Bankruptcy & Insolvency

Updated: Dec 3, 2018

More and more people are relying on the bankruptcy route for securing their assets in the worst case when one cannot be able to pay the debt. Looking at the detailed view on the bankruptcy route, you would realize that the path going into bankruptcy is not an option due to many reasons. On the other hand, Bankruptcy helps people who can no longer pay their debts get a fresh start by liquidating assets to pay their debts or by creating a repayment plan. Bankruptcy laws also protect financially troubled businesses.

Bankruptcy & Insolvency


Of course, the rules of bankruptcy and insolvency differs from one country to another and information provided below should be considered for reference only.

Why do people go bankrupt in general?

  • Income source cut off.

  • Unreasonable expenses.

  • Lavish lifestyle.

  • Not thinking long term or having no vision.

  • Do not assess budget vs. expenditures.

  • Habits of owning more debts through loans or mortgages.

When a debtor to be considered committing the acts of bankruptcy in general?

There are many ways, you may avoid bankruptcy, however in situations as below a person to be considered committing the bankruptcy.

  • If the debt or debts owing to the applicant creditor or creditors.

  • If the debtor files in the court a declaration of insolvency.

  • If the debtor makes a fraudulent gift, delivery or transfer of the property in the country or elsewhere.

  • If the debtor has the intent to defeat or delay and departs out of dwelling house, jurisdiction or country or otherwise absents himself or herself.

  • If the debtor makes any transfer of the debtor’s property or any part of it or creates any charge on it, that would under the act, null as a fraudulent preference.

  • If the debtor makes a fraudulent gift, delivery or transfer of the debtor’s property or of any part of it in a country or elsewhere.

  • If the debtor exhibits to any meeting of his creditors any statement of his assets and liabilities that shows that he is insolvent, or presents or causes to be given to any such meeting a written admission of his inability to pay his debts.

  • If the debtor fails in the complying summons served within the appropriate time.

  • If the debtor assigns, removes, secretes or disposes of or dispose of any of his property with intent to defraud, defeat or delay his creditors or any of them.

  • If the debtor gives notice to any of his creditors that he or she has suspended or that he or she is about to defer payment of his debts.

What should you consider before going into bankruptcy in general?

The bankruptcy should be a last resort in the life during financial turmoil. Noone would like to be bankrupt if he or she does have choices. Additionally, Creditors would prefer alternative options rather than going to court for getting money from the debtor. It is not entirely true that you should seek bankruptcy if you do not have money. Following guidelines will help you explore the solution.

  • Find other sources or options to cope with debt. Your options may depend on the amount of money and assets you have.

  • Have a negotiation with creditors and give them payment options.

  • Do not hide, flee or secrets from creditors.

  • Consult private debt advisor for an expert advises available across countries.

  • There are number debt management schemes or resources available through governmental agencies for assisting the debtor.

  • Utilize free legal services available for providing debt management advice.

  • Use your non-essential assets and excess income for paying off debts.

In the USA, Debtors should be aware that there are several alternatives to chapter 7 relief. For example, debtors who are engaged in business, including corporations, partnerships, and sole proprietorships, may prefer to remain in business and avoid liquidation. Such debtors should consider filing a petition under chapter 11 of the Bankruptcy Code. Under chapter 11, the debtor may seek an adjustment of debts, either by reducing the debt or by extending the time for repayment or may find a more comprehensive reorganization. Sole proprietorships may also be eligible for relief under chapter 13 of the Bankruptcy Code.

In Canada, there are counseling services available from the government.

In the UK, you may use various tools to avoid bankruptcy such as an informal agreement that you write to your creditors for agreeing on repayment timetable, Negotiating your repayment terms through Individual voluntary arrangements (IVAs), Administration order and debt relief order (DRO) orders to make payments, etc.

In Australia, A declaration of intention (DOI) which provides temporary relief from Creditors and allows you up to 21 days to decide whether to proceed with Bankruptcy. A Debt Agreement is a binding agreement where your Creditors agree to a sum of money based on what you can afford. You are released from your debt once you have fulfilled your obligations as per the agreement and a Personal Insolvency Agreement (PIA) is a flexible way to reach an agreement with your Creditors while avoiding Bankruptcy.

In India, there are many options available including repayment plan, consultations or advice helping recover.

In China, Before the enterprise being declared bankrupt, the debtor or its creditors can apply to the People’s Court for restructuring.

What are the duties of bankrupt in general?

  • Give information about any of the bankrupt’s conduct and examinable affairs as the trustee requires.

  • As soon as practicable after becoming a bankrupt, advise the trustee of any material change that occurred between the time the bankrupt lodged his or her statement of affairs and the time the bankrupt became bankrupt.

  • Attend a meeting of creditors whenever the trustee requires.

  • If during a bankruptcy a change occurs in the bankrupt’s name or the address of the bankrupt’s principal place of residence, the bankrupt must immediately tell the trustee in writing of the change.

  • Disclose to the trustee, as soon as practicable, a property that is acquired by him or her, or devolves on him or her, before his or her discharge, being property divisible amongst his or her creditors.

  • The trustee has the power to sell, lease or review all or part of properties of bankrupt, divide the properties among the creditors, dispose off or wind up properties for the benefit of creditors, postpone the winding-up of the estate, prove the charges in respect of any debt due to the mortgage and compromise or claim any outstanding.

  • Provide access to administrator or official receiver or trustee about all premises, deeds, books, documents, possessions, statement of affairs and evidences relating to any matters connected with the performance of the functions of the administrator or Official Receiver or a trustee under the act, obtain advice or assistance relating to the administration of the estate, conduct or affairs of the bankrupt, refer any dispute to arbitration, bring, institute or defend any action or other legal proceeding relating to the administration of the estate, execute powers of attorney, deeds or other instruments for the purpose of carrying the provisions of this Act into effect and employ the bankrupt, to superintend the management of the whole, or a part, of the property of the bankrupt, to carry on the bankrupt’s trade or business for the benefit of the bankrupt’s creditors or to assist in any other way in administering the property of the bankrupt and, in consideration of the bankrupt’s services, make such allowance to the bankrupt out of the estate as the trustee considers reasonable make such allowance out of the estate as he or she thinks just to the bankrupt, the spouse or de facto partner of the bankrupt or the family of the bankrupt, Right to pay off mortgages, Right of trustee to inspect goods held as security,

What may happens to your estates in case of bankruptcy if you are individual or owning firm in general?

In case of Personal bankruptcy, following things may happen

  • If you have a household, belongings, clothing then Trustee of creditors may replace with the cheaper alternative.

  • If you have a bank account, it will be frozen. The trustee of creditors can ask to release some money including your daily living needs or the other person in a joint account.

  • If you are renting, Bankruptcy is mostly unaffected assuming you are up to date with your rental payment.

  • If you have a mortgage on the property, then the mortgage provider banks or credit union may claim the money to the mortgage amount and remaining money can be claimed by the trustee of creditors.

  • If you are self-employed, your business will be closed to cover off the debt by Trustee of creditors. Your employee may claim unpaid wages including holiday pay, insurance fund, etc.

  • If you have a pension scheme, most often the pension money may not be part of the bankruptcy debt to be paid.

  • If you have a life insurance policy, then your interest in the plan may transfer to Trustee of creditors.

  • If you have the death benefits, the trustee will claim any death benefit after you die during the bankruptcy process.

  • If you have a motor vehicle, furniture or other belongings, then Trustee may sell to pay for your bankruptcy debt.

  • If you have a finance agreement with vehicles or furniture, A vehicle under a finance agreement may not be exempt from your bankruptcy. The trustee will review your financial agreement to see if there is a benefit in claiming the vehicle for the estate.

  • Your bankruptcy will stay on a credit file for up to 6 or more years after the bankruptcy order. After bankruptcy period is over, you should check if the entry removal.

If your firm or company gets bankrupts then you may expect the consequences as below

  • The company will not exist.

  • The company will stop doing business and employing people.

  • The company assets are used to pay off its debts and any money left goes to shareholders.

  • The directors of the company will no longer have control over the company and can not act on behalf of the company.

  • Your company's bank account freezes after filling a petition to wind up the company.

Who has the first claim on the bankrupt's assets in general?

A person or organization such as a bank or building society which holds the security, for example, a mortgage, over a bankrupt's assets has first claim on the assets subject to any such mortgage.

What are the types of debts in general, you may not be freed in case of bankruptcy?

There are certain types of situations, the debtor may not be freeing from debt such as

  • Debts gained by fraud

  • Money owed under family proceedings (maintenance and lump sum settlements)

  • Damages payable to anyone for personal injuries

  • Student loans

  • Court fines

  • Debts created after the bankruptcy order

What are the kinds of bankruptcy in general?

