Bankruptcy
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