How to file for bankruptcy in India
Any person who starts a business does so in order to gain profit. But due to the dynamic nature of market, some business don’t earn as much as others. And this is fine till the time you are able to make your ends meet. But as always, exceptions are there. These are the people or organisations whose liabilities are much greater than their assets (movable and immovable) and they are frequently chased down by their creditors. Some succumb to this pressure and end their lives. But the smart decision in such situation would be to file for bankruptcy. It is quite true that there is a lot of social stigma attached to this term ‘bankrupt’ but to the person filing it; it can be a way to start things afresh.
The process for filing for bankruptcy is simple as well as complicated at the same time. The reason for this is that there are two different types of bankruptcy laws in our country; namely, Presidency Towns Insolvency Act, 1909 (PTIA) and the Provincial Insolvency Act, 1920. The residents of metro cities like Bombay, Chennai and Kolkata will have to file for their bankruptcy application under the former act while the residents of rest of the country will have to file through the latter. The major difference between the two acts is only procedural while the rest of the provisions are pretty much same in both.
Any person filing for bankruptcy requires the help of a bankruptcy lawyer. The lawyer can help in deciding whether there is actually any way of getting out from being labelled as bankrupt or not. He/she will try to negotiate with the creditors on your behalf, to avoid the court proceedings, will explain you the after effects of it, the impact it will cause on the co-signers etc. And even after that if you still wish to file for bankruptcy he/she will help you by preparing your petition, arguing the case, making sure you don’t lose assets which you don’t want to etc.
The process of bankruptcy is that you will have to file a bankruptcy petition though your bankruptcy lawyer in the respective court of the city where you have been either residing in for more than a year or doing business for the same period. The petition should include details about your financial conditions (income, liabilities, expenses etc.) the different bankruptcy forms, details about the creditors, details of claims against you etc. If the court accepts your application, it will assign a date for your hearing, for which you will have to bring all yours books and account details and show the court that why you should be labelled as bankrupt with the help of your lawyer. After this the court will try to verify your accounts and books to make sure that you have not filed this case just to escape your creditors but are genuinely in no position to pay them back. The court will then either declare you as bankrupt or not bankrupt and all your creditors will have to abide by the decree of court.
Even though this process seems like a perfect escape, it should only be the last resort because there are lots of back draws it brings with it. Like after being labelled as bankrupt, your credibility in the market will go down and starting a new business might become difficult. The banks may also decide, not to grant you loans any more. But that is the thing with doing business you have got to take risks. And getting yourself labelled as bankrupt is probably the biggest risk.