  • Bankrupt owing money to an individual creditor.

  • Bankrupt due money, loan or mortgage to the financial institutions, union, corporation or company.

  • Bankrupt due income tax to be paid to government revenue agency under the income tax act of jurisdiction.

What should you do after bankruptcy discharged?

After getting clearance, bankrupt have some home work to do for removing the claim from his or her name such as

  • In some countries are, but in the majority, you won’t automatically receive a letter confirming your discharge. You can always get a proof after the discharge date depending on the situation if the court made you bankrupt, you can ask the court for a Certificate of Discharge and if you applied for your bankruptcy and your case was handled legally.

  • The government appointed an officer for bankruptcy won’t tell the credit agencies when your bankruptcy ends. You may need to ask the credit agencies to update their records to include details of your discharge and also, You’ll need to verify the status of the bankruptcy removal from your credit record.

  • Assets that are part of the bankruptcy stay under the trustee’s control when your bankruptcy ends.

  • You may apply for your bankruptcy to be canceled or annulled. When an annulment is made you’ll return to your pre-bankruptcy status. Any sale of your property and assets will remain valid, but you will receive your unsold assets back. You’ll still have to pay any debts not settled in your bankruptcy.

  • You will need to apply to both Land Charges and Land Registry to have your bankruptcy entry removed from any properties you still own after paying your debts.

  • The government appointed officer will put your bankruptcy in the Gazette, which publishes legal notices and provides a permanent public record of your bankruptcy. You can ask the officer or administrator to put your discharge or annulment in the Gazette.

What additional cost the creditors should be paying in case of bankruptcy generally?

  • The costs of administration which may include the expenses and fees of the person acting under direction,

  • The expenses and fees of the trustee and legal expenses.

  • The levy payable out of dividends for supervision expenses.

  • The amount of any wages, salaries, commissions, compensation or disbursements.

  • Trustee to pay dividends as required.

  • The claimed amount in respects of debts or liabilities.

  • The municipal taxes assessed or levied against the bankrupt.

  • The claims resulting from injuries to employees of the bankrupt in respect of which the provisions of any Act respecting workers’ compensation do not apply, but only to the extent of money received from persons guaranteeing the bankrupt against damages resulting from those injuries.

  • In the case of a bankrupt who became bankrupt before the prescribed date, all indebtedness of the bankrupt under any Act respecting workers’ compensation, under any Act respecting unemployment insurance or under any provision of the Income Tax Act creating an obligation to pay to Her Majesty amounts that have been deducted or withheld.

  • The amount equal to the difference a secured creditor would have received and the amount received by the secured creditor.

When may the bankrupt person, firm or corporation be imprisoned or consider guilty of offences in general?

There are different punishments or fines for various offenses, and it may differ from country to country. In many cases, bankrupt may face one or more offenses, and some of the examples are as below.

  • Bankrupt who makes any fraudulent disposition of his or her property.

  • Bankrupt refuses or neglects to answer fully and truthfully all proper questions put during examinations.

  • Bankrupt makes the false entry or knowingly makes a material omission in a statement or accounting.

  • Bankrupt conceals, destroys, mutilates, falsifies of the dispositions, books, or document affecting the bankrupt's property or affairs.

  • Bankrupt obtains any credit or any property by false representations.

  • Bankrupt makes the false claims.

  • Bankrupt makes the unlawful transactions.

  • Inspectors accept the illegal fee from the bankrupt.

  • Bankrupt fraudulently conceals or removes any property of a value of fifty dollars or more or any debt due to or from the bankrupt.

  • Bankrupt hypothecates, pawns, pledges or disposes of any property that the bankrupt has obtained on credit and has not paid for, unless in the case of a trader the hypothecation, pawning, pledging or disposing of is in the ordinary way of trade and unless the bankrupt had no intent to defraud.

  • Bankrupt failure to comply with duties as outlined in the Act.

  • Bankrupt failure to disclose the fact of being undischarged, if arrested.

What does happen to bankruptcy claim application if debtor dies in general?

If a debtor applicant dies, the proceedings shall, unless the court otherwise orders, be continued as if the debtor were alive.

Creditors may apply for a bankruptcy order against the estate or succession of a deceased debtor.

The creditors or liquidator of the succession of a deceased debtor shall not make payment of any amounts of money or transfer any property of the deceased debtor, except as required for payment of the proper funeral and testamentary expenses.

The bankrupt, or the legal personal representative or heirs of a deceased bankrupt, is entitled to any surplus remaining after payment in full of the bankrupt’s creditors with interest as provided by this Act and of the costs, charges and expenses of the bankruptcy proceedings.

How does the court proceedings take place if bankrupt is imprisoned in general?

If a bankrupt is undergoing imprisonment to enable the bankrupt to attend in court in bankruptcy proceedings at which the bankrupt’s presence required, to attend the first meeting of creditors or to perform the duties required of the bankrupt under this Act, direct that the bankrupt produced in the protective custody of an executing officer or other duly authorized officers at any time and place that may be designated, or it may make any other order that it deems proper and requisite in the circumstances.

When does arrest of bankrupts take place generally?

The court may by warrant for arrest, and any books, papers, and property in his possession seized and safely kept as directed until the court may order, under the circumstances

  • If, after the filing of a bankruptcy application against the bankrupt, it appears to the court that there are grounds for believing that the bankrupt has absconded or is about to flee from a country with a view of avoiding payment of the debts or of avoiding examination in respect of his affairs.

  • If, bankrupt is about to remove their property intending to prevent or delaying possession being taken of it by the trustee.

  • If, bankrupt has concealed or is about to hide or destroy any of their property or any books, documents or writings that might be of use to the trustee or the creditors of the bankrupt in the course of the bankruptcy proceedings.

  • If, after the commencement of proceedings under this Act, he has failed to obey an order of the court.

On what circumstances, an arrest of bankrupt discharge may be refused, suspended or granted conditionally in general?

  • If the bankrupt omitted to keep books of account and carried on business and fail to disclose the business transactions and financial position within the period beginning on the day that is three years before the date of the initial bankruptcy event and ending on the time of the bankruptcy, both dates included.

  • The bankrupt has continued to trade after becoming aware of being insolvent.

  • The bankrupt has failed to account satisfactorily for any loss of assets or for any deficiency of assets to meet the bankrupt’s liabilities.

  • The bankrupt has brought on or contributed to, the bankruptcy by rash and hazardous speculations, by unjustifiable extravagance in living, by gambling or by culpable neglect of the bankrupt’s business affairs.

  • The bankrupt has put any of the bankrupt’s creditors to unnecessary expense by a frivolous or vexatious defense to any action brought adequately against the bankrupt.

  • The bankrupt has, within the period beginning on the day that is three months before the date of the initial bankruptcy event and ending on the time of the bankruptcy, both dates included, incurred unjustifiable expense by bringing a frivolous or vexatious action.

  • The bankrupt has, within the period beginning on the day that is three months before the date of the initial bankruptcy event and ending on the time of the bankruptcy, both dates included, when unable to pay debts as they became due, given undue preference to any of the bankrupt’s creditors.

  • The bankrupt has, within the period beginning on the day that is three months before the date of the initial bankruptcy event and ending on the time of the bankruptcy, both dates included, incurred liabilities in order to make the bankrupt’s assets equal to fifty cents on the dollar on the amount of the bankrupt’s unsecured debts.

  • The bankrupt has on any previous occasion been bankrupt or proposed to creditors.

  • The bankrupt has been guilty of any fraud or fraudulent breach of trust.

  • The bankrupt has committed any offense under this Act or any other statute in connection with the bankrupt’s property, the bankruptcy or the proceedings thereunder.

  • The bankrupt could have made a viable proposal, chose bankruptcy rather than a plan to creditors as the means to resolve the indebtedness.

  • The bankrupt has failed to perform the duties imposed on the bankrupt under the Act or to comply with any order of the bankruptcy.

What does happen to deceased person's estates of inheritance in bankruptcy generally?

  • Deceased person will lose the inheritance.

  • There is no law prohibiting your client from altering the terms of his or her will if a beneficiary has filed (or may have to register) bankruptcy.

  • People try to hide money from Trustee in Bankruptcy, which means in other words, you are breaking the law, and you may face prosecution. Instead, seek legal advice to protect your assets or inheritance in legitimately. One of the options is to establish a discretionary trust in your last Will. In this arrangement, your portion of the estate will enter into the trust upon the death of the testator. The trustees will have control over the assets that are placed in trust, and they will be able to give those assets to you once your bankruptcy has been discharged.

