects. You can only apply if your case has been running for at least five years. You also can’t be under investigation or in ongoing court proceedings.
You have to apply yourself, online through the e-Insolvensi portal. If none of your lenders object, the Insolvency Department aims to decide within 36 days, and it wants to cut that in 2027. Azalina didn’t give a new number, so it isn’t clear yet how much faster it’ll be. If your application is rejected, you can’t apply on the fast track again. You can still apply the normal way at the branch handling your case, but your application won’t get priority.
If your repayments are getting hard to manage, get advice before your lender goes to court. The Credit Counselling and Debt Management Agency (AKPK) can put your bank debts, such as credit cards, personal loans, hire purchase, and housing loans, into one monthly payment. It can also talk to your lenders for you. AKPK’s services are free, and you can call it at 03-2616 7766.
AKPK can only help with loans from banks and other lenders that take part in its programme, so it can’t help with loans from licensed moneylenders. You also can’t join its Debt Management Programme once you’ve been declared bankrupt, so it’s better to go early.
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Christina writes about personal finance with an eye for making the complicated feel straightforward. She is drawn to the everyday money decisions people face and genuinely enjoys finding the clearest way to explain them. Between articles, she is probably napping, on a hiking trail, or terrorising her sister’s cats.
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