LAW OF INSOLVENCY I

TUTORIAL QUESTION 1
ISSUE
Whether Maju Bank can proceed with
bankruptcy proceeding against Brett Peet ?.
INTRODUCTION
Bankruptcy happens when a person is unable to settle his debts (known
as a debtor) owed to the people or party who loan him the money.

Before filing a bankruptcy petition either by the debtor or creditor, the
following criteria have to be met:
The sum involved is RM30,000 or more
The sum of money must be ascertainable (liquidated sum)
There is a default period of six months for the act of bankruptcy to have
occurred
Before the petition date, the debtor must have reside in Malaysia for at least
one year



Generally, a person falls into bankruptcy due to several reasons. One of the reasons
is acting as a guarantor.
A guarantor can be a social guarantor or a corporate guarantor.
A corporate guarantor is a person who stood for loans relating to business loans,
for example in a business partnership
A guarantor is also liable to face bankruptcy when summoned by the creditors. The
creditors will go after the borrower first and if that fails to recover the amount
owed, they will go after the guarantor to settle the debts.
A person who stood as a guarantor for loans like education, house, car hire
purchase, scholarship and also third-party loans is known as a social guarantor.

LAW
Section 2
A social guarantor is a person who provides guarantee,
not for the purpose of making profit with regard to:

A loan, scholarship or grant for educational or research purpose
A hire purchase transaction of a vehicle for personal use or non
business use
A housing loan transaction solely for personal dwelling

LAW
Section 5
A social guarantor is immune from bankruptcy
proceedings so long as the creditor has not
exhausted all avenues to recover debts owed to
him by the debtor
APPLICATION
In applying the situation at hand, generally, Maju Bank
cannot sue Brett Peet as he is a social guarantor
according to Section 2. He falls under section 2 as he is
a guarantor for scholarship. As defined in section 5,
social guarantor is immune from bankruptcy
proceeding, however, the immunity is not absolute.
Section 5(3), prohibits bankruptcy action being
pursued against a guarantor unless all avenues to
recover the debt owed have been exhausted.

This means that the creditor which is Maju Bank,
must claim from the debtor first then if the amount
given by Engelina Juli is not sufficient, then only
Maju Bank can claim against the guarantor, Brett
Pett for the balance.
CONCLUSION
In conclusion, Maju Bank cannot proceed with
bankruptcy proceedings against Brett Pett unless
Maju Bank in all circumstances have exhausted
all avenues.