  • If the deceased testator is bankrupt and has applied for Bankruptcy, the trustee of bankruptcy may be entitled to receiving money from the inheritance left.

  • If the inheritor is bankrupt and filed bankruptcy before receiving an inheritance, the trustee of bankruptcy will be allowed to collect money from the inheritance irrespective of the sources form parents, spouse, relatives, etc.

  • One of the primary concern of bankruptcy is delaying in payment to inheritors and creditors. By changing the way the case handled makes a big difference in minimizing delay.

General glossary of bankruptcy terminology

Bankrupt estate is all legal or equitable interests of the debtor in property at the time of the bankruptcy filing.

Insolvency takes place when individuals or businesses have insufficient assets to cover their debts or are unable to pay their debts when they are supposed to.

Debtor includes an insolvent person and any person who, at the time an act of bankruptcy was committed by him or her.

Creditor means a person is having a claim provable against the debtor under the bankruptcy act, or laws or legislation.

Liquidation means turning a company's assets into cash and then distributing this to the creditors. The most commonly used procedure for insolvent companies, liquidation is the end of the road for a company. After the selling of the assets completes and the proceeds distributed, the company is struck off the register or dissolved, and the company ceases to exist.

Inspectors: Creditors appoints inspectors. Inspectors duties may include verifying the bank balance of the estate, examine the trustee’s accounts, inquire into the adequacy of the security filed by the trustee and approve the trustee’s final statement of receipts and disbursements, dividend sheet and disposition of unrealized property. The term "Inspectors" used in Canada and UK. The term "Inspector general" used in Australia.

Insolvent is person who is not bankrupt and who resides, carries on business or has property, whose liabilities to creditors provable as claims under the Bankruptcy act amount to one thousand dollars (in Canada).

Licensed Trustee or Trustee: The court appoints a licensed trustee who has the duties and responsibilities to perform. The duties may include taking possession of the deeds, books, records, documents and all property of the bankrupt. Trustee makes an inventory, verify the bankrupt's statement of affairs, deposit fund in a bank and report to inspectors and creditors. Charge against the estate of bankrupt, sell or dispose of the property of bankrupts, carry on the business of bankrupt and defend any action or other legal proceeding relating to the property of bankrupt. Employ a barrister, solicitor or advocate or any other representative, take any proceedings or do the business that sanctions by the inspectors, compromise and settle any debts owing to the bankrupt, forwarding copies of documents, notices, reports and statements to Superintendent, etc. The Trustee has to have the license for performing any affairs as mentioned above under the Bankruptcy Act. The "Trustee" term used in Canada, USA and Australia.

Proxy is the formal instruction to an individual who may be the representation of the meeting or anybody else to vote on behalf of the creditor at a meeting.

Administrator is a Trustee or a person responsible for supervising the administration of bankruptcy cases, estates, and trustees which may include monitoring plans and disclosure statements, creditors, fee applications, and

performing other statutory duties.

  • In Canada, the administrator appointed by the Superintendent to administer consumer proposals.

  • In USA, An officer of the judiciary serving in the judicial districts of Alabama and North Carolina who, like the U.S. trustee, is an administrator.

  • In UK, the Official receiver and Administrator are the terms used.

Proposal: An insolvent person may make the proposal, a receiver, a liquidator of an insolvent person's property, a bankrupt or a trustee of the estate of a bankrupt. The inspector approves the proposal before any further action needed.

Clerk is the person who files the affidavit and hearing the debtor and settle the amounts to be paid by the debtor into court, enter in particulars of the value in the register and fix the date for hearing any objections by creditors. The term "Clerk" is used in Canada & Australia.

Register referred to in this section shall be separate from all other books and records kept by the clerk and shall be available to the public for inspection, free of charge, during the hours when the office of the clerk is open to the public. The term "register" is used in Canada and India.

Proof of claims: Every creditor shall prove his claim, and a creditor who does not justify his claim is not entitled to share in any distribution through himself or thorough Trustee.

Counselling services: The trustee provides the counseling for an individual bankrupt.


What are the duties of bankrupts in Canada?

  • Do not make the direct payments to your creditors excepts mortgage, child support payments, etc.

  • Deliver all his property that is under his possession or control to the trustee or to any person authorized by the trustee to take possession of it.

  • Deliver all his credit cards issued to and in possession or have control over it.

  • Deliver to the trustee all books, records, documents, writings, and papers including without restricting the generality of the preceding, title papers, insurance policies and income tax returns and records thereof in any way relating to his property or affairs.

  • Prepare and submit to the trustee in quadruplicate a statement of the bankrupt’s case in the prescribed form verified by affidavit and showing the particulars such as the bankrupt’s assets and liabilities, the names and addresses of the bankrupt’s creditors, the securities held by them respectively, the dates when the securities were given. Where the affairs of the bankrupt are so involved or complicated that the bankrupt alone cannot reasonably prepare a proper statement of cases, the official receiver may, as an expense of the administration of the estate, authorize the employment of a qualified person to assist in the preparation of the statement;

  • Give all the assistance within his power to the trustee in making an inventory of his assets.

  • Disclose to the trustee of all property disposed of by transfer at undervalue within the period beginning on the day that is five years before the date of the initial bankruptcy event and ending on the time of the bankruptcy, both dates included.

  • Attend the first meeting of his creditors unless prevented by sickness or other sufficient cause and submit thereat to examination. When required, attend other meetings of his creditors or the inspectors, or participate on the trustee.

  • Submit to such other examinations under oath concerning his property or affairs as required.

  • Aid to the utmost of his power in the realization of his property and the distribution of the proceeds among his creditors.

  • Execute any powers of attorney, transfers, deeds and instruments or acts that may be required.

  • Examine the correctness of all proofs of claims filed if necessary by the trustee.

  • Disclose the false claim if any, to the trustee.

  • Inform the trustee of any material change in the bankrupt’s financial situation.

  • Generally, do all such acts and things in relation to his property and the distribution of the proceeds among his creditors as may be reasonably required by the trustee, or may be prescribed by the General Rules, or may be directed by the court by any particular order made with reference to any specific case or the occasion of any specific application by the trustee, or any creditor or person interested.

  • Keep advising the trustee all times of his place of residence or address.

How does the bankruptcy governed in Canada?

The federal government governs it through "Bankruptcy and Insolvency Act." and all affairs handled through court and it is briefly described as below.

  • Bankrupt or creditors cannot withdraw an application without the leave of the court.

  • The Governor in Council appoint a Superintendent of Bankruptcy to hold office during good behavior, but the Superintendent may be removed from office by the Governor in Council for the cause. The salary of Superintendent to fix by the Governor in Council. The Superintendent shall supervise the administration of all estates and matters to which this Act applies.

  • One or more creditors may file in court an application for a bankruptcy order against a debtor if it alleges in the claim that the debt or debts owing to the applicant creditor or creditors amount to one thousand dollars and if the debtor has committed an act of bankruptcy within the six months preceding the filing of the application.

  • If two or more applications filed against the same debtor or joint debtors, the court may consolidate the proceedings or any of them on any terms that the court thinks fit.

  • On a bankruptcy order, the court shall appoint a licensed trustee as trustee of the property of the bankrupt, having regard, as far as the court considers, to the wishes of the creditors.

  • One bill of costs of a barrister or solicitor or an advocate, including the executing officer’s fees and land registration fees, shall be payable to the creditor against the property of the bankrupt.

  • Where a banker ascertains, a person having an account with the banker is a non-discharge bankrupt, it is his duty to inform the trustee that the banker shall not make any payments out of the account except under an order of the court or following instructions from the trustee.

  • There are exclusive rights for farmers, fishers, and aquaculturists in regards to selling and delivering products of agricultural, sea, lakes, rivers or an aquaculturist.

  • If any property of bankrupt vesting in a trustee consists of articles that are subject to a patent and sold to the bankrupt subject to any restrictions or limitations, the trustee will not bound by the restrictions or limitations but may sell and dispose of the articles free and clear of the restrictions or limitations.

  • Trustee entitles to sell, or authorize the sale or reproduction of, any copies of the published work. The copyright and manuscript to revert to the author if the copies of the work are on the market then, but there shall be paid to the author or his heirs' such sums by way of royalties or share of the profits as would have been payable by the bankrupt.

Following is the brief procedure for filing bankruptcy:

  • The trustee to monitor and report to the court about the insolvent person's business and financial affairs examine the insolvent's property, from the filing of the notice of intention until a proposal underprocess or the insolvent person becomes bankrupt.

