Bankruptcy- Inability Of Bank To Pay Its Creditors

Bankruptcy- Inability Of Bank To Pay Its Creditors

An individual who is legally affirmed as incapable of clearing all his debts is called as a Bankrupt. The inability of an individual to clear his debts is known as Bankruptcy. A creditor may file a bankruptcy petition against the deceased debtor who fails to clear the debts. The creditor receives his settlement by liquidating the assets available with the debtor. The procedure and the process for bankruptcy is strictly controlled by the bankruptcy law governed by the concerned court which also decides the duration of the bankruptcy. Debts that arise after the filing of petition in the court will not be included in bankruptcy. The process of bankruptcy begins with the filing of petition in the court the court issues an order to cease all the further collection activities. The court also appoints a bankruptcy trustee to handle all the related affairs of the bankrupt. The trustee is responsible to answer all creditor related issues ensuring, that the bankrupt complies in accordance with bankruptcy Act. The bankrupt is obliged to disclose all the information pertaining his income, expenditure, assets and liabilities to the appointed trustee. The trustee is empowered with all the rights to indulge in the activities of the bankrupt as governed and conferred by the court of law. The trustee then summons for the first meeting to discuss the affairs of the bankrupt. The trustee will scrutinize the financial statement of the bankrupt with the creditor, regulating the activities of bankrupt's estate. Upon the court's declaration, the trustee will take complete charge of the properties of the insolvent for the purpose of liquidation. The trustee will then settle the claims of the creditors by liquidating the assets of the bankrupt. The onus of prioritizing the creditor lies with the trustee as governed by the court of law. Bankruptcy is considered to be the method of last resort to relieve an individual from his financial obligation of debt claims. The goal of bankruptcy is to protect the interest of the deceased debtor thereby repaying the creditors, at least partially. Bankruptcy provides an opportunity for the debtors to have a fresh start by legally settling the claims of the creditors. The most important highlight of bankruptcy is the automatic stay that comes into effect as soon as the bankrupt files a bankruptcy petition with the court. The creditors are thus hauled from the further credit collecting activities, either legally or illegally. Thus the ultimate purpose of bankruptcy is to protect the interest of the insolvent. The objective is to have amount outstanding discharged by creditors so it will not will be enforceable and removed from later credit histories The debts of the bankrupt, who strictly adheres to the bankruptcy liquidation process will be easily discharged and the bankruptcy judge will also terminate the petition shortly. The court will also order for the exemption of the bankrupt's property, preventing the bankrupt from becoming destitute. The most commonly exempted property are bankrupts personal home, personal vehicle, clothing etc. Bankruptcy, thus serves as a rehabilitation process for the impoverished and needy debtors.

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