Page 51 - Banking Finance April 2016
P. 51
FEATURE
How and when to
file for
bankruptcy
W hile India has taken steps application has been hearing when you will have to submit
towards bringing in a found to be false, the all your books of accounts.
Bankruptcy Law for court can even penalise you for
corporates, there are providing wrong information. The court will examine all documents
ways in which individuals can get and conduct an inquiry to know
similar protection when they are Bankruptcy may be used as a last whether your case is genuine. All
genuinely in debt and in no position to resort, but is an important remedial creditors will be made party to the
repay their creditors. tool when debts are mounting, as it case and will be legally bound to accept
gives you a chance to start afresh. the court verdict.
Understanding bankruptcy
How to file Suppose you have taken bank loans,
By filing for bankruptcy, you are the bank is well within its right to put
announcing that you are in no position If you are a resident of Mumbai, your name as a defaulter after non-
to pay off your debts and are an Chennai or Kolkata, your bankruptcy payment of dues.
insolvent individual. application will come under the
Presidency Towns Insolvency Act, 1909 If it is a secured loan, banks can
To safeguard yourself from your (PTIA), while for all other cities and liquidate the security and obtain their
creditors, you file an application with towns, the application will be dues, without waiting for any court
the court requesting to waive off your submitted under the Provincial verdict. For unsecured loans, the banks
debts. Insolvency Act, 1920 (PIA). will wait for a court verdict and may
have to agree with the final decision
The court will consider your The underlying law is the same for both of the court.
application if it is proved genuine. Acts except for some minor procedural
differences. You need to file By filing for bankruptcy, you may be
Increasing debt per se does not make bankruptcy petition at a court in the able to ward off creditors and even
you insolvent. You will be considered city where you have either lived for restart your life, but do note that your
eligible to file for bankruptcy only if more than a year or have conducted credit score will take a big hit.
your liabilities exceed all your movable business for the same period.
and immovable assets put together. You may even be blacklisted by credit
While there is no minimum amount of You can hire a lawyer and prepare a rating companies, making you ineligible
debt at which you can file for petition on bankruptcy request by for any further loans. File for
bankruptcy, you will have to prove in attaching all details of your assets and bankruptcy only as a last resort and not
the court that your current assets are debts. just as a tool to escape repayments.
insufficient to pay off your debt. (Source: Business Line)
Once the court accepts your
If the information stated in your application, it will fix a date for a
BANKING FINANCE | APRIL | 2016 | 51
