7 Warning Signs You May Be Heading Into Bankruptcy In Malaysia
According to the Malaysian Insolvency Department, some of the top 5 reasons Malaysians go bankrupt in 2019 include personal loans, vehicle financing, home loans, business loans, and credit card debt.
Meanwhile, the total number of Malaysians declared bankrupt in December 2019 stands at 299,186. While the number of people declared bankrupt trended down from 2017 to 2019, 2020 was a financially difficult year for everybody.
Watch out for the following warning signs of an impending personal financial crisis. Sometimes these signs can be the only thing stopping you from filing for bankruptcy.
You may be facing a serious debt problem if you see one or more of these signs:
1. You missed too many payments and the creditors are calling you
If you default on your payments, you will be hounded by creditors, who can file a bankruptcy lawsuit against you. In some ways, this is the biggest warning sign you can get as it can lead to you receiving bankruptcy notice from your creditors.
When it comes to debt management, it’s always better to be safe than sorry. If you find yourself facing insurmountable debts and are unable to get things back on track, it is best to turn to debt management professionals such as Agensi Kaunseling and Pengurusan Kredit (AKPK). The longer you delay paying off your debts, the worse the problem will be.
2. Foreclosure and repossession of property
When you fail to make timely payments on your car and properties, action – including foreclosure and repossession – will be taken against you by the lender. This happens when you stop paying off your loans for a while. These are clear signs that you have lost control over your financial situation.
3. Cash advances on credit cards
When you fall behind in paying your bills, do you use cash advances on your credit cards to make payments?
Getting credit card cash advances is not the answer! Most credit cards charge more than the usual interest rate for cash advances. Cash advances can cost you 5% of the withdrawal amount and on top of that you may be charged a daily interest rate.
If you resort to cash advances, you are heading for bankruptcy faster than you can say “credit card.”
4. Maximize your credit cards
It’s a vicious cycle that starts with charging more than you can afford each month. When that happens and you start paying only the minimum amount on your monthly credit statement and keep making new purchases with your card, you are heading into an expensive debt trap.
Since the credit card debt is unsecured, the financial institution that provided you with the card will charge very high monthly interest rates.
It is important to make sure that you use credit cards with caution. The general rule of thumb is not to use more than 30% to 40% of your credit limit at a time. This gives you flexibility in the event of job loss, illness, divorce, or other threats to your income.
5. Be the guarantor of a loan
As if it wasn’t enough to manage your own debt repayments, you can also go bankrupt because of someone else’s action. Co-signing a loan for someone else is also a common factor in many bankruptcy cases where the person you co-signed for defaults on the loan and you are held liable by the lender.
Being a guarantor has many implications. It is important for you to consider these implications before making this decision, even if the recipient is a family member or close friend.
6. Bad credit score
Are you trying to get a personal loan to manage your debts, but you can’t get the loan approved by a bank? You most likely have a bad credit rating.
Failure to repay your loans, use all available funds on your credit cards, and vouch for a delinquent loan can hurt your credit rating. This means that your credit score will hit an all time high and you will find that any new loan application will be rejected.
A bad credit score can affect you more than you think. Ensure timely payment of your loans and bills for a clean credit report.
7. You do not have a contingency fund
Finally, your bank account shouldn’t go negative every month. If you find that you are rejecting payments and are often in the red before the next paycheck, this is a strong sign that your current money management plan is not working and bankruptcy is likely to happen. ‘horizon.
When you get by without a back-up plan, all it takes is one financial misstep and you could find yourself facing bankruptcy.
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This article was first published in 2014 and has been updated for freshness, accuracy and completeness.
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