Debt recovery in Malaysia

We act for businesses and people who are owed money: unpaid invoices, loans, rent, and court judgments that have not been paid. Our aim from the first letter is a settlement outside court, as early as possible. Each step on the ladder adds pressure, so that paying becomes easier for the debtor than fighting on. The work follows the ladder. Here is what each step involves and the period the law attaches to it.

Step 1: the letter

A letter of demand from a firm of lawyers sets out what is owed, why, and a date to pay by. No law fixes that date. Seven to fourteen days is the usual practice. Many debts that get paid are paid at this step.

If the debtor is a company and owes more than RM50,000, there is a stronger letter: a statutory demand under section 466 of the Companies Act 2016. It gives the company 21 days to pay, agree terms, or put up security. If it does none of these, the law treats the company as unable to pay its debts, and you can apply to wind it up.

If the debtor is a person, and you already have a court judgment for RM100,000 or more, there is a bankruptcy notice. It gives 7 days (Insolvency Act 1967, sections 3(1)(i) and 5(1)(a)).

Step 2: the court case

We file a claim and have it delivered to the debtor. In court language the claim is a writ, and delivering it is service.

The debtor then has 14 days to tell the court they will defend the case (Rules of Court 2012, Order 12 rule 4). If they do not, the court can give judgment without a hearing (Order 13). This is called judgment in default, and it is how many debt cases end.

If the writ is sent by registered post, the post office returns a signed delivery card. We need that card back. Without it, the court will not give judgment in default (Goh Teng Whoo v Ample Objectives, Federal Court, 2021).

Which court hears the case depends on the amount. Up to RM100,000 it is the Magistrates' Court. Above RM100,000, up to RM1,000,000, it is the Sessions Court. Above that it is the High Court (Judiciary of Malaysia).

If you are an individual and the debt is RM5,000 or less, there is a small-claims procedure. It is cheaper and quicker, but neither side may use a lawyer (Rules of Court 2012, Order 93).

A writ must be delivered within 6 months of the date it is issued (Order 6 rule 7).

Step 3: you have a judgment. Now what?

A judgment is a court order telling the debtor to pay you. It does not collect anything by itself. The court does not chase the debtor for you, and nothing happens automatically. The next move is yours. Many people stop here, and a judgment nobody enforces is a piece of paper.

Enforcement means using the court's tools to take payment from what the debtor has. The first job is to find out what that is.

First, find out what the debtor has

• Question them under oath. You can make the debtor come to court and answer questions about their income, their property, and what they have sold or given away. This is called a judgment debtor summons (Debtors Act 1957, section 4). The court can then order payment in one sum or by instalments.
• Question other people too. Anyone likely to know about the debtor's money can be summoned as a witness: a bank officer, a business partner, a spouse, an accountant (Debtors Act 1957, section 4(3)). This is the widest search tool in the system, and almost nobody uses it.
• Search the public registers. A company search at SSM shows the directors and shareholders. A charges search shows what the company has borrowed against, and often names the property. A land search shows who owns a property, but only if you already have the title number. A bankruptcy search shows whether someone else has already moved against the debtor.
• Know the dead ends. Land cannot be searched by a person's name. Credit reports from CTOS or CCRIS cannot be pulled without the debtor's consent or a court order (Credit Reporting Agencies Act 2010, section 24). There is no public lookup of who owns a vehicle. The judgment debtor summons is the lawful way through all three.

Then match the tool to the asset

• What they haveMoney in a bank account, or money someone else owes them

  Bank account order

  Legal nameGarnishee proceedings (Rules of Court 2012, Order 49)

  What it doesThe court orders the bank, or the other person, to pay the money to you instead of to the debtor. It covers current accounts, savings and fixed deposits.

  The catchThe order bites only from the moment it is served on the bank. Money moved out before that is gone. Speed and surprise matter.

• What they haveThings they own: vehicles, stock, machinery, furniture

  Seize and sell

  Legal nameWrit of seizure and sale (Rules of Court 2012, Orders 46 and 47)

  What it doesA court bailiff seizes the debtor's movable property and sells it at public auction. You are paid from the proceeds.

  The catchThe court's own costs of the seizure and sale come out first. Clothing, bedding, cooking pots and a worker's tools are protected (Debtors Act 1957, section 3). A seizure that finds nothing is itself a ground for bankruptcy (Insolvency Act 1967, section 3(1)(j)).

