Debt Collection in Malaysia
Get started today with the recovery of your debts from debtors in Malaysia. In just a few minutes, you can put a debt collection agency in Malaysia to work collecting your unpaid debt. Read on to see how!
What makes Oddcoll a good option for debt collection in Malaysia
International debt collection is tricky, as it is hard to get a debtor to pay when you are in another country. A localised debt collection agency or law firm is needed, someone who knows the local laws, customs, and procedural routes. We make sure our clients are in the best possible position to get paid by their debtors, no matter where they are in the world.
We do this through a unique international debt collection platform that brings together the best debt collection agencies and law firms worldwide. This means that when you start your case with us, our quality-assured, selected debt collection agency in Malaysia will immediately begin taking the necessary steps to collect the debt on your behalf.
Our debt collection agency in Malaysia will directly initiate recovery actions for your claim!
We are excited to announce that Upper Class Collections will be our debt collection agency in Malaysia. They will immediately start collection actions in Malaysia when you start a case.
The debt collection process in Malaysia
Below is information on how the debt collection process works for a debtor in Malaysia. Payment is primarily sought through persuasion and negotiation. If that is not enough, you may have to go to court. If a debtor is insolvent and lacks sufficient assets to pay its debts, insolvency proceedings may be considered.
Out-of-court debt collection in Malaysia
First and foremost, debt collectors in Malaysia try to collect payment from debtors without going to court. Instead, through pressure and persuasion, to get the debtor to pay his debt.
How does this work?
The debtor is contacted by various means, such as telephone or letter, and is made aware that non-payment may result in the case being escalated to court in Malaysia. When a local Malaysian specialist makes that kind of demand and describes the consequences in that way, the debtor is much more cooperative. A debtor is aware that the case is much closer to being escalated when handled by a local debt collection specialist who is familiar with the procedures and legal rules in Malaysia. Most cases are resolved at this out-of-court collection stage in Malaysia.
Judicial debt recovery in Malaysia
The legal system in Malaysia
Malaysia is a federation of states and federal territories. Federal laws enacted by the Malaysian Parliament apply nationwide. There are also state laws passed by the state legislatures that apply in each state. The most important legislation in Malaysia is the Federal Constitution. It provides the legal framework for statutes, legislation, courts, and other administrative bodies. It also defines the government, the monarch, and their powers, as well as the rights of citizens.
When no law governs a particular circumstance, case law may apply. The legal system in Malaysia is based, in the main, on British common law, as a direct result of Britain’s colonisation of the country. Before independence in 1957, most of Britain’s laws were imported and either incorporated into local law or simply applied as case law. Muslims are subject to Islamic law (Sharia). Islamic law is primarily a set of civil laws governing private matters for individuals. Syariah rules are set by various sultans, who serve as the heads of the Islamic faith in their respective regions.
The structure of the courts
There are five levels of courts in Malaysia (here in ascending hierarchical order).
- Magistrates’ Court
- Sessions Court
- High Court
- Court of Appeal
- The Federal Court
Federal Court: Malaysia’s highest court. The Federal Court can hear appeals from the Court of Appeal’s civil decisions.
Court of Appeal: The Court of Appeal generally hears all civil appeals against High Court decisions.
High Courts: The High Courts have general supervisory and review jurisdiction over all subordinate courts and have jurisdiction to hear appeals from subordinate courts in civil and criminal matters. The High Courts generally hear civil cases where the claim exceeds RM 1,000,000, with a few statutory exceptions. The High Courts also hear all cases relating to bankruptcy and the liquidation of companies.
Subordinate Courts: Magistrates’ Courts and Sessions Courts in Malaysia have jurisdiction in both criminal and civil matters.
Sessions Courts: The Sessions Court hears cases where the amount in dispute does not exceed RM1 000 000. A Sessions Court can listen to all civil cases involving car accidents, landlord-tenant disputes, and enforcement actions.
Magistrates’ Courts: Magistrates are divided into First Class Magistrates and Second Class Magistrates, with the former being legally qualified and having greater powers.
First Class Magistrate: A First Class Magistrate can hear civil cases where the amount in dispute does not exceed RM100,000.
Second Class Magistrate: civil jurisdiction: a Second Class Magistrate may hear a civil case that does not exceed RM10 000 including interest costs.
To initiate a legal procedure, civil proceedings are initiated either by:
– a writ of summons “writ.”
Where there is a substantial dispute of facts, a “writ” should begin the proceeding.
– an “originating summons.”
Where there are few factual disagreements and the main issue is how to interpret the law, the proceeding may be begun by originating summons.
Summary judgment: In some cases, a plaintiff can apply for a so-called summary judgment. This is a simplified procedure with a simplified judgment that does not go through the whole legal process. It only applies to cases started by a “writ”. The circumstances of the case must lend themselves to this. Factors that come into play are that there is no real intention or reality for the defendant to defend the action.
It is therefore ideally suited to judicial debt collection in Malaysia, where the debtor fails to pay a debt without any legal basis for non-payment. Default judgment: Another type of simplified judgment may also be envisaged. This is a so-called default judgment, which may be applied if the defendant does not respond to the writ of summons.
Who bears the cost of legal action?
Can the costs of proceeding with judicial debt collection in Malaysia, through litigation, be charged to the debtor? A court has the power to shift costs onto the losing party. How much of the costs are shifted to the losing party depends on the specific case. Factors that come into play include the size of the case, the legal complexity, etc.
When does a claim become time-barred so that it can no longer be pursued legally?
As far as limitation periods for breach of contract are concerned, a claim becomes time-barred six years after the date of the breach. In situations where a judgment has been obtained by legal action, the judgment is time-barred after 12 years, after which it must be enforced before then.
Alternative dispute resolutions
Are there any alternative dispute resolution methods to going to court for legal recovery of a claim in Malaysia? The alternatives to proceeding with a civil lawsuit by the debtor are mediation or arbitration. Mediation is a voluntary process regulated by the Mediation Act 2012. Communication and negotiations are facilitated by the existence of a third party acting as a mediator.
The parties are free to appoint their own mediator. Still, they may request the Malaysian Mediation Centre of the Bar Council (MMC) to appoint a qualified mediator if they are unable to reach an agreement. Successful mediation results in agreements being written down in a settlement agreement signed by the parties. However, the parties to an unsuccessful mediation may proceed to trial or arbitration.
Arbitration is a private procedure with judicial review by an independent third party, the arbitrator. Arbitration is similar to court proceedings in that the arbitrator decides the outcome of the dispute in the same way as a judge; however, the parties are free to determine the number of arbitrators, the appointment of the arbitrator, and the rules to be applied during the arbitration. An arbitral award is binding on the parties. Usually, arbitration is agreed upon as a method of dispute resolution when two parties enter into a contract.
Enforcement of claims
As a final step in the legal debt collection process in Malaysia, one may need to apply to enforce the claim. In short, this means applying to the court for assistance in transferring assets from the debtor to oneself. This is provided that you have a successful judgment from legal proceedings (or something equivalent, such as a settlement agreement or an arbitration award). An application for enforcement can then be made to the court. Tools available to the court to get assets from the debtor include seizure and sale of the debtor’s assets.
Insolvency proceedings
It should also be noted that insolvency proceedings may be initiated. This is if the Malaysian debtor simply does not have sufficient funds to settle its debts. In such a case, reconstruction or liquidation proceedings for the debtor may become relevant.