[Exclusive] Over 80% Of Bankrupt Malaysians Owe RM500,000 Or More

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Over 80% of Malaysians declared bankrupt in the past five years owed at least half a million ringgit, a period that also recorded bankruptcies among retirees and students

Statistics from the Insolvency Department show that 19,432 cases reported during this period involved debts between RM500,000 and RM999,999. 

A total of 1,275 individuals, representing 5.54% of all bankruptcies, had debts exceeding RM1 million.

The bankruptcy threshold in Malaysia has been adjusted several times. 

Before 2020, an individual could be declared bankrupt if they owed RM50,000 or more. 

This was amended in 2020, raising the threshold to RM100,000.

People struggle financially as costs rise but incomes stay the same

Malaysia University of Science and Technology (MUST) lecturer, Professor Emeritus Dr Barjoyai Bardai, said the figure of almost 6,000 bankruptcy cases annually is concerning, especially as most individuals owe RM500,000 or more.

He said the huge amount suggests people are not going bankrupt merely due to reckless consumer borrowing, but because large, structured debts have become unsustainable.

"Someone with debts between RM50,000 and RM100,000 has a realistic chance of rebuilding, but those owing RM500,000 to RM1 million face long-term financial exclusion, even after discharge," he said.

He noted that the high debt levels indicate prolonged exposure to high-risk borrowing, weak income resilience, and limited financial buffers. 

Dr Barjoyai attributed this to several interlinked factors, including household incomes not keeping pace with the cost of living, rising housing prices, and business risks.

"While nominal wages have increased, real purchasing power has not kept up with housing, healthcare, education, and everyday necessities. 

"Many households rely on debt just to maintain a middle-class lifestyle," he said.

Dr Barjoyai noted that some bankruptcies stem from post-pandemic financial scars, as individuals who survived through loan restructuring, Employees Provident Fund (EPF) withdrawals, or short-term credit saw problems resurface once relief measures ended.

Meanwhile, of those declared bankrupt in the past five years, over 33%, or 9,758 cases, involved individuals working in the private sector. 

Last year alone, 2,384 private sector workers were declared bankrupt, up from 1,813 cases the previous year.

Entrepreneurs were the second-largest group, with 5,692 individuals declared bankrupt over the past five years. 

Last year, 1,348 more entrepreneurs were declared bankrupt, a slight increase from 1,300 the year before.

Retirees and students are also falling into bankruptcy

On a more sobering note, the past five years also saw bankruptcies among retirees and students. 

A total of 63 government retirees and three students were declared bankrupt during this period.

Last year alone, 13 government retirees were declared bankrupt, a decrease from 24 cases the year before. 

No students were declared bankrupt last year, although there were two cases the previous year.