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Sam Ghosh Founder and SEBI Regd. Investment Adviser at Wisejay Private Limited Bangalore, Karnataka
How Insolvency and Bankruptcy Code 2016 deals with Individuals? Part 2: Fresh Start Process
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06:44:40 AM, 3rd April, 2019
  • Sam GhoshFounder and SEBI Regd. Investment Adviser at Wisejay Private LimitedBangalore, Karnataka

    In the last post in this series, we talked about the basics of Insolvency and Bankruptcy Code 2016 (hereafter the Code) as it will apply to individuals.

    Part 1:

    In this post, we will talk about the Fresh Start Process, one of the two processes covered under the Code.


    This process gives the debtors get cleared off from the debt obligations. Obviously, the eligibility for the Fresh Start process is stringent. This involves an application to the Debt Recovery Tribunal (DRT).

    ELIGIBILITY FOR FRESH START PROCESS (section 80 of the Code)

    1. The gross annual income of the debtor is not more than Rs. 60,000.

    2. The aggregate value of the assets held by the debtor is not more than Rs. 20,000.

    3. The aggregate value of the qualifying debt is not more than Rs.35,000.

    4. The debtor does not own a dwelling unit.

    5. The debtor is not an undischarged bankrupt i.e. the debtor is not a bankrupt who did not receive a discharge order.

    6 There is no other fresh start process, insolvency resolution process or bankruptcy process in force against the debtor.

    7. No fresh start order made for the debtor in the last 12 months.


    Eligible applicants will be able to make application for a fresh start with applicable fee directly or through a resolution professional. The application will have to contain a list of all debts owned by the debtor, list of interest payable and rates, list of securities held with respect to the debts, the financial history of the debtor and immediate family for up to two years, particulars of legal actions commenced against the debtor, etc.

    An interim-moratorium will come into effect on the date of the application and end of the day of rejection or acceptance of the application. During this period, all legal actions and proceedings related to any debt of the debtor will automatically stay and no new legal action or proceeding related to such debt can be initiated. During this period the debtor cannot act as a director of a company or promote or manage any company. Also, during this period the debtor cannot dispose of any assets, have to mention that she is going through a fresh start process to her/his business partner, have to mention the status before entering any financial or commercial transaction and cannot leave the country without the permission of the Debt Recovery Tribunal.

    If the application is made through a resolution professional, it will be evaluated whether there are any disciplinary proceedings against the resolution professional. In the case of direct application, a resolution professional will be nominated.

    The resolution professional will examine the application of and recommend acceptance or rejection of the Debt Recovery Tribunal (DRT). The report shall contain the list of qualifying debts and the debts which are eligible to discharge as per the resolution professional.

    The Debt Recovery Tribunal (DRT) will pass an order either accepting or rejecting the application of fresh start. An acceptance order will mention the amount of debt discharged.

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