What is Bankruptcy in simple terms?
When someone falls into an inescapable debt circle, he/she tends to exhaust all his/her funding sources as well as income sources. When such a situation is faced by any individual, he/she might find himself/herself in a difficult position. Bankruptcy is defined as a condition or an individual or a business organization when they are not able to repay their debts successfully on time. There are many reasons which make people land in a situation in which applying for bankruptcy can help them. This process generally begins by signing a petition which is filled by the debtors. This is the most common process of declaring oneself bankrupt. There is another way of filling a bankruptcy petition which is done on the behalf of the creditors. It is less common among business organizations. The Insolvency and Bankruptcy Code (IBC) has charted out certain rules for both corporate business organizations and individuals for filing bankruptcy. According to Indian laws, the process of declaring bankruptcy by an individual is more complicated whereas companies and organizations have a straightforward rule guide.
When to file Bankruptcy and its benefits:
The most effective use of bankruptcy is that it helps an individual or an organization to rise from the ashes. Proverbs apart but declaring bankruptcy can help a person or a business organization to start afresh and get in business again as all the pending debt is scraped off by the government. The government department responsible for inquiring into a bankruptcy case then counts the assets of the individual who filed for bankruptcy and on the basis of his/her assets, their value is calculated. The debt is then tried to be settled among the debtors by compensating with the money which is fetched by evaluating and selling off of the concerned individual’s or organization’s assets. There is a particular law that comes under the Provincial Insolvency Act. According to this, an individual can file his case for declaring bankruptcy when he/she is not able to pay a debt greater than INR 500.
If you are someone who has to buy your daily necessities items and groceries off of your credit card, then it is high time for yourself to declare bankruptcy. This is a vicious cycle and it may worsen your situation. The interest that will be charged on your credit card will only increase your debt. So in this situation, it will be optimal for you to opt for declaring bankruptcy. Another reason for which you should definitely apply for bankruptcy declaration is when your interest rates have been increasing continuously because of your inability to pay your debts on time. If this is going on for more than a few months, you should file for your bankruptcy. If you have tried all your resources to balance your financial life and it is not working, you should probably file for your bankruptcy and let the government help you by exempting some of your debt and settling some.
After your application for bankruptcy has been accepted and verified, the court can either reject the application for declaring bankruptcy or reject it. The court can easily proceed further into the bankruptcy case by following the legal procedure of evaluating the total debt on the applicant and the net value of its assets. It is very crucial and severs financial step which an individual or an organization should take with thought and appropriate measures. You should try out other options like trying to settle your debt by selling some property etc. before considering the option of filing bankruptcy.