Bankruptcy is something you don’t want to talk about. Well this quote will make you think about it. “Bankruptcy is a serious decision that people have to make”. Bankruptcy can make your life a living hell. People you have borrowed from, call you everyday asking ….Where is my money? Abusive calls…threatening calls….you feel like taking a long holiday never to return. Is Bankruptcy the end of the World? It’s not. It is just a reality which you must face head on. Just like other challenges in life, bankruptcy is something you can overcome. Time to remember this quote by Guy Finley “Nothing in the universe can stop you from letting go and starting over”.
You are considered bankrupt or insolvent, if you are unable to pay your loans or debts. This is quite simple….If you cannot repay your loans and debt to your creditors, you are given a legal status, Bankrupt. Your creditors are harassing and threatening you. You are fed up of all those calls…You just want to file for bankruptcy, if only to rid yourself of all these calls. But can you?
You can file for bankruptcy, only if your liabilities (loans and debt you owe your creditors), exceed your assets. You also should not be in a position to escape from this situation, in the immediate future. This would make it impossible to repay your creditors, anytime soon. If you have the ability to repay your loans and file for bankruptcy, just to avoid harassment by your creditors (people you owe money), your petition will be rejected. A court order has been passed and you have been arrested, or your property has been seized and attached, you can file for bankruptcy. By filing this petition you declare you are not in a position to repay your loans and debt, or even service them (pay interest on your loans). You are free from the legal obligation of paying back your creditors.
Bankruptcy or insolvency in India is governed by two acts, Presidency Towns Insolvency Act, 1909 which is applicable in Chennai, Mumbai and Kolkata. The Provincial Insolvency Act, 1920 which is applicable in the rest of India. You have to file for bankruptcy at the court, whose location depends on the place you reside and conduct your business. You can file for bankruptcy only for yourself and not for your spouse.
Hire a good lawyer, who would help you prepare the petition for filing bankruptcy. In the document you make a statement saying, you are unable to pay back your debts and loans. You also state where you reside and conduct your business. If you have been arrested on court order, make a mention of it. You have to give a list of all claims against you, which are related to money matters. Mention the names and addresses of all your creditors. Your lawyer will help you submit the petition in the court which has jurisdiction; depending on the place you reside and conduct your business.
Get ready for the proceedings…If you run a business; produce the book of accounts of your business. You will also have to submit a list of all your creditors and a complete list of all your properties. Your dealings, conduct and properties will be examined in court, in the presence of your creditors. You must make a full disclosure of all your real estate holdings (properties), which would be examined in court.
The court will declare you insolvent and will appoint an officer, who will take charge of your property. You cannot touch your assets and properties, until they are sold. The money will be divided among your creditors, to pay back your loans and debt.
In India if you are bankrupt, you might find your friends avoiding you. There is a social stigma attached to being bankrupt. Being bankrupt is a demeaning experience and you might have to say bye bye to your great social life.
You remain on the cibil list for 10 years, during which it could be impossible to avail a loan. You can always improve your cibil score. If your record improves, you could even apply for a car loan. Consider this a small start.
If you lose your house and property, where would you stay? The court does not care about your accommodation and expenses. The worst part…You would have to pay for fighting your case in the court.
Your creditors cannot harass you asking for money, while the bankruptcy/ insolvency process is in the court. This is a very long process which could take years. Your creditors would be directed to the court, where your bankruptcy/insolvency petition is being processed. As the matter is pending in court, creditors cannot file separate suits against you, without the court’s permission. You maintain your sanity and peace of mind. Think of all those people who have committed suicide on being bankrupt.
You get another shot at life if you file for bankruptcy. In a strict sense this cannot be called an opportunity. It does help to get creditors off your back. Your knowledge, talent and skills remain with you. You can always make a fresh start.
Good financial planning helps you avoid bankruptcy. The team of wealth doctors at IndianMoney.com is always there to help and guide you. You can explore this unique Free Advisory Service just by giving a missed call on 022 6181 6111. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice / education to ensure that you are not mis-guided while buying any kind of financial products.
Mr C.S.Sudheer is a management graduate. He started his career with ICICI Prudential Life Insurance and later on worked with Howden India. After his brief stint in Howden India, he moved on and incorporated Suvision Holdings Pvt Ltd which is the sole promoter of IndianMoney.com. He aims to build a nation that is financially literate with investment savvy citizens.