PETALING JAYA - Close to 25,000 Malaysians from Gen Y, defined as those below the age of 35, have become bankrupts over the past five years.
The main reasons they cited for the worrying trend - being unable to settle car and house loans as well as other personal loans, and being guarantors for other loan defaulters.
A total of 24,953 people below the age of 35 had been made bankrupt since 2010, according to the Insolvency Department's records.
Between January and April this year, there were 107,306 cases of bankruptcies, 948 of which involved people under the age of 35.
The Bankruptcy Act states that a person could be subjected to bankruptcy proceedings if he or she fails to settle a minimum debt of RM30,000 ($10,700).
The Federation of Malaysian Consumers Associations (Fomca) has called for a financial education policy to tackle the growing problem of young bankrupts.
"It is a serious problem as those affected are young workers who are the nation's future," said secretary-general Paul Selvaraj. "Fomca is drafting a financial education policy with the hope that the government will implement it at all levels."
Datuk Selvaraj said a Fomca survey of 1,000 people in 2013 found that 37 per cent of young Malaysians were living beyond their means, while 47 per cent used more than one-third of their monthly incomes to settle debts.
He said the rising cost of living, moderate salary increments and low retirement savings would only worsen the situation if the issue was not addressed soon.
"We have initiated several awareness programmes and even published a monthly magazine called Ringgit funded by Bank Negara for the purpose," Mr Selvaraj said, adding that Fomca is gathering feedback from stakeholders and has started another survey to gauge the extent of the problem. It plans to submit the findings and recommendations to the government by the end of the year.
Among those involved in the survey are the Credit Counselling and Debt Management Agency or AKPK (its Malay acronym), non-governmental bodies, financial institutions and insurance companies.
AKPK, set up by Bank Negara in 2006, provides counselling, debt management and financial education to help people take control of their financial situation.
An agency official said that if a person seeking help was found to be unable to manage debts, he or she would be advised to undergo a debt management programme.
"After a confidential counselling session, personalised debt repayment plans will be worked out for individuals through negotiations with the financial service provider," the official said.
All services by AKPK are free and available at its 11 branches and 23 credit counselling offices in major banks in Malaysia.
THE STAR/ASIA NEWS NETWORK