How to file an Individual Insolvency?

Hello Sir/ ma'am,

In India Presidency Towns Insolvency Act 1909 and Provisional Insolvency Act 1920 deal with individual insolvency cases. Both the Acts provide framework for individual insolvency. Under Presidency Towns Insolvency Act, 1909 the High Courts of Bombay, Calcutta and Madras can try insolvency cases. Provisional insolvency Act 1920 is for those living in India other than Mumbai, Kolkata and Chennai. However provisions in both the Acts are similar.

Conditions for Filing Insolvency: Currently an insolvency petition can be filed for an amount exceeding Rs 500. However, the act of insolvency on which the petition is grounded has to occur within 3 months of filing the petition. The court does  not entertain a petition for insolvency against an individual filed by a creditor unless he proves certain crucial conditions- that he is a creditor to the debtor, that there exists a legally enforceable ascertained debt between him and the debtor, and that the debtor has committed an act of insolvency as suggested under the Act.

The Process: After analysing if the conditions for filing an insolvency have been met, the court may accept or reject the petition. Once the petition is accepted, here's what will follow;

Hearing and interim receiver: After filing of the petition, a date of hearing is fixed and the court appoints a interim receiver. The interim receiver appointed by the court takes immediate possession of the debtor's property. The interim receiver functions until a regular receiver is appointed. 

Adjudication: On the date of hearing, the court is satisfied by the petition- shall make an ' order of adjudication'. After passing of  this order, the debtor becomes an 'unorganized insolvent'. After the adjudication, the property of the debtor will be vested with an 'Official Assignee' under the Presidency Towns Insolvency Act and an 'Official Receiver' under Provisional Insolvency Act, appointed by the court to conduct insolvency proceedings.      

Distribution and sales proceeds: Hereafter, it is the Official Assignee's duty to sell of the insolvent's property within a reasonable time and distribute the money recovered in the form of sale proceeds among the creditors.

Certification of Absolute Discharge: Once the process of distribution is complete, the insolvent is requires to collect the 'certificate of absolute discharge' which is granted only when it is proved that the insolvency resulted due to misfortune and not because of any dishonest behavior. Besides, the behavior of the debtor during the proceedings is also taken into consideration. on receiving of 'absolute discharge certificate', the remaining unpaid debts of the debtor are cancelled and he cannot be forced or threatened by any creditor to repay the debt amount.

Section 39 of the insolvency act prescribes grounds on which discharge can be refused. It is mainly dependent   on the discretion of the court, which arrives after taking into consideration all the relevant factors. Filing of insolvency does not discharge an insolvent from all his debts. Even after the discharge, an individual would be liable for providing maintenance to his wife, further it does not exempt him from paying of any debt due to government, any debt or liability incurred by means of fraud or fraudulent breach of trust or debt or liability in respect to which he has obtained forbearance by any fraud. As a matter of right,  the insolvent is not entitled to maintenance. However, it is a discretionary relief that varies from case to case.

Hope this helps.

Regards,

 Esheta Lunkad