In the last three posts, we discussed the basics of Insolvency and Bankruptcy Code 2016 (hereafter the Code) and the two processes- Fresh Start and Insolvency Resolution process.
The Bankruptcy process will be invoked when the above mentioned Fresh Start and Insolvency Resolution Fails. The Bankruptcy process for individuals is covered under chapter IV and V of Part III of the Code.
WHEN AN APPLICATION FOR BANKRUPTCY CAN BE MADE?
The creditors separately or jointly with other creditors or the debtor can make application for bankruptcy on the basis of an order from the Debt Recovery Tribunal
(a) When the Debt Recovery Tribunal rejects the application for Insolvency Resolution Process on the basis of the report submitted by the resolution professional that the insolvency resolution application was made with the intention to defraud his creditors or the resolution professional.
(b) When the Debt Recovery Tribunal rejects the repayment plan created under the insolvency resolution process.
(c) When the Debt Recovery Tribunal passes a bankruptcy order based on the report from resolution professional that the repayment plan has not been completely implemented under the insolvency resolution process.
BANKRUPTCY APPLICATION BY DEBTOR
1. Records of insolvency resolution process undertaken under insolvency resolution process.
2. Statement of affairs of the debtor.
3. Copy of bankruptcy order passed by the Debt Recovery Tribunal.
The debtor may propose and an insolvency professional as the bankruptcy trustee in the application for bankruptcy.
BANKRUPTCY APPLICATION CREDITOR(S)
1. cords of insolvency resolution process undertaken under the insolvency resolution process.
2. Copy of the order passed by the Debt Recovery Tribunal permitting the creditor to apply for bankruptcy.
3. Details of the debts owed by the debtor to the creditor as on the date of the application for bankruptcy.
4. If the case of secured debt some more documents are required. The secured and unsecured parts of a dent are treated separately.
The creditor may propose an insolvency professional as the bankruptcy trustee in the application for bankruptcy.
From the date of application to the bankruptcy commencement date, an interim-moratorium will be in force. During this period all debt related legal processes will be stayed and no new legal action can be initiated.
If any bankruptcy trustee already proposed by the applicant, it will be evaluated whether there are any disciplinary proceedings against the resolution processional proposed to act as the bankruptcy trustee. If no bankruptcy trustee proposed, a trustee will be nominated.
The Debt Recovery Tribunal will pass a bankruptcy order based on which
1. Estate of the bankrupt shall vest in the bankruptcy trustee.
2. Estate of the bankrupt shall be divided among his creditors.
3. The creditors can initiate legal action with respect to the debts claimed.
The responsibilities of the bankruptcy trustee are
1. Investigate the affairs of the bankrupt.
2. Get completely understanding of the estate of the bankrupt.
3. Distribute the estate of the bankrupt.
The responsibilities of the bankrupt are
1. Giving to the bankruptcy trustee the information about her affairs.
2. Meeting the trustee as required.
3. Notifying the bankruptcy trustee on
a. acquisition of any property by the bankrupt;
b. devolution of any property upon the bankrupt;
c. increase in the income of the bankrupt.
d. doing all other things as may be prescribed.
4. handing over any property, books, papers or other records which bankruptcy trustee is required to take possession for the purposes of the bankruptcy process in possession of the bankrupt or her banker or any other person.