The theories underpinning personal insolvency or bankruptcy law: a legal overview

• Main Authors: Azmi, Ruzita, Abd Razak, Adilah, Ahmad, Siti Nur Samawati
• Format: Article
• Language: English
• Published: Future Academy 2018
• Subjects: K Law (General)
• Online Access: http://repo.uum.edu.my/26225/1/UUMILC2017%20500%20512.pdf; http://repo.uum.edu.my/26225/; http://doi.org/10.15405/epsbs.2018.12.03.49
• Institution: Universiti Utara Malaysia

In Commonwealth countries including Malaysia, when individuals become bankrupt the legal mechanism is the bankruptcy law. Both law and policy on bankruptcy have been subject to long-standing debate. The goal of bankruptcy law, at its core, is effective debt collection. Another important feature of bankruptcy law is for individual debtors who resort to bankruptcy to obtain a discharge as a form of bankruptcy relief or rehabilitation. Discharge is viewed as granting the debtor a financial fresh start. Historically, these two features: to serve as a collective debt-collection device and to protect the interest of the debtors in providing for their discharge, have entered bankruptcy laws at different stages in its development. Whether bankruptcy should concern itself in catering for the creditors’ maximization of return to recover their debts, or to protect the interest of the debtors in providing for their discharge, or to protect the public from culpable bankrupts, resulted in debates on the underlying principles such as the objectives and theoretical foundations of such law. To properly understand the role of such law, it is pertinent to review the theories underpinning bankruptcy law. For this purpose, information was obtained by scrutinizing various secondary data comprising of textbooks, articles from both law and other social science journals.