  • The insolvent person files the notice of intention.

  • The insolvent person submits the statement, report on the reasonableness of a cash flow statement and a report containing prescribed representations.

  • The trustee to inform the creditors with a copy of the notice with including all of the information required by the act. The creditors may obtain the cash flow statement by requesting the trustee.

  • Trustee to help prepare a proposal, including negotiations thereon.

  • The trustee shall call meetings of the creditors after the filing of the plan with the official receiver.

  • The creditors may resolve to accept or may refuse the proposal as made or as altered at the meeting or any adjournment thereof.

  • The trustee will report to the official receiver about the acceptance or refusal of the proposal.

  • Upon receipt of a proposal by the creditors, the trustee shall apply to the court for an appointment for a hearing the application for the court's approval of the plan.

  • The court will hear the report of the trustee, the debtor, the person proposing, the creditors and such further evidence as the court may require. The court may accept, refuse or order the amendment of the proposal.

  • A proposal approved by the creditors and approved by the court does not release the insolvent person from any particular debt or liability unless the plan explicitly provides for the compromise of that debt or liability and the creditor concerning that debt or obligation voted for the acceptance of the proposal.

  • The final statement of receipts and disbursements take place between debtors and trustee of creditors.

Interim receiver: The court appoints an interim receiver for the protection of debtor's estate and the interests of the creditor who sent the notice. The interim receiver's duty may include the taking of possession, exercise control or taking measures or disposing of the debtor's property as permissible in the bankruptcy act.

Notice of intention: An insolvent person file notice of intention with the official receiver before proposing.

Superintendent is the person who will be appointed by the governor of the council for supervising of the administration of all estates and matters to which Bankruptcy act for a prescribed term. The superintendent has a wide range of power in managing the Bankruptcy claims including engaging the person for investigation, appointing employees to assist in the case, examine bank accounts, records and documents, collecting evidence, intervene in any matter, proceeding in the court, etc.

Bankruptcy districts and divisions: Each of the provinces constitutes one bankruptcy district for this Act, but the Governor in Council may divide any bankruptcy district into two or more bankruptcy divisions and name or number them.


  1. Bankruptcy and Insolvency Act, Canada:

  2. Personal bankruptcy, Canada:


A fundamental goal of the federal bankruptcy laws enacted by Congress is to give debtors a financial “fresh start” from burdensome debts. The Supreme Court made this point about the purpose of the bankruptcy law in a 1934 decision. It gives to the honest but unfortunate debtor a new opportunity in life and a bright field for future effort, unhampered by the pressure and discouragement of preexisting debt. This goal accomplishes through the bankruptcy discharge, which releases debtors from personal liability from specific debts and prohibits creditors from ever taking any action against the debtor to collect those debts.

How does the bankruptcy governed in USA?

The United States Constitution Article I, Section 8, authorizes Congress to enact “uniform Laws on the subject of Bankruptcies.” Under this grant of authority, Congress enacted the “Bankruptcy Code” in 1978. The Bankruptcy Code, which codifies as title 11 of the United States Code, has been amended several times since its enactment. It is the uniform federal law that governs all bankruptcy cases. The procedural aspects of the bankruptcy process govern through the Federal Rules of Bankruptcy Procedure (often called the “Bankruptcy Rules”) and local rules of each bankruptcy court. The Bankruptcy Rules contain a set of official forms for use in bankruptcy cases. The Bankruptcy Code and Bankruptcy Rules (and local rules) set forth the formal legal procedures for dealing with the debt problems of individuals and businesses. There is a bankruptcy court for each judicial district in the country. Each state has one or more districts. There are 90 bankruptcy districts across the country. The bankruptcy courts generally have their own clerk’s offices.

The following section explains the bankruptcy process and laws.

The court official with decision-making power over federal bankruptcy cases is the United States bankruptcy judge, a judicial officer of the United States district court. The bankruptcy judge may decide any matter connected with a bankruptcy case, such as eligibility to file or whether a debtor should receive a discharge of debts.

Much of the bankruptcy process is administrative, however, and conducts away from the courthouse. In cases under chapters 7, 12, or 13, and sometimes in chapter 11 cases, this administrative process is carried out by a trustee who is appointed to oversee the case. A debtor’s involvement with the bankruptcy judge is usually minimal. A typical Chapter 7 debtor will not appear in court and will not see the bankruptcy judge unless an objection raises in the case. A chapter 13 debtor may only have to appear before the bankruptcy judge at a plan confirmation hearing. Usually, the only formal proceeding at which a debtor must appear is the meeting of creditors, which usually held at the offices of the U.S. Trustee. This meeting is informally called a “341 meeting” because section 341 of the Bankruptcy Code requires that the debtor attend this meeting so that creditors can question the debtor about debts and property. The debtor may initiate the process of filing the petition with the bankruptcy court and is having a slight difference in the way handled in different chapters. The US trustee plays a significant role in monitoring and supervising the progress of chapters case. The purpose of an examiner is generally more limited than that of a trustee. The examiner is authorized to perform the investigatory functions of the trustee and is required to file a statement of any investigation conducted. Creditors committees appointed by the US trustee consists of unsecured creditors who hold the seven most substantial unsecured claims against the debtor.

The Chapters on Bankruptcy code are briefly explained below.

  • Chapter 7: The chapter of the Bankruptcy Code providing for "liquidation,"(i.e., the sale of a debtor's nonexempt property and the distribution of the proceeds to creditors). Chapter 7 contemplates an orderly, court-supervised procedure by which a trustee takes over the assets of the debtor’s estate, reduces them to cash, and makes distributions to creditors, subject to the debtor’s right to retain certain exempt property and the rights of secured creditors. Because it is usually little or no nonexempt property in most chapter 7 cases, there may not be an actual liquidation of the debtor’s assets. These cases are called “no-asset cases.” A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. If such a debtor’s income is over certain thresholds, the debtor may not be eligible for chapter 7 relief.

  • Chapter 13: The chapter of the Bankruptcy Code providing for adjustment of debts of an individual with regular income and is also called as a wage earner's plan. Chapter 13 allows a debtor to keep property and pay debts over time, usually three to five years. Chapter 13 is often preferable to chapter 7 because it enables the debtor to keep a valuable asset, such as a house, and because it allows the debtor to propose a “plan” to repay creditors over time – usually three to five years. Chapter 13 is also used by consumer debtors who do not qualify for Chapter 7 relief under the means test. The discharge is also somewhat broader under Chapter 13 than the discharge under Chapter 7.

  • Chapter 11: The chapter of the Bankruptcy Code entitles the reorganization, usually involving a corporation or partnership (not the individual). The Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in Chapter 11. The Chapter 11 debtor usually has the exclusive right to file a plan of reorganization for the first 120 days after it files the case and must provide creditors with a disclosure statement containing information adequate to enable creditors to evaluate the plan. The court ultimately approves or disapproves the plan of reorganization. Under the confirmed plan, the debtor can reduce its debts by repaying a portion of its obligations and discharging others. The debtor can also terminate burdensome contracts and leases, recover assets, and rescale its operations to return to profitability. Under Chapter 11, the debtor usually goes through a period of consolidation and emerges with a reduced debt load and a reorganized business.

  • Chapter 12: It entitles adjustment of debts of a Family Farmer or Fisherman with regular annual Income, provides debt relief to family farmers and fishers with a steady income. The process under Chapter 12 is very similar to that of Chapter 13, under which the debtor proposes a plan to repay debts over a period – no more than three years unless the court approves a more extended period, not exceeding five years.

  • Chapter 9: The chapter entitled Adjustment of Debts of a municipality, provides essentially for reorganization, much like a reorganization under Chapter 11. Reorganization of the debts of a municipality is typically accomplished either by extending debt maturities, reducing the amount of principal or interest, or refinancing the debt by obtaining a new loan. Only a “municipality” may file under Chapter 9, which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts.

  • Chapter 15: The purpose of Chapter 15, entitled ancillary and Other cross-border Cases, is to provide an effective mechanism for dealing with cases of cross-border insolvency. This publication discusses the applicability of Chapter 15 where a debtor or its property is subject to the laws of the United States and one or more foreign countries.

  • Securities Investor Protection Act (SIPA): Although the Bankruptcy Code provides for a stockbroker liquidation proceeding, it is far more likely that a failing brokerage will find itself involved in a proceeding under the SIPA, rather than a Bankruptcy Code liquidation case. The purpose of SIPA is to return to investors securities and cash left with failed brokerages.

