What is Bankruptcy?
Bankruptcy is nothing but financial crises. Nowadays many businesses are not able to pay their debt, thus facing financial crises. So when to file for bankruptcy? A good owner should know when to file for bankruptcy. When the profits earned are not able to clear the debts or when there is no profitability to clear the debts – its time to declare bankruptcy.
Who can file for bankruptcy?
By definition - an insolvent or a bankrupt person is the one who is unable to pay his debts. A person can be insolvent even when his/her assets are more than liabilities. The court will decide whether to declare one as insolvent or not.
Procedure for bankruptcy
The procedure differs geographically. In Mumbai, Chennai and Kolkata, the Presidency Towns Insolvency Act, 1909 (PTIA) is applicable, while the rest of the country comes under Provincial Insolvency Act, 1920 (PIA).
You need to have a business in that particular area or must have resided in that area and you must have a lawyer to prepare your petition. One may also get arrested for not paying debt. Thus documents such as address of the residence and business and details of the arrest as well as the list of creditors need to be attached while filing for bankruptcy.
In all the parts of the country – examination takes place at the time of the hearing except the three cities mentioned above, where examination will take place only when insolvency has been declared.
One must know all laws of bankruptcy before declaring to be bankrupt. In India, people are ashamed to be declared as bankrupt or insolvent.
Disadvantages of bankruptcy
Not eligible for loans
No credit given
In India even if you start gaining profits you will not get any credit even if you are eligible because of the mindset of people
How to recover from bankruptcy?
It make take months or even years to clear off all your debts, but that doesn’t mean you can always recover from it. Once the mark of bankruptcy has entered your records, it is very difficult to get back to normal thus one should avoid such financial crise