If you are stuck in a situation where you are not in a position to pay all of your creditors and your liabilities exceed all of your assets, then in such a situation the law has provided for filing of an insolvency petition. An individual can file for insolvency petition if he/she is unable to pay his/her debts on fulfilment of any of the three conditions:
- Debts amount to more than Rs. 500
- Individual is under arrest or imprisonment in execution of a money decree
- There is a subsisting order of attachment against his/her property in execution of such a decree.
A Petition for insolvency can be filed in a particular court only if one has resided in that place or conducted business in that place for a year. Bankruptcy is filed in an individual capacity. The petition should have a statement that one is unable to pay his debts, details of pecuniary claims against, details of the creditors. After filing of the suit, on the date of hearing, one is supposed to produce the books of accounts, submit a complete list of your creditors and properties. he court will examine your conduct, dealings and properties in the presence of the creditors. This gives the latter an opportunity to examine if you have made a full disclosure of your real estate holdings. The court will declare you insolvent and will appoint an officer, who will take charge of your property. You cannot touch your assets and properties, until they are sold. The money will be divided among your creditors, to pay back your loans and debt.
The advantage of filing for insolvency is that the creditors cannot chase you. Instead they will be directed to the court in which the insolvency petition is being processed. As long as the matter is in the court, creditors cannot file separate suits against you
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