  • Service members Civil Relief Act (SCRA): The act applies in bankruptcy cases. It protects members of the military against the entry of default judgments and gives the court the ability to stay proceedings against military debtors.

How is a discharge of bankruptcy governed in USA?

A debt for which the Bankruptcy Code allows freeing the debtor's liability and in such case, the debtor is no longer legally required to pay any discharged debts. The discharge is a permanent order prohibiting the creditors of the debtor from taking any form of collection action on discharged debts, including legal action and communications with the debtor, such as telephone calls, letters, and personal contacts. Unless there is litigation involving objections to the discharge, the debtor will usually automatically receive a discharge. Although a debtor is not personally liable for discharged debts, a valid lien (i.e., a charge upon specific property to secure payment of a debt) that has did not avoid (i.e., made unenforceable) in the bankruptcy case will remain after the bankruptcy case. Therefore, a secured creditor may enforce the lien to recover the property acquired by the lien.

The most common types of non-dischargeable debts are

  • Tax claims.

  • Debts not set forth by the debtor on the lists and schedules for which the debtor should have filed with the court.

  • Debts for spousal or child support or alimony.

  • Debt for willful and malicious injuries to person or property.

  • Debts to governmental units for fines and penalties.

  • Debts for most government funded or guaranteed educational loans or benefit overpayments.

  • Debts for personal injury caused by the debtor’s operation of a motor vehicle while intoxicated.

  • Debts owed to specific tax-advantaged retirement plans, and debts for the particular condominium or corporative housing fees.

The debtor does not have an absolute right to a discharge. An objection to the debtor’s discharge may be filed by a creditor, by the trustee in the case. To object to the debtor’s discharge, a creditor must file a complaint in the bankruptcy court before the deadline set out in the notice. Filing a complaint starts a lawsuit referred to in bankruptcy as an “adversary proceeding.” The court may deny or revoke discharge for specific reasons as described in the act.

What are the terms used in USA?

Plaintiff is a person or business that files a formal complaint with the court.

Trustee is the representative of the bankruptcy estate who exercises statutory powers, principally for the benefit of the unsecured creditors, under the general supervision of the court and the direct supervision of the U.S. trustee or bankruptcy administrator. The trustee is a private individual or corporation appointed in all Chapter 7, Chapter 12, and Chapter 13 cases and some Chapter 11 cases. The trustee's responsibilities include reviewing the debtor's petition and schedules and bringing actions against creditors or the debtor to recover property of the bankruptcy estate. In Chapter 7, the trustee liquidates property of the estate and makes distributions to creditors. Trustees in Chapter 12 and 13 have similar duties to a Chapter 7 trustee and the additional responsibilities of overseeing the debtor's plan, receiving payments from debtors, and disbursing plan payments to creditors.

Secured creditors is the one who is holding a claim against the debtor who has the right to take and keep or sell certain property of the debtor in satisfaction of some or all of the claim.

Secured debt is the debt backed by a mortgage, pledge of collateral, or other liens, debt for which the creditor has the right to pursue specific pledged property upon default. Examples include home mortgages, auto loans, and tax liens.

Insiders are the two types.

  • First one is Insider of an individual debtor who can be any relative of the debtor or of a general partner of the debtor, a partnership in which the debtor is a general partner; general partner of the debtor, or a corporation of which the debtor is a director, officer, or person in control.

  • The second one is Insider of a corporate debtor who can be a director, officer, or person in control of the debtor; a partnership in which the debtor is a general partner; a general partner of the debtor; or a relative of a general partner, director, officer, or person in control of the debtor.

Claim: A creditor's assertion of a right to payment from the debtor or the debtor's property.


  1. USA courts Bankruptcy act:


How does the bankruptcy govern in UK?

The Bankruptcy Acts 1988 to 2015 is one of a group of acts (Bankruptcy Act 1988, Euro Change over Amounts act 2001, Civil law miscellaneous provision act 2011 and Bankruptcy amendment act 2015) governs the bankruptcy in the UK.

You can declare yourself bankrupt in England or Wales if you live outside the EU or in Denmark. You can’t declare yourself bankrupt in England or Wales if you live somewhere else in the EU, Scotland or Northern Ireland.

Following is the brief process of applying for bankruptcy in the UK.

  • You can apply bankrupt application online. If someone else claims to make you bankrupt, you’ll get a copy of the petition, so you’re aware of the situation. You can ask the court not to make you bankrupt, but you will most likely need to pay the debt or prove to the court that you don’t owe the money.

  • The Official receiver handles the early stages of bankruptcy. An official receiver works for the Insolvency Service and is attached to the court. They will also be your trustee unless an insolvency practitioner is appointed to take over that role. The trustee will sell any assets (except any reasonable domestic items and items needed for your job). The official receiver will write to you within two weeks of the bankruptcy order, explaining what you need to know and what you must do.

  • Your responsibilities as a bankrupt, You must give the official receiver information on your finances, a full list of your assets, tell your trustee about any rise in income during your bankruptcy, tell anyone who offers to loan you over £500 that you’re bankrupt go to court to explain why you owe money if asked to do so. There are also things you can’t do while bankrupt. These are called restrictions.

  • Once your applications to bankruptcy are approved, you’ll have an interview with the official receiver. If you’ve presented your bankruptcy petition, this may happen directly after the bankruptcy order. Alternatively, your letter from the official receiver may invite you to an interview either in person or by telephone. If offered a telephone interview you can ask to be interviewed in person if you prefer. If you have been made bankrupt by one of your creditors, the official receiver may also contact you by telephone to find out if there is anything that needs to sort out urgently. You must attend the interview and cooperate with the official receiver. If you don’t, your bankruptcy extends beyond the usual 12 months, and you could face an examination in court. The more organized you are, the more straightforward the process will be. The examiner will verify the information in the questionnaire if you have been asked to complete one ask anything else they need to about your assets and debts, and about the circumstances that led to your bankruptcy deal with any queries, you have to tell you if you need to supply further information.

  • After the interview, the official receiver will send a report to your creditors showing your assets and debts. They will also report to the Insolvency Service if they think you may have broken the law in your financial dealings.

  • The official receiver will take control of your assets unless the creditors appoint an insolvency practitioner. An insolvency practitioner is usually an accountant or solicitor in case if you have significant assets. The person who takes control of your assets is known as the ‘trustee.’ The law says you must cooperate fully with them. The trustee will sell your assets and tell the creditors how the money to share. Creditors must then make a formal claim. You can’t make payments directly. If an insolvency practitioner is handling your bankruptcy, then the administration and the general fees will still be charged, but they will charge their schedule of payments rather than the asset realization and distribution fees that the official receiver would charge. You should ask them how much it will cost to administer your case.

Official receiver in England & Wales, the Governor in Council shall appoint one or more official receivers in each bankruptcy division who shall be deemed to be officers of the court and shall have and perform the duties and responsibilities specified by this Act and the General Rules. The official receiver shall make a record of the examination and will forward a copy to the Superintendent and the trustee.

In Scotland, there is no Official Receiver, the petitioning creditor or debtor may nominate an Insolvency practitioner to act as the bankrupt's trustee, or secretary of state may appoint a trustee. If no insolvency practitioner is designated, the role of trustee falls to the Accountant in Bankruptcy; a Government appointed an official who has overall supervisory powers for sequestration.

Accountant in Bankruptcy (AiB) is an Agency of the Scottish Government responsible for administering the process of personal bankruptcy and recording corporate insolvencies in Scotland. Can act as trustee in sequestrations.

Receiver is the term used in Scotland (UK), and the receiver is appointed by the court to take possession or control of all or substantially all of the inventory, accounts receivable or other property of an insolvent person or bankrupt that was acquired for or used in relation to a business carried on by the insolvent person or bankrupt.

What are the types of liquidation for limited companies in UK?

Before declaring this, you must call a meeting of shareholders and ask them to vote, and a specific percentage of shareholders must agree to liquidate the business in any of the following scenarios.

  • Creditors voluntary liquidation, i.e., the company can not pay its debts, and you involve your creditors when you liquidate it.

  • The compulsory settlement, i.e., your company, cannot pay its debts, and you apply to the courts to settle it.

  • Members voluntary liquidation, i.e., your company can pay its debts, but you want to close it due to you wish to retire, step down from the family business as nobody else wants to run it or you do not want to run a business anymore.

Terms used in UK

Bankruptcy order and award of sequestration (In England and Wales), the courts are officially responsible for making a bankruptcy order against an individual which will declare as bankrupt. In Scotland, an award of sequestration can be granted either by the court or by the Accountant in Bankruptcy. The order initiates at the request of either a creditor or the individual (debtor's petition). Requesting the court to make someone bankrupt is referred to as petitioning the court for a bankruptcy order/award of sequestration.


