Insolvency and Bankruptcy Code (IBC), 2016 has bought a number of new concepts in the arena of resolution of individual's or firm's insolvency.
One such initiative under IBC, 2016 by the government is fresh start process.
What is fresh start process?
A fresh start process is enacted specially for persons who owe relatively less amount of money and have little or no assets to repay their debts.
Once an eligible person makes an application to the Debt Recovery Tribunal (DRT) and the application gets accepted, they are discharged from the qualifying debts and are not required to pay such debts.
Now, the question must be coming in your mind is what is qualifying debt?
Qualifying Debt
So, according to section 79(19) of the Insolvency and Bankruptcy Code, 2016:
A qualifying debt means amount due, which includes interest or any other sum due and dues not include:-
- An excluded debt,
- A debt to the extent it is secured, and
- Any debt which has been incurred 3 months prior to the date of the application for fresh start process.
Now, the next question comes into the picture is what is an excluded debt?
Excluded Debt
As per section 79(15) of the Insolvency and Bankruptcy Code (IBC), 2016 an excluded debt means:-
- Liability to pay fine imposed by a court or tribunal ,
- Liability to pay damages for negligence, nuisance or breach of a statutory, contractual or other legal obligation
- Liability to pay maintenance to any person under any law
- Liability in relation to a student loan
- Any other debt as may be prescribed.
Who is eligible for making an application under the fresh start process?
As per section 80 of Insolvency and Bankruptcy Code (IBC), 2016, A debtor who fulfills the following criteria is allowed to file an application for initiation of fresh start process:-
- The gross annual income of the debtor does not exceed Rs. 60,000
- The aggregate value of the assets of the debtor does not exceed Rs.20,000
- The aggregate value of the qualifying debts not exceed Rs. 35,000
- They are not undischarged bankrupts
- They do not own a dwelling unit, irrespective of whether it is encumbered or not,
- A fresh start process, insolvency resolution process or bankruptcy process is not subsisting against them,and
- No previous fresh start order had been made in relation to them in the preceding 12 months of the date of the application for a fresh start.
Conclusion
By this fresh start process under the Insolvency and Bankruptcy Code(IBC),2016 an individual can kick-start their solvency (i.e., discharge themselves from pending debts in a time-bound manner and can make a fresh start as new entity.
Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of preparation. The user of the information agrees that the information is not professional advice and is subject to change without notice. Author assume no responsibility for the consequences of the use of such information.
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