By definition, a bankrupt or an insolvent person is the one who is unable to pay his debts.
In India, there are Two Acts that govern insolvency:
1.The Presidency Towns Insolvency Act, 1909 (PTIA),
2. Provincial Insolvency Act, 1920 (PIA).
Applicability: The PTIA is applicable in Mumbai, Chennai and Kolkata, while the rest of the country comes under PIA. Except for some minor procedural differences, the law concerning insolvency is the same under both the Acts.
Procedure :A petition for insolvency can be filed in a particular court only if you have resided in that place or have conducted business for a year. Bankruptcy is filed in an individual capacity without including the spouse, but first, you will have to hire a lawyer to help prepare the petition.
This document should have a statement that you are unable to pay your debts, the place where you reside or conduct the business, details of the court order if you have been arrested, details of pecuniary claims against you, as well as the list and addresses of creditors.
After the suit has been filed, the court shall fix a date for hearing. Here, you will be required to produce books of accounts, an inventory of your properties and the list of creditors. The 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.
If you have filed for insolvency in Mumbai, Chennai or Kolkata, the examination will take place only after you have been declared insolvent, while in all other areas, the examination takes place at the time of hearing. Once you are declared insolvent and the public examination concludes, you can file an application of discharge, which requests the removal of the status of ‘insolvency’.