Part 1 - Who Owes You Money?
Let us start with identifying whether your debtor is an individual or a company, as different methods apply to the two.
If your debtor is an individual, the two basic things you should do are:
Conduct a bankruptcy search with the Malaysian Insolvency Department (MID) to check whether the individual is a bankrupt; and
Carry out a search at the National Registration Department (NRD) / Jabatan Pendaftaran Negara (JPN) to obtain the current registered address. Nowadays, JPN is more strict in disclosing this information and you may be required to engage a lawyer to conduct such a search.
Keep in mind that the process to claim against a bankrupt is different. It may be not worth your time and money to sue a bankrupt and recover nothing. If the debtor is already a bankrupt, you may file a Proof of Debt in the Insolvency Department to prove your debt and you will have to ‘wait in line’ (with other creditors) to be repaid.
If your debtor is a company, you should:
Carry out a search with the Companies Commission of Malaysia (CCM) / Suruhanjaya Syarikat Malaysia (SSM) for two reasons. Firstly, to determine the company’s business and business and registration address; and
Obtain information on the company’s financial standing to see whether it is worth pursuing a claim against the company.
Creditors generally have six (6) years to file a claim against an individual or company to recoveryour debts. The 6-year duration starts from the date on which the debt became due and owing to you.
Part 2 - The Civil Claim.
Generally, there are three possible outcomes to a civil claim:
Outcome 1: If the debtor (defendant) does not defend the claim, the Court will award you a Judgment in Default (basically a Court order that states that the debtor owes you money that has to be repaid). This can happen as quickly as within 1 or 2 months from the filing of your claim.
Outcome 2: If the debtor (defendant) defends the action, you can choose to file an application for “Summary Judgment”. This is when you have super strong and clear documents to prove that the debtor owes you money. For example, invoices and delivery orders acknowledged by the debtor, and emails or text messages where the debtor admitted the debt or did not dispute the debt. A “Summary Judgment” application is a shortcut when the documents are very clear which allows the Court to give an order in your favour without you needing to go to trial. If the “Summary Judgment” application is successful, you can get your order four or five months from the time you filed your claim. If the “Summary Judgment” application is rejected, you will have to go to trial.
Outcome 3: If you to go to trial, you will need to produce documents and call witnesses to prove your claim against the debtor (defendant). After the trial process, the lawyers will make their submissions to Court based on legal principles and the evidence. Then the Court will give its judgment whether to allow or dismiss the claim. From start to finish, this process will generally take at least 9 months or a year. This is when the matter is not very complicated. If it is complicated, the whole process can even take years to complete.
Note that this process in Part 2 “merely” gives you a Court judgment (or Order) that requires the debtor to pay you. It does not automatically result in you receiving money in your bank account. If the debtor (defendant) does not obey the Court judgment, you will have to enforce the judgment against the debtor. Part 3 – How to Enforce the Judgment?
These are the legal steps you can take if the debtor does not obey the Court judgment:
Bankruptcy Proceedings: This is if the debt is owed by an individual. You file a petition to make the debtor a bankrupt. This is if the debt owed to you is above the applicable debt threshold (which at the date of this article is RM 50,000.00). This is a popular option because it applies a lot of pressure to pay so that he/she will not be declared a bankrupt. But bear in mind that making a debtor a bankrupt does not automatically mean you will get your money. It is a long process for the Insolvency Department to call for meetings and asses the debtor’s means of repaying the debts. Also, there may be other creditors who are owed money, such as banks. If that is the case, banks (who are normally secured creditors), will stand first in line to take whatever the debtor has. This may end up with you and other creditors having the ‘scraps’. The process of petitioning to bankrupt an individual will generally take four to five months to be determined in Court.
Winding Up Proceedings: This is if the debtor is a company. You file a winding up petition to wind up the company. This is if the debt owed to you is above the applicable debt threshold (which at the date of this article is RM 10,000.00). The same considerations in paragraph 6.1 above apply here too. It is effective if the owners of the company do not want their company to be wound up which will ruin their ongoing business. But if you wind up the company, there may also be other creditors waiting too. The process of petitioning to wind up a company will generally take four to five months to be determined in Court.
Garnishee Proceedings: This is where you apply to take money from the debtor’s own source of income. For example, if the debtor is an individual who is an employee, you can garnish the individual’s salary where the employer will then pay to you a portion of the debtor’s monthly salary. Similarly, if a company has contracts where it is due to receive payment from another person or entity, you can garnish that income and redirect the payment to you instead. Another popular method is to garnish the debtor’s bank account. If you know which bank the debtor is using (you don’t need the exact account number), you can apply to court to take the money in the debtor’s account to repay your debt. This process can take up to three or four months to be determined in Court.
Judgment Debtor Summons (“JDS”): This is where you ‘drag’ the debtor to Court to disclose their financial status, their income and expenses etc. If the debtor is an individual, this JDS process ‘drags’ that person to Court. If the debtor is a company, this JDS process ‘drags’ the directors of the company to Court. The Court will examine the individual or director by asking them to disclose their bank accounts, assets that they own such as real property or shares own, their source of income such as their salary or business revenues. The Court will also ask what are their expenses, and from there the Court will make an order for the debtor to repay the debt in instalments or in whatever manner the Court thinks is reasonable. This JDS process will generally take three or four months to be determined in Court.
Writ of Seizure and Sale: This is where you apply for the Court to seize properties owned by the debtor and then sell those properties to repay your debt. Properties such as real property, shares, vehicles and other movable assets. Depending on the type of assets that are targeted, this process can take up to five or six months to be determined in Court.
Committal Proceedings: This is where you apply to for the debtor to be fined or put in jail for failing to comply with the judgment. But the Courts generally do not allow such an application in monetary debts. Generally not suitable in this situation.
Essentially, Your decision of which proceeding to use will depend on the situation (i.e. time and cost factors, type of assets that the debtor owns and so on). You can use any combination of the above proceedings to enforce your judgment so long as it does not result in you getting more than what is due. A creditor has 12 years to enforce the Court judgement against the debtor.