Bankruptcy is a legal process in which an individual or business declares inability to repay debts, and a court supervises the resolution or discharge of those debts.
Bankruptcy is a legal remedy for insolvency, allowing individuals or companies to either restructure their debts or liquidate assets to repay creditors. In India, bankruptcy and insolvency matters are governed by the Insolvency and Bankruptcy Code, 2016, which provides a structured and time-bound resolution framework.
When a person or company cannot meet financial obligations, they can file for bankruptcy. The court or tribunal then appoints a professional to assess assets, liabilities, and repayment options. The process may involve:
For individuals, bankruptcy can offer relief from overwhelming debt but may negatively impact credit score and future borrowing ability. For businesses, it may result in restructuring or closure, depending on financial viability.
Bankruptcy aims to balance the interests of both borrowers and creditors, ensuring fair resolution and recovery.
"A business with heavy losses and unpaid loans files for bankruptcy. The court supervises the sale of its assets, and the proceeds are distributed among creditors as per legal priority."