  1. England & Wales - Guide to Bankruptcy:

  2. England & Wales - Guide to liquidate the limited company:

  3. England & Wales - Guide on Options to pay off your debt:

  4. Insolvency Act 1986:

  5. Scotland's Insolvency service:

  6. Bankruptcy (Scotland) Act 2016:

  7. Northern Ireland - Bankruptcy Guide:


How does the bankruptcy govern in Australia?

The Minister may delegates an officer all or any of the Minister’s powers under this Act, other than this power of delegation.

Ministery appoints the inspector general and may exercise any of the powers under the act, and perform any of the functions, of an Official Receiver, in the same way as the Official Receiver. The Inspector general shall make inquiries and investigations as the Minister directs in respect to the administration of or the conduct of trustee. The Inspector general may make inquiries and investigations as the Inspector general think fit concerning any affair of the bankruptcy, composition, scheme or agreement or administration concerned relates to a debt agreement. For discharging his or her functions under Act, the Inspector-General may require the production of any books kept by an official receiver, may need a trustee to answer an inquiry made to him or her, may investigate the books of trustee, may require the production of any books kept by the administrator, or former administrator, of a debt agreement.

Once Debtor has committed the act of Bankruptcy as per Australian bankruptcy act then an Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor the one or more "final judgment or final order" as per act.

The Commonwealth or a State a debtor serves with a bankruptcy notice. Also, upon the making of a sequestration order against the estate of a debtor, the debtor becomes bankrupt and continues to be a bankrupt until bankruptcy discharges or annulled by force as per act.

A debtor who is insolvent may give the Official Receiver a written proposal for a debt agreement. If the Official Receiver is to process a debt agreement proposal, the Official Receiver must write to each of the affected creditors who is known to the Official Receiver, asking each affected creditor to indicate whether the proposal should be accepted. A debtor who gives the Official Receiver a debt agreement proposal must provide the Official Receiver a statement of the debtor’s affairs with the plan. The debtor, creditor or the official receiver may apply to the court for an order terminating or voiding a debt agreement as per act.

The debtor may present to the Official Receiver a petition against himself or herself as per act. The debtor may apply to the Administrative Appeals Tribunal for the review of a decision by the Official Receiver to reject a petition, and before accepting a debtor’s petition the Official Receiver must give the debtor the information prescribed by the regulations. The Official Receiver must refer a debtor’s petition to the Court for a direction to accept or reject it if there is a creditor’s petition pending against a group of debtors that includes the debtor against whom the debtor’s petition progresses. If the Court directs the Official Receiver to accept the debtor’s petition, the Court must specify the time of the commencement of the bankruptcy that results from acceptance of the debtor’s petition. The Official Receiver must accept a debtor’s petition unless the Official Receiver rejects it as per act or is directed by the Court to dismiss it.

At any time after issuing a bankruptcy notice or presenting creditor’s petition concerning a debtor and before the debtor becomes bankrupt, the Court may direct the Official Trustee to take custody, control and own property as security for payment of a debt and sell the property. Also, apply the proceeds of the sale wholly or partly towards the amount of the debt as per act. At the hearing of a creditor’s petition, the Court shall require proof of the matters stated in the petition service of the petition and the fact that the debt or debts on which the petitioning creditor relies are or still owing. If it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor. If the Court makes a sequestration order, the creditor who obtained the order must give a copy of it to the Official Receiver within the time as per act. A bankrupt against whom a sequestration order issued, may without fee and either personally or by an agent inspect the bankrupt’s statement of affairs or obtain a copy of, or take extracts from, the bankrupt’s statement of affairs.

A declaration presented by a debtor under this section accompanies by a statement of the debtor’s affairs and a copy of that statement. If the Official Receiver accepts the declaration, the Official Receiver must give written notice of the acceptance of the declaration to each of the creditors disclosed in the debtor’s statement of affairs.

Where a debtor becomes bankrupt, the creditors may, if the Official Trustee is the trustee of the estate of the bankrupt, by resolution, at a meeting of creditors, appoint a registered trustee to the office of trustee of the estate of the bankrupt in place of the Official Trustee. The Official Trustee shall have such seals as the Minister directs by writing under his or her hand. The duties of an official trustee may include notifying the bankrupt's creditors of the bankruptcy, determining whether the estate is adequate to pay a dividend to the creditor and reporting to creditors within time. The official trustee will decide whether the bankrupt has made a transfer of property that is void against the trustee, taking appropriate steps to recover property for the benefit of the estate, taking whatever action is practicable to try to ensure that the bankrupt discharges all of the bankrupt’s duties under this Act. Also includes referring to the Inspector-General or to relevant law enforcement authorities any evidence of an offence by the bankrupt against this Act, administering the estate as efficiently as possible by avoiding unnecessary expense, exercising powers and performing functions in a commercially sound way, investigating the bankrupt’s conduct, examinable affairs, books, accounts and records kept by the bankrupt. The trustee of the estate of a bankrupt must give the Official Receiver information, access to and facilities for inspecting the bankrupt’s books and generally such assistance as is necessary for enabling the Official Receiver to perform his or her duties. The Official Receiver may exercise the powers, and complete the functions, of the Official Trustee.

The Official trustee will open the common investment fund account. After the commencement of the case, the Official Trustee receives money to pay to the Common Fund. The official trustee may invest the money in public securities (bonds, debentures, stock, etc.) or a loan the repayment of the portion of funds not required to pay immediately.

The Federal Court and the Federal Circuit Court have concurrent jurisdiction in bankruptcy, and that jurisdiction is exclusive of the jurisdiction of all courts other than the jurisdiction of the high court or family court. The Court has the full power to decide all questions, in any case of bankruptcy or any matter coming within the cognizance of the Court. The court may make orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for carrying out or giving effect to this Act in any such case or matter.

The Inspector-General may review a decision of a trustee to assess the Inspector-General’s initiative or if requested to do so by the bankrupt or ombudsman for reasons that appear to the Inspector-General to be sufficient to justify a review. Inspector-General may decide whether to review the decision or request further information, refuse or accept a request. Inspector-General to notify bankrupt and trustee of an outcome.

The duties of an administrator of a debt agreement include dealing with the debtor’s property in the manner specified in the debt agreement, giving information about the administration of the debt agreement to the debtor if the debtor makes a reasonable request for the information about the administration of the debt agreement to a creditor. The administrator to notify creditors and official receiver and maintain a separate bank account and keeping an account.

Composition or arrangement with creditors: The debtor may file composition application either directly with the People’s Court by this law or after the case accepted by the People’s Court but before the debtor being declared insolvent. The debtor shall submit its composition draft agreement to the People’s Court when applying for composition. The composition agreement approved by the People’s Court is binding both to all conciliated creditors and the debtor. The debtor shall pay off his debt following the terms prescribed in the composition agreement.

Annulment of bankruptcy: If a special resolution of creditors accepts the proposal at a meeting held by the Insolvency Practice Rules, the bankruptcy annuls, by force of this subsection, on the day the special resolution was getting passed.

Executive officer includes a sheriff, a bailiff, and any officer charged with the execution of a writ or other process under this Act or any other Act or proceeding concerning any property of a debtor.

Judge duties may include issuing warrant authorizing a constable to enter into the premises, searching the premises for relevant property for any cupboard, drawer, chest, trunk, box, package or other receptacle, fixture in the premises, taking possession or securing any possessions in the premises for delivering to the trustee under the warrant as permitted under act.

Personal insolvency agreement must identify the debtor’s property and income to pay creditors’ claims, specify how does the property deal with, Specify the extent to which the debtor release of his or her provable debts and specify the conditions for the agreement coming into operation. Specify the circumstances on which the agreement terminates, Specify the order in which proceeds of realizing the property distribution among creditors and also specify the order of income distribution among creditors. Specify whether or not the antecedent transactions provisions of this Act apply to the debtor and make the provision for a person or persons to be trustee or trustees of the agreement. Also, provide that the debtor will execute such instruments and generally do all such acts and things concerning his or her property and income as is required by the agreement.


  1. Australia options on recovering from bankruptcySee some information here:


How does the bankruptcy govern in India?

Financial creditor means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred.

Adjudicating Authority for this Part, means National Company Law Tribunal constituted under section 408 of the Companies Act, 2013.

Personal guarantor means an individual who is the surety in a contract of guarantee to a corporate debtor.

Associate is the person who belongs to the immediate family member, relative, partner, spouse, employee, employer or trustee of the debtor.

