The aim to launch the Insolvency and Bankruptcy Code in 2016 was to change and consolidate the existing laws related to insolvency and the idea was to assimilate a number of acts into a single code. Again, the key focus of this code was to revive the company and resolve the issues in a timely manner thereby maximizing the value of the property belonging to the defaulter. The laws of bankruptcy and insolvency in India provide a definite structure to help those companies that are sick to wind up their business or recommend an alternative plan of revival. Apart from this, it also plans to say goodbye to the investors in a manner so that it does not result in loss of investments. The new code also bestows the workmen and the suppliers with the power to begin the process when it initiates due to default.
● Feature of the code
One of the primary features of the code is that it hardly distinguishes between the rights of the domestic and the international creditors, or between the classes of economic organizations. The code intends to create balance in the interests of the shareholders involved along with the modification in the order of the payment when it comes to the dues of the government. The new law has been created keeping in mind that the proceedings of insolvency in the future must be driven professionally and commercially rather than in the court. Apart from this, the adjudging authorities are to complete the due procedure fast instead of referring to the merits of the resolution. The lawyers in India specializing in bankruptcy are to help their clients initiate the procedure and comply with the norms.
● Parties filing the bankruptcy
When you follow the definition of bankruptcy, you will learn that it refers to an entity or an individual not in a position to repay the debts. However, the petition can only be filed when the liabilities exceed the assets making it also almost impossible to repay the debts. Quite clearly, this option is not open to every consumer with debts. If you file the petition under inappropriate grounds when you are not able to pay the debt, there are more chances of the petition being dismissed. However, you can file for the procedure when you have been already arrested according to a court order or your property is attached. You can also file for it when you are not arrested, but the amount of debt should exceed the limit. Consulting a bankruptcy law lawyer can assist you and allow you to understand in-depth when you are eligible to declare insolvency.
● Acts governing bankruptcy
The acts governing the bankruptcy procedure in this country are the Provincial Insolvency Act, and the Presidency Towns Insolvency Act. While the latter is applicable to the states of Mumbai, Chennai, and Kolkata, the rest of the country comes under the former even though there are minor differences in the procedures. Furthermore, the petition can be filed in the court only when you reside in the locations that apply or have conducted business there for a year. Usually, the procedure is to be started in the capacity of an individual without including the spouse but the consumer bankruptcy lawyers can guide you and help you to file the petition.
● Formalities of documentation
The petition document must include a statement that clearly mentions your inability to pay the debt, the place where you have conducted the business, the proceedings of the court order when you are arrested, the details of the monetary claims against you, and the list of the creditor’s addresses. Once the suit is filed, the court fixes a date for the hearing wherein you have to produce, the book of accounts, the list of your properties, and the creditors. The court examines in detail the dealings, conduct, and your properties in the presence of the creditors thereby offering an opportunity to the creditors to have a comprehensive idea of the real estate holdings.
For the people living in Mumbai, Chennai, or Kolkata, the examination takes place after the declaration that you are insolvent. However, for the rest of the locations, the court conducts the examination at the time of the hearing. As soon as you are declared insolvent, you have to file the discharge requesting for the removal of the status of insolvency. The period within which the status is absolved is not fixed and depends on the time of the court proceedings. However, the courts are bestowed with the power to declare a timeframe for absolving the status and they do not entertain applications after the time frame.
Things to remember for filing insolvency
You have to hire a good lawyer to file the bankruptcy petition in the court and submit the petition that has jurisdiction over the area of the residence or the location where you have conducted business. Before you are compelled to declare that you are insolvent, you can prioritize the payment of loan with the highest rates of interest such as the credit card loans. Apart from this, you can curb the unnecessary expenses such as vacation and liquidate those investments that present a low ROI when compared with the interest you have to pay for the loans. Even though you may think about the option of the settlement, it is going to impact the credit score. When you find it hard to pay the bank loans, you can ask them to restructure it to facilitate the payment. However, if your current financial situation does not permit you to hold on to the debt payment, consulting with a bankruptcy lawyer can yield the solutions. One of the biggest advantages of bankruptcy filing is to escape those cranky creditors chasing you for payment of debts.
Author Bio
Amy Jones has been serving as an experienced legal expert in Ahlawat & Associates-Law firms in India. She is a passionate writer and always on the lookout for opportunities for sharing her knowledge with the legal community.