If you live in Mumbai, Kolkata or Chennai, you will be governed by the Presidency Towns Insolvency Act, 1909; for all other places in India, you will be governed by the Provincial Insolvency Act, 1920. Both laws are similar and eventually are meant to be replaced by the IBC.

Under the Provincial Insolvency Act, you can file for bankruptcy if you are unable to repay a debt greater than ₹500. According to Aishwarya Satija, research fellow, Vidhi Centre for Legal Policy, an independent legal advisory group, “After analysing whether the conditions for filing of bankruptcy have been met, the court may accept or reject the application. Until the decision on the application is taken, an interim receiver takes possession of the property of the debtor. If the application is admitted, the court can apply a stay on any legal proceedings against the property or assets of the debtor.” In other words, you can get a stay order against further recovery efforts by your creditors.

• If you are unanble to repay your loans and have debts of more than Rs 500,you can file for bankruptcy in court
• You can apply for a stay against all recovery proceedings by your creditors
• An official appointed to take control of your assets,will distribute them among your creditors
• Once the process is complete,the court will discharge you and you can start your life afresh

Once your application is admitted, your property vests with the “receiver” appointed by the court. This official then distributes your assets among the creditors, unless a compromise proposed by you has been accepted by your creditors and the court. Once this process is completed, you will be “discharged from bankruptcy” by the court, giving you the opportunity to build your life and finances afresh, without being hounded by your previous creditors.

While the insolvency proceedings are pending before the court, you can apply for a minimum maintenance amount for your own and your family’s survival.