Bankruptcy trustee is the insolvency professional appointed as a trustee for the estate of the bankrupt or debtor. Bankruptcy trustee has substantial duties including investigating the affairs, realize the estate and distribute the estate of the bankrupt, holding property of every description, make contracts, sue and be sued, employ persons to assist him, execute any power of attorney, deed or other instrument and do any other act which is necessary for exercising rights. Also, The bankruptcy trustee shall take possession and control of all property, books, papers and other records relating to the estate of the bankrupt or affairs of the bankrupt which belong to him or are in his possession or under his control. The Bankruptcy trustee and Bankrupt duties are explained mainly in Chapter IV, Administration and distribution of the estate of the bankrupt.

Adjudicating Authority for Individual and partnership firms:

Board The Central government of India appoints the Insolvency and bankruptcy board of India. The Board shall be a body corporate by the name aforesaid, having perpetual succession and a common seal, with power, subject to the provisions of this Code, to acquire, hold and dispose of property, both movable and immovable, and to contract, and shall, by the said name, sue or be sued. The Board may establish offices at other places in India and will consist of Chairperson, three members from amongst the officers of the central government, one member to be nominated by the Reserve Bank of India and five other members to be appointed by the central government. The Board shall, subject to the general direction of the Central Government. The board will promote the professional development and regulation of insolvency professionals to improve the services of competent insolvency professionals to cater the needs of debtors and creditors. Promote right professional and ethical conduct amongst insolvency professionals to protect the interests of debtors and creditors to encourage the growth of professional insolvency agencies for the effective resolution of insolvency and bankruptcy processes under this Code. The Board may issue, renew, suspend or cancel the certificate of registration granted to a professional insolvency agency. A professional insolvency agency shall be responsible for giving membership to the individual who fulfills requirements set out in its bylaws on payment of membership fee. Lay down standards of professional conduct and monitor the performance of its members, safeguard the rights, privileges, and interests of its members. Suspend or cancel the membership of insolvency professionals and redress the grievances of consumers against insolvency professionals who are its members and publish information about its functions, list of its members, the performance of its members and such other information as may be specified by regulations. Any person aggrieved by the functioning of an insolvency professional agency or insolvency professional or an information utility may file a complaint to the Board in such form, within such time and in such manner as may be specified. The Central Government may, after due appropriation made by Parliament by law in this behalf, make to the Board grants of such sums of money as that Government may think fit for being utilized for this code. The Board shall maintain proper accounts and other relevant records and prepare an annual statement of accounts in such form as may be prescribed by the Central government in consultation with the Comptroller and Auditor-General of India. The accounts of the Board as certified by the Comptroller and Auditor-General of India or any other person appointed by him in this behalf together with the audit report thereon shall be forwarded annually to the Central Government, and that Government shall cause the same to lay before each House of Parliament.

Information utilities will provide services including creation, storage, receiving, submission and access of financial information in a universally accessible format to persons and all concerned parties in such manner as may be specified by regulations, publish such statistical information as may be prescribed by rules and have interoperability with other information utilities.

Demand notice means a notice served by an operational creditor to the corporate debtor demanding repayment of the operational debt in respect of which the default has occurred.

There is a different process of executing the individual, partnership firm or corporate bankruptcy. The simplified process, in general, is as follows.

  • The debtor, Creditor, insolvency professional, and bankruptcy trustee have duties and responsibilities and notwithstanding as per act may turn into punishment, imprisonment or fine. Refer to Chapter VII Offences and Penalties for details.

  • A debtor who is unable to pay his debt and fulfills the conditions as per act shall be entitled to make an application for a fresh start for a discharge of his qualifying debt. Debtor (or resolution professional on behalf) or financial creditor either by itself or jointly with other financial creditors may apply to initiate individual (or partnership or corporate) insolvency resolution process against an individual (or partnership or corporate) debtor before the Adjudicating Authority when a default has occurred. In case of debtor who is individual (or partnership), where the debtor files an application through a resolution professional, the Adjudicating Authority shall direct the Board,of the date of receipt of the application and shall seek confirmation from the Board that there are no disciplinary proceedings against the resolution professional who has submitted such application. The board shall communicate to the Adjudicating Authority in writing either confirmation or rejection of the appointment of the resolution professional who applied on behalf of a debtor (or partnership). Upon appointment of resolution professional, the debtor shall make available all information to resolution professional in regards to your affairs, attend meetings and comply with the requests of the resolution professional and resolution professional may submit an application to the Adjudicating Authority.

  • The Adjudicating Authority shall ascertain the existence of a default from the records of an information utility or other evidence furnished by the financial creditor. The Adjudicating Authority shall, before rejecting the application, give a notice to the applicant to rectify the defect in his application of receipt of such notice from the Adjudicating Authority. The Adjudicating authority shall communicate the order to the financial creditor and individual (or partnership or corporate) debtor of admission or rejection of the application. Upon acceptance of the application, individual (or partnership or corporate) insolvency resolution process shall commence from the date of admission of the application.

  • An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed. If corporate debtors do not respond to the demand notice and repayment terms do not meet then the operational creditor can initiate the corporate insolvency process. Otherwise, From the repayment plan, the resolution professional shall apply to the Adjudicating Authority for a discharge order concerning the debts mentioned in the repayment plan and the Adjudicating Authority may pass such discharge order.

  • An operational creditor initiating a corporate insolvency resolution process may propose a resolution professional to act as an interim resolution professional. Where a corporate debtor has committed a default, a corporate applicant thereof may apply to initiate corporate insolvency resolution process with the Adjudicating Authority.

  • The Adjudicating Authority shall appoint an interim resolution professional within a term as per act from the insolvency commencement date. In case of individual and partnership debtor, an interim-moratorium shall commence on the date of the making of the application on all actions against the properties of the debtor in respect of his debts. The moratorium shall cease any pending legal action or legal proceeding against any property of the debtor on the bankruptcy commencement date and during the interim-moratorium period. The creditors of the debtor shall not entitle to initiate any legal action or legal proceedings against any property of the debtor in respect of any of his debts.

  • The Board shall, within a specified time of the receipt of a reference from the Adjudicating Authority, recommend the name of an insolvency professional (as a proposed trustee) to the Adjudicating Authority against whom no disciplinary proceedings are pending. Where the debtor or creditor do not propose a bankruptcy trustee, the Adjudicating Authority shall direct the Board, receiving the application to nominate a bankruptcy trustee for the bankruptcy process. The Board shall nominate a bankruptcy trustee within ten days of receiving the direction of the Adjudicating Authority.

  • The interim resolution professional shall collect all information relating to the assets, finances, and operations of the corporate debtor for determining the financial position of the corporate debtor. The interim resolution professional shall make every endeavor to protect and preserve the value of the property of the corporate debtor and manage the operations of the corporate debtor as a going concern.

  • The interim resolution professional shall after collation of all claims received against the corporate debtor and determination of the financial position of the corporate debtor, constitute a committee of creditors. The committee of creditors shall comprise all financial creditors of the corporate debtor. Where the corporate debtor owes financial debts to two or more financial creditors as part of a consortium or agreement, each such financial creditor shall be part of the committee of creditors, and their voting share shall determine from the financial debts owed to them. To replace the interim resolution professional, it shall file an application before the Adjudicating Authority for the appointment of the proposed resolution professional. The Adjudicating Authority shall forward the name of the resolution professional proposed to the Board for its confirmation and shall make such appointment after confirmation by the Board. Notwithstanding anything contained in any other law for the time being in force, the resolution professional, during the corporate insolvency resolution process, shall not take any of the actions as per act without the prior approval of the committee of creditors.

  • The resolution professional shall prepare an information memorandum in such form and manner containing such relevant information as may be specified by the Board for formulating a resolution plan.

  • If the Adjudicating Authority is satisfied that the resolution plan as approved by the committee of creditors meets the requirements, it shall by order approve the resolution plan which shall be binding on the corporate debtor and its employees, members, creditors, guarantors and other stakeholders involved in the resolution plan.