• What they haveLand or a house

  Land freeze, then sale

  Legal nameProhibitory order (Rules of Court 2012, Order 47 rule 6; National Land Code, sections 334 to 339)

  What it doesThe order is registered on the land title and stops the debtor from selling, transferring or charging the property. The court can then order it sold.

  The catchNothing is frozen until the order is registered at the land office. The order lapses after 6 months unless it is extended before then. Property owned jointly with someone else is harder.

• What they haveShares in a company

  Charge over shares

  Legal nameCharging order (Rules of Court 2012, Order 50)

  What it doesThe court charges the debtor's shares or government stock in your favour, so they can be sold to pay you.

  The catchHigh Court only. It cannot be used for land. It cannot be enforced until 6 months after the first order.

• What they haveRent or other income they receive

  Court-appointed collector

  Legal nameReceiver by way of equitable execution (Rules of Court 2012, Order 51)

  What it doesThe court appoints a receiver who collects the income, for example rent from tenants, and pays it to you.

  The catchThe court will refuse if the cost of the receiver would eat the money collected.

• What they haveA debtor who can pay but refuses

  Instalment order, then the last resort

  Legal nameDebtors Act 1957, sections 4 and 6

  What it doesAfter questioning under oath, the court can order payment by instalments. A debtor who has the means and still does not pay can be sent to civil prison for up to 6 weeks.

  The catchPrison does not cancel the debt, and you pay for the debtor's keep while they are inside (Debtors Act 1957, sections 10 and 14). It is a pressure tool, not a way to get paid.

• What they haveNothing you can find, but the debt is large

  Bankruptcy or winding up

  Legal nameInsolvency Act 1967, section 5(1)(a); Companies Act 2016, section 466

  What it doesFor a person who owes RM100,000 or more on a judgment, a bankruptcy notice. For a company that owes more than RM50,000, a statutory demand and then a winding-up petition. An official then takes over the debtor's affairs and looks for assets you could not find.

  The catchYou may share what is found with every other creditor. For a person, bankruptcy often ends the chance of being paid in full.

• What they haveAssets in another country

  Register the judgment abroad

  Legal nameReciprocal Enforcement of Judgments Act 1958

  What it doesA High Court judgment can be registered and enforced in the United Kingdom, Singapore, Hong Kong, Brunei, India, Sri Lanka and New Zealand.

  The catchOnly those seven. Not Australia, the United States, China outside Hong Kong, Indonesia or Thailand. Registration must be applied for within 6 years of the judgment.

You do not have to use the tools in any order. The rules let you use one or several at once (Rules of Court 2012, Order 45 rule 1). An instalment order does not stop a seizure. Bankruptcy does not require a failed seizure first.

A judgment can be enforced for 12 years (Limitation Act 1953, section 6(3)). After the first 6 years you need the court's permission before you can seize or garnish (Rules of Court 2012, Order 46 rule 2).

The court charges filing fees for each tool and keeps a small commission on money it collects for you. Those are the court's charges, not ours.

The clock that runs against you

In Peninsular Malaysia you must file a claim within 6 years of the date the debt was due (Limitation Act 1953, section 6(1)(a)). If the debtor pays part of it, or signs something admitting the debt, the 6 years start again from that date (sections 26(2) and 27(1)). Sabah and Sarawak have their own rules, with a 3-year limit for money lent and for unwritten contracts (Sabah Limitation Ordinance, Cap. 72; Sarawak Limitation Ordinance, Cap. 49). If the date is close, act now.

Five mistakes that weaken a claim

1. Threats. Threatening someone to make them pay can be a crime (Penal Code, sections 503 and 506). So can repeated messages meant to harass (Communications and Multimedia Act 1998, section 233(1)(b)). Since 1 June 2026, collection agencies must be registered under the Consumer Credit Act 2025. Using an unregistered one exposes you too.
2. Waiting. Every month closer to the 6-year limit is a month less to find the debtor's assets.
3. Poor records. Missing invoices, statements or proof of delivery turn a clear debt into an argument.
4. Getting the sum wrong. Interest, part payments and set-offs must be right before the letter goes out.
5. Skipping the formal steps. A statutory demand or a bankruptcy notice with a mistake in it gets thrown out by the court, and you start again.

Bad debts and tax

If your business cannot recover a debt after real effort and writes it off, it may be able to deduct the amount from its taxable income (Income Tax Act 1967, section 34(2)). Keep a record of the steps you took. That record is what supports the claim.