What Happens When You Go Bankrupt

Bankruptcy is a situation where you practically are in a state at which you are unable to pay for almost everything. Depending upon the class of bankruptcy, there are different things that might happen to you. The same goes for when a business or a person goes bankrupt in India. There are things that are going to happen once and during the insolvency resolution process that can make it quite difficult for you to financially manage yourself. However, if you are prepared for such a situation beforehand, you do not have to worry. Therefore, through the course of this article, we are going to ponder upon the things that might happen to you during your bankruptcy situation that you should be prepared for.

What Happens After You Go Bankrupt

What happens during and after bankruptcy?

1. You will have to maintain the record of your bankruptcy for a particular period of time. Through this time, you would need to make sure that for 7 to 10 years, the record is present. However, once you come out of bankruptcy, you can get back to your feet.

2. People will know about your bankruptcy: Bankruptcy can have an immense blot on your reputation. The entire matter is advertised through the company channels. Therefore, you need to prepare for the reputation backlash as well.

3. When you have gone insolvent, you also can find that you are not suitable to file for bankruptcy: This is one of those unlucky scenarios that you need to properly watch out for. There can be a condition where you won’t be able to file for bankruptcy.

4. The entire process of Insolvency Procedure initiation is hard: Once you file for bankruptcy, you are also filing for getting your insolvency resolved. However, the process to do so is pretty hard and it involves a lot of experts. Furthermore, the entire matter isn’t cheap either.

5. The debtor’s assets would have to be liquidated: In cases where the insolvency resolution process is unsuccessful, the corporate debtor has to be liquidated. In this process, the assets of the debtor would be sold. You can think of this as stripping the debtor for parts to recover the debt.

6. There are social repercussions: Once your credit score has gone kaput, there is social fallout that you would have to watch out for. These are the matters that you need to be clear upon. There is harm to your reputation and it can also cause issues with your personal life.

7. You can lose your personal relationships: There are personal consequences of bankruptcy where dissatisfaction can cause serious debt in personal relationships like Marriage.

8. Starting from a clean slate: After the insolvency process is resolved. Then you, as a debtor get a clean slate. However, starting form a clean slate can be quite difficult.

When you bankrupt, then you should know that the IBC 2016 is not meant to aid you as a debtor, but to aid the creditors in order to maximize the availability of credit in the market. This new bankruptcy law in India might be a bit harsh, but it is definitely a good motivator.