  • Liquidation process will take place where the Adjudicating Authority passes an order for the liquidation of the corporate debtor, the resolution professional appointed for the corporate insolvency resolution process shall act as the liquidator for liquidation unless replaced by the Adjudicating Authority. On the appointment of a liquidator under this section, all powers of the board of directors, key managerial personnel and the partners of the corporate debtor, as the case may be, shall cease to affect and shall be vested in the liquidator. The personnel of the corporate debtor shall extend all assistance and cooperation to the liquidator as may be required by him in managing the affairs of the corporate debtor. The liquidator shall have the power to consult any of the stakeholders entitled to a distribution of proceeds. The liquidator shall hold the liquidation estate as a fiduciary for the benefit of all the creditors which will include all the liquidation estates as per act. the liquidator shall have the power to access any information systems for admission and proof of claims and identification of the liquidation estate assets relating to the corporate debtor. The liquidator shall receive or collect the claims of creditors within a period as per act from the date of the commencement of the liquidation process. A financial creditor may submit a claim to the liquidator by providing a record of such claim with an information utility. An operational creditor may submit a claim to the liquidator in such form and such manner and along with such supporting documents required to prove the claim as may be specified by the Board. The liquidator shall verify the claims submitted under section 38 within such time as specified by the Board. The liquidator may require any creditor or the corporate debtor or any other person to produce any other document or evidence which he thinks necessary to verify the whole or any part of the claim. The liquidator may, after verification of claims, either admit or reject the claim, in whole or in part, as the case may be, provided that where the liquidator rejects a claim, he shall record in writing the reasons for such rejection. The liquidator shall communicate his decision of admission or rejection of claims to the creditor and corporate debtor of such admission or rejection of claims. A creditor may appeal to the Adjudicating Authority against the decision of the liquidator rejecting the claims within a term as per act of the receipt of such decision.

  • The Adjudicating Authority, to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors thereof shall be the "National company law tribunal" having territorial jurisdiction over the place where the registered office of the corporate persons located.


  1. The insolvency and bankruptcy code, 2016.


How does the bankruptcy govern in China?

Enterprise Insolvency Law of the People’s Republic of China was Adopted at the 23rd Session of the Standing Committee of the 10th National People’s Congress on August 27, 2006, and goes into effect since June 1, 2007. This Law is to formulate for regulating enterprise insolvency practice and activities, fair liquidation of debts, protecting the legitimate rights and interests of creditors and debtors, maintaining the order of the socialist market economy where there is no relevant rule in this Law applicable to the insolvency case, regulations prescribed in Civil Litigation Law for reference.

The People’s Court hears the insolvency case where the debtor is domiciled.

The law utilizes an administrator who will act much like bankruptcy trustees do in U.S. bankruptcy proceedings. The administrator’s role is to help the creditors and to assist in assuring the bankruptcy runs smoothly. The law provides who may serve as an administrator, and most administrators will come from the ranks of China lawyers and China accountants.

Where enterprise with legal person status is unable to pay off debts falling due, and the debtor’s asset fails to meet the debts, or the debtor lacks apparent ability to pay off the debts, all debts to liquidate per rules prescribed herein.

The debtor may file a petition for reorganization, composition, or liquidation with the People's Court. Where the debtor is unable to pay off debts, its creditors may file a petition for reorganization or settlement with the People’s Court. Where debtor with legal person status is dissolved without being liquidated or with pending liquidation and its assets fail to meet debts, those responsible for settling the enterprise shall file a liquidation petition with the People’s Court.

When a debtor or creditor applies to insolvency with the People’s Court, the applicant shall submit an Application Form for Insolvency Case and relevant evidence to the court. Upon filing a petition for insolvency, evidence pertinent to provide to the People’s Court. The People’s Court shall notify the debtor within a time as per law upon receiving the insolvency petition filed by the creditor. The People's court may accept or reject the case then explain with the reasoning of rejection within a time specified by law.

The People’s Court shall appoint an Administrator at the time when the case is accepted. Once the People’s court agrees with the insolvency case, all judiciary measures were taken against the debtor’s property to preserve the property, and all execution proceedings shall stay. Once the People’s court accepts the insolvency case, pending civil or arbitral cases involving the debtor shall be stayed. Only after the Administrator takes over the debtor’s property shall the stay imposed upon the pending civil or arbitral cases be lifted. Once the case is accepted, civil cases involving debtor shall be presented before the People’s Court receiving the insolvency petition.

After the People’s Court accepts the insolvency case, the debtor's debtor shall make payment to the Administrator and holder of a debtor's property shall deliver the property to the Administrator. The Administrator shall perform functions and duties by Law, report to the People’s Court and accept the supervision from creditors meeting and creditors committee. The Administrator shall attend and report to creditors meeting on the performance of its duties and answer inquiries from creditors meeting. The Administrator performs the various functions and responsibilities including taking over the debtor’s property, sealing and accounting books, documents, data, and other articles. The administrator functions also include investigation and formulation of reports on the debtor’s property, dealing with the internal and management affairs, deciding the debtor’s routine and other necessary expenses. The administrator functions include determining to continue or close the business operation, managing and disposing of the debtor’s property, participates in the litigation, arbitration or other legal proceedings on behalf of the debtor, Proposes the convention of creditors meeting and other functions and duties deemed as appropriate by the People’s Court. The creditor shall declare claim to the Administrator within the time limit confirmed by the People’s Court.

Insolvency costs and ordinary debts shall be paid off instantly from the debtor’s property. Insolvency costs may include the litigation, administration, appraisal, distribution costs of the debtor's property. Where a debtor's property is insufficient to pay off the insolvency costs and ordinary debts, the costs for insolvency shall be paid off in priority.

Where the debtor's property is insufficient to pay off the insolvency costs or ordinary debts, then payments should be made on a pro-rata basis. Where the debtor's property is insufficient to pay off the insolvency costs, the Administrator shall apply to the People’s Court for termination of the insolvency proceeding. The People’s Court shall rule to terminate the insolvency proceeding within a time as per law after receiving the application.

The Administrator implements the distribution plan approved by the People’s Court. The distribution of insolvent property shall be made in cash unless otherwise resolved by the creditors' meeting. The Administrator shall formulate the distribution plan of insolvent property without undue delay and submit it to the creditors' meeting for discussion.

Where the debtor has no available property to distribute, the Administrator shall request the People’s Court to terminate the insolvency procedure.

Creditors meeting establishes by creditors committee. The creditor's committee shall be composed of the creditor’s representative appointed by creditors meeting and one representative from the debtor’s employees or labor union. Members on the creditor's committee shall be no more than 9. The creditor's committee supervises the management and disposition of the debtor’s property, oversee the distribution of the insolvent estate, propose the convention of creditors meetings and having powers entrusted by the creditors meeting. The creditor's committee is entitled to require the Administrator or relevant personnel of the debtor shall make explanations or provide relevant documents within the scope of their functions and duties as required by the creditor's committee in the course of performing powers. Where the Administrator or appropriate personnel of the debtor in violation of this Law refuses to accept supervision, the creditor's committee may request the People’s Court to render the ruling regarding the supervision issue. The Administrator shall report the creditor's committee including transferring the ownership of real estate, transferring mining right, tenure intellectual property rights and other property rights. Also, the administrator shall report of transferring the stock or business, granting a loan, providing security, assigning claim or transferring securities, performing the contract and its counter party, releasing rights, taking the security property bak and other matters concerning property disposition having a material effect on creditor interest.

Reorganization plan can be handled either by a debtor or administrator depending on whosoever the property and business affairs are in process. The debtor or the Administrator shall submit a Reorganization plan to the People’s Court and creditors meeting within a time as per law. The reorganization draft plan will include management scheme of a debtor, classification of the claims, adjustment and repayment scheme of the applications, implementation time limit of the reorganization plan and other schemes conducive to the reorganization. The People’s Court shall convene creditors meeting in the time as per law upon receiving the reorganization draft plan for voting and adopting the reorganization plan. Where the reorganization draft plan fails to be selected and approved by the People’s Court in or the adopted reorganization plan fails to be approved by the People’s Court, the People’s Court shall rule to terminate the reorganization procedure and declare the debtor as insolvent. If approved then The debtor shall implement the adopted reorganization plan. The Administrator in charge of managing the property and business affairs shall transfer the property and business affairs to the debtor after the People’s Court ruled to approve the reorganization plan. The Administrator shall submit the supervision report to the People’s Court upon the expiration of the supervising time limit. The Administrator will not be discharged from its duties until the supervision report receives to the People’s Court. The debtor is no longer obligated to pay the debts reduced or discharged in conformity with a reorganization plan upon the finalizing implementing the reorganization plan.


  1. China's Enterprise Bankruptcy Law of 2006.


The information provided in this blog is general information only. While every effort has been made to ensure that the information contained in it is accurate as of the published date of this Blog post, it is not a full and authoritative statement of the law on any particular topic. The information presented in this blog should not be cited or relied upon as legal authority and can not substitute for reference to the Bankruptcy acts, laws and legislation of country and jurisdictions. The information should not consider as a substitute for the advice of competent legal counsel or a financial expert.

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