How long does Bankruptcy last?

Bankruptcy is a big term that has a huge price and a long life of up to a decade. A person falls in the traps of debt, cannot come out and finally gives up the struggle and goes to the court for declaring his inability to tackle the situation. The court then collects the necessary information and then if found suitable, declares the person as Bankrupt. Necessary legal procedures takes place to take possession of the person’s assets, which are then sold off by the official person who is responsible for it and is appointed by the court. And whatever amount is collected through this, the same is given to the creditors as per the due amount. The story doesn’t end here and isn’t that simple as it sounds. From here only the really tough journey begins.

When the bankruptcy petition is filed and the court after making necessary hearings declares a person bankrupt, his bankruptcy period begins from then on. The same is officially recorded in the State Gazette Records and an online Register called the Individual Insolvency Register. So times may change, years may roll off but the name remains permanently on record. It is a different matter on who sees the record for more than a span of seven to eight years or a maximum of one decade.

After the declaration, the Official Receiver who will act as the Trustee would take the assets under his charge and the person would no more be entitled to these assets. But in case he has a house in which he stays with his wife and children or dependents, then he is not asked to vacate it immediately. He is given a period of twelve months to find an alternative for himself and his family. And after the due time only the house would be put on sale. Once it is complete, the court’s restrictions ends on a person provided that he has not got himself into trouble again by disobeying the restrictions or being dishonest. Or otherwise also, if the bankruptcy is the result of a person’s carelessness, fraudulent intensions and behaviors, criminal activities then he will not be set free of bankruptcy so easily. In such cases, the restrictions may be applicable for a period ranging from 2 year to 12 years based on the seriousness of the case.

The situations in which he may face the above extended restrictions include but not restricted to:
Within a span of six years if a person declares himself insolvent it shows an act of carelessness on his part thereby putting him under the legal scanner.

If the assets he owns are disposed off at an underestimated value that may be considered as a fraudulent intention leading to extended restrictions.
If he has provided any false or baseless information only with the intention of getting a credit that would be taken as a fraudulent intention.
Knowingly availing debts of high value that is not at par with his financial situation and he is well aware that it is beyond is repaying capability.
Doing a business and availing business debts, even after knowing that he will not be in a position to repay it.

After due findings of the above, the same is reported along with the mention of the extended period for the restrictions, to the court by the Official Receiver and also a copy sent to the concerned person. The Official Receiver has a time frame of twelve months within which he has to do the reporting. If the person receives it and gives an undertaking to the effect that he agrees to it, it would be termed as a Bankruptcy Restriction Undertaking. If done mutually i.e. if he accepts this straight away he has chances that the restriction period may be reduced. But if the person disagrees to the terms laid down, he has the right to go to the court against the order. And in that case, the court may give the order and it is called the Bankruptcy Restriction Order. But there are other options too that may happen. If the court is not satisfied with the Official Receiver’s Order, the court may reject it. Or in case it feels that more information is wanting, it may defer the order and asks to furnish more information and then takes up the proceedings.

Apart from this, if a person wants to start afresh and beginning his new journey, the same becomes difficult. Though officially the bankruptcy duration is over once the property is sold off and the debts repaid, but the effects remain there for long. Banks and financial institutions would not get the required confidence on the person’s repayment capacity. He may not get a loan, a credit card, overdraft facilities, check facilities and anything on credit. So considerable amount of care has to be taken before going for a bankruptcy declaration.

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