KUALA LUMPUR: The Dewan Rakyat today passed the Bankruptcy (Amendment) Bill 2016, which has been hailed as more borrower-friendly, after the second and third reading that took place on the same day.

Under the amended law, debtors will be granted an automatic discharge from bankruptcy after three years, though they may still have to settle part of the debt termed target contribution — an amount set by the Insolvency Department's director-general based on the total debt — which the debtor has to repay when ordered to do so by the DG.

The third reading took place after Minister in the Prime Minister's Department Datuk Seri Azalina Othman Said satisfied Beruas MP Ngeh Koo Ham's query on whether granting debtors automatic discharge from bankruptcy would compromise creditors’ positions.

Earlier, Azalina also highlighted that though the discretion to not impose bankruptcy on an individual lies with the Insolvency Department director-general (DG), creditors have the right to file their opposition to such an act through the court, even under the current law.

"Therefore, the DG’s decision will still have to depend on the court's decision," she said in response to Pandan MP Rafizi Ramli's concern about possible abuse of power by civil servants to rescue an individual from bankruptcy.

Meanwhile, among the amendments to the original Bankruptcy Act 1967 that were passed under the bill are: the prevention of bankruptcy actions against social guarantors, and raising the minimum debt threshold for the initiation of bankruptcy proceedings to RM50,000 from the present RM30,000.

A social guarantor is a party who provides guarantee not for the purpose of making profit.

"From the government's point of view, we are trying to protect social guarantors, because these people are guaranteeing for things like education loans. I agree that we need to teach our youths the responsibility to repay their debts, but the social guarantors are innocent, they are not doing it [guaranteeing the loan] for a profit," Azalina explained

She also revealed that Malaysia recorded 169,927 bankruptcy since the economic crisis in 2008, till end-2016.

The Bill was passed after a majority vote on completion of the third reading.