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Document Type

Article

Abstract

A popular Malay proverb advises, “[L]et it be slow, as long as it is safe” (biar lambat asal[kan] selamat),1 combining the sentiments of two similar English proverbs: “haste makes waste,” and “slow and steady wins the race.” These principles certainly seem to have guided Malaysian lawmakers in the quarter-century, multistage development of the most important element of modern bankruptcy law: the discharge. Adopted in 1967,2 Malaysian bankruptcy law has long included a very limited debt discharge, but as it left more and more economically debilitated debtors in perpetual bankruptcy limbo, policymakers became dissatisfied with leaving a huge and growing mass of debtors to languish.3 In 1998, they began taking a series of hesitant steps to alleviate the flow of cases into and, more importantly, accelerate the exit of cases out of the bankruptcy system.4 This process culminated just under twenty-five years later in the adoption of a fairly modern statutory discharge, effective in October 2023.5 A year and a half of empirical data now reveal the important but limited effects of this process of entry and exit recalibration, particularly the complementary discharge aspects, in the Malaysian bankruptcy regime.

The halting series of legislative and regulatory changes and consequent empirical results in Malaysia from 1999 to 2025 are enlightening as to the purpose and (in)effectiveness of various “safe” approaches to reducing the incidence of personal bankruptcy and expanding discharge relief. This article reveals those lessons. It also reveals the motivations for the revolution in Malaysian bankruptcy policy, with a closer look at the nuanced role of Islam and individual religious conviction in a modern democratic majority-Muslim state.

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