The Proposal of Voluntary Bankruptcy for Individual Debtors in Thailand *
Over the past two years, there has been debate as to whether Thailand should adopt a scheme of voluntary bankruptcy for individual debtors. Voluntary bankruptcy means when any individual who is insolvent and indebted to a set amount of money files a petition for bankruptcy. If he or she is an honest debtor and cooperates with the creditors and government officials in collecting all available assets for repayment of his or her debts, after a designated time, he or she will be discharged from bankruptcy without any debts. The reasons behind this argument stem from the present Bankruptcy Law in Thailand. According to Thai Bankruptcy Act B.E. 2483 (A.D..1 940), any debtor who is faced with financial difficulties cannot file a petition for bankruptcy. Instead, he or she has to wait for a creditor or creditors to file a bankruptcy petition against him or her. There is merely a compulsory bankruptcy system in Thailand. Moreover, individual debtors who do not have their creditors file a bankruptcy charge against them cannot take advantage of section 81 / 1 of the Act. This stipulates that a natural person adjudged a bankrupt by the court shall be discharged from bankruptcy immediately upon the lapse of three years from the date the court adjudged him or her bankrupt. In addition, proceedings for reorganizing the business of a debtor under Chapter 3/1 apply only to the debtor who is a limited company, a public limited company or other juristic persons as provided in the ministerial regulations. The individual debtor cannot utilize the provisions in Chapter 3/ 1. Therefore, Thai individual debtors do not have the chance to begin a `fresh start' voluntarily. When a debtor is placed under the receivership order, all of his or her assets save necessary .items will be seized and he or she cannot perform any juristic acts. If the debtor is a government official when the court declares him or her a bankrupt, then that individual has to quit his or her job. Many people view these provisions as a hindrance to the economic and social development of Thailand.
2. Discussion of advantages and disadvantages of introducing voluntary bankruptcy for individual debtors in Thailand
The proponents of the voluntary bankruptcy system suggest that an honest debtor should have the opportunity to start a `new life'. When one has a financial problem, the problem may not come from one's mismanagement or dishonesty. The monetary crises could derive from events outside one's control such as hikes in the oil price, natural disasters or sudden changes of government. Thus, any honest debtor should have a chance to revive his or her business and life. This amendment will not affect economic development, since the current Bankruptcy Law leaves the debtors and their enterprises with no other alternatives. Debtors do not have many options to avoid bankruptcy. So, most of the time, debtors try to conceal their accessible assets or choose not to work as most of their salaries or any kind of compensation will be garnished to repay their creditors. These present circumstances benefit no one. The debtor should pay all his or her debts with all the assets that he or she has. Voluntary bankruptcy benefits both the creditors and the debtors. For the creditor, since the debtor can no longer pay all his or her liabilities, whether the creditor files a bankruptcy charge against the debtor or the debtor declares himself or herself bankrupt, the shares the creditors receive will be equally the same. With this proposed scheme, the debtors are more willing to cooperate with the creditors in collecting their assets because if they assist the official receiver and act as an honest debtor, they will be discharged from bankruptcy after a certain amount of e has passed. For debtors, though they may lose all non-exempt assets, they will be free from all their liabilities and will have a new beginning. For society as a whole, if the debtor is discharged, there will be another efficient member of society working towards its progress and development. Voluntary bankruptcy is in line with the philosophy of the market-driven economy which encourages people to do business. This promotes competition amongst businessmen to use all limited resources to the fullest extent, resulting in new technology, products and services to ease the daily lives of the citizen of the world. To prepare Thailand for the free trade era, Thai people need to brace themselves for fierce competition from abroad. Bankruptcy law needs to play a part as a safety net in supporting people to take risks in doing business by enacting a voluntary bankruptcy amendment.
However, the opponents of the voluntary bankruptcy system have a large number of concerns. They argue that this scheme would create a serious moral issue for Thais. People would get used to spending recklessly and would have the belief that if they did become indebted, they would not have to make the repayments. In fact, those who are indebted must work harder to repay their loans. Furthermore, all the financial institutions would be affected. They would have to calculate the risk of non-performance loans when they reckon the appropriate interest rate for the deposit and loan. The interest rate of a loan would rise and the interest rate of a deposit would fall. It would be more difficult for an entrepreneur to secure financial support. The voluntary bankruptcy scheme would be market interference and would not help the debtors as long as they do not change their spending habits. These people will incur debt again and again. The government should let each debtor deal with his or her financial situation by himself or herself. The right solution should be that the government creates more jobs and find more markets for entrepreneurs.
Those who disagree with the system also worry that the relationship between the debtor and the creditor will worsen. Those in need of financial aid might be rejected from obtaining loans because the creditor is afraid that the debtor may file a bankruptcy petition in the future. By the same token, there is a chance that some creditors will use violent and unlawful methods to reclaim their loans from debtors. Moreover, it is very hard to differentiate between an honest debtor and a dishonest one. With the proposed amendment in force, dishonest debtors will be more motivated to conceal their assets and refuse to pay their debts.
After weighing the pros and cons of all parties concerned, I think Thailand should have a voluntary bankruptcy for individual debtors. Before moving onto the details of this paper, mutual understanding regarding the legal terminologies throughout this writing is necessary. "Individual Debtor" means a debtor who is a natural person excluding an ordinary partnership and a limited partnership. "Official Receiver" means a government official in charge of administering a bankruptcy case. "Receivership Order" means a court order that bars the debtor from doing any act relating to his or her assets, or his or her business, except such act done by an order or approval of the court, the official receiver, or the creditttor's meeting. There are two methods of voluntary bankruptcy system. The first is the lodging of the bankruptcy petition by the debtor; the second is where the debtor proposes a voluntary debt arrangement or agreement with the creditors to have a hair cut and/or pay his or her debts in installments within a certain period of time. This article deals exclusively with the first alternative. Before I get into the details of my proposal, it is critical to take a look at the bankruptcy laws of other countries concerning voluntary bankruptcy for individual debtors