Currently, the Narendra Modi government was able to get the latest Bankruptcy Code Bill covered in the parliament and it is considered to be one of the major economic reforms of present India. After passing the bill first in Lok Sabha and then in Rajya Sabha, the present road is quite clear of the latest bankruptcy law in India, which is here to become a law soon enough.
Repealing Presidency Town Insolvency Act and more:
This new bankruptcy law is subject to repeal the Presidency Town Insolvency Act (1909) and even the Provisional Insolvency Act (1920). The well-known bankruptcy law in India is further subject to amend some of the other laws. Some such examples over here are that of Limited Liability Partnership Act, Companies Act, and Securitisation Act to name a few.
Unlike any of the other pending bills as in parliament, the opposition parties failed to have any argument against the bill and so the government can get this bill properly passed quite smoothly.
As per this new code, when any debtor goes bankrupt, the property will take be taken over by creditors quite easily. It is stated that if 75% or more creditors agree, then the action might take place within 180 days.
Even within that time, the debt is not paid then the firm or person will be declared bankrupted automatically. It clearly states that the new law if it is in place, then delays in recovering the loans and associated losses might come to an end automatically.
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Companies and people who are not able to repay loans will be given that opportunity to repay a loan or just declare themselves bankrupt within the given time. In case the debtor is found guilty of misconduct, then he or she might face the prospect of getting imprisoned for a period of 5 years.
The new laws and some better understanding:
As per the new law stated under the Indian government, the declaration process of bankruptcy can be carried by licensed pros only. It has been proposed by NCLAT Delhi to declare any firm bankrupt and it is then time for the Debt Recovery Tribunal to act and get this declaration covered over here. According to this new rule, as implemented, Bankruptcy Fund will then be created. But, the law remains silent about how this fund will be utilized later.
Planning to declare bankruptcy – learn the pros and cons:
The major benefit of just filing for bankruptcy is that you will get cleared of all or some debts like credit card obligations and unsecured debts like medical bills. Declaring that you are bankrupt means you are eliminating yourself of all debt. Learning about bankruptcy law and its pros and cons is important before taking the final leap.
Filing for such bankruptcy will have significant upside which will stop the creditors from harassing you to collect the owed payments. Once declared bankrupt, the automatic stay will take place. This stay will prohibit collection based activities like phone calls from legal firms and creditors, even though there will be some exceptions. The creditors might ask the court to lift the stay.
But, filling for bankruptcy will not help in winning all debts. It will fail to eliminate child support loan or student loan debt. On the other hand, if the creditor can convince the judge that particle dischargeable debt might survive bankruptcy, then you will remain responsible for paying it later.
Moreover, filing for bankruptcy will always discharge your debts but will never eliminate liens. It means that creditors will repossess any items with liens or foreclose on any of the real property, which is subjected to lien if you fail to make payments.
Another major downside to filing for bankruptcy is that the credit score will always take a big dip. It means that bankruptcy is about the worst thing that might happen to credit and even considered worse than a foreclosure.
Information from Joint Parliamentary Committee:
The Joint Parliamentary Committee has further stated that there is no single law under which the bankruptcy based action might be undertaken. So, there is always an attempt to make one law in place of multiple laws. But, the market houses another observation from the same JPC. It shows that the draft bill has not yet touched overseas issues associated with the bankruptcy world. So, it might be placed under incomplete legislation without even dealing with any of the overseas problems. This new code will not add this suggestion of JPC.
However, the Indian government has clearly declared that as this issue remains complicated, it might be added in law after going through some extensive discussion in this lot. Right now, the question revolving around overseas assets of the bankrupt firm or even with individuals will be in the dark. The government can only deal with such instances after entering into some of the suitable agreements with the foreign-based government bodies first. So, it remains in the standstill.
The bankruptcy code in India has so much more to be added in and the incorporation of this code into Indian jurisdiction system will take some time for sure.
