Recovery of Bad Debt and Lost Money through Insolvency and Bankruptcy Code 2016

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Perturbed & Distressed By Bad Debt?

It is a known fact that bad debts are an adverse factor and if not recovered, it becomes detrimental to the financial health of the Creditor, be it an individual or a corporate.

In pursuing the recovery of your debt, many a time, the debtor evades or dodges, making it obvious that he is not interested or capable of repaying the debt.

Effective Way & Means To Recover Debt

As a creditor, you should be aware of your rights in order to recover bad debt from a corporate debtor in various ways. Insolvency and Bankruptcy Code, 2016, is a very effective instrument if the amount owed to you is one lakh or more. The Code is an amalgam of different earlier codes & provides a single window clearance system.

Be Acquainted Of Corporate Insolvency Resolution Process

In case of initiation of the insolvency process, there are certain eligibility criteria laid down by the Insolvency and Bankruptcy Code, 2016.

• If a default has occurred.
• The Creditor should owe the debt.
• The debt should be legally assigned to the debtor and transferred.

There are two different Sections in the Code that caters to the Financial and Operational creditors respectively.

Factors:-

Section of I & B Code, 2016, applicable!

• People who can avail
• Claim Amount
• Time Frame

Financial Creditors:-

Section 7!

• Financial Institutions, Banks, homebuyers, etc
• One lakh or more
• Six months (approximately)

Operational Creditors:-

 Section 9!

• Traders, manufacturers, Employees, etc.
• One lakh or more
• Six months (approximately)

Decode The Code: Step-By-Step

Step 1. Issuance of Notice: A Notice shall be served by the creditor to the corporate debtor, granting him 10 days and requesting to pay the dues.

Step 2. Initiation of Insolvency Resolution Process: In case of failure of any positive response by the debtor, the creditor can file an application in NCLT against the corporate debtor and initiate insolvency.

Step 3. Admittance of the Application: Within 14 days of submitting the duly filled application, it shall be accepted and the corporate insolvency process shall begin from the date.

Step 4. In Case of Rejection of Application: In case of rejection, the applicant shall have to remove the errors pointed out by the authority, within 7 days.

Step 5. Name of Proposed Resolution Professional: The name of the resolution professional has to be proposed along with the application.

Once the application is accepted, the adjudicating authority proceeds with the process of insolvency in full earnestness.

On average, it takes around six months for this process to be completed.

Can You Do It Independently?

Frankly, if you are a layman, it is an arduous task to accomplish. There are many legalities that have to be followed and if any discrepancy remains, your application shall be rejected.

Only a professional sound company, firm or individual can help you in successfully recovering your dues legally and in a stipulated time.

There are extensive paperwork and a prompt follow up that needs to be taken up, after the initiation of the insolvency process.

Where To Seek Help?

Obviously, your best bet would be to select a firm that has an exemplary track record in this field, that which hires the best of professionals and has successfully closed many deals.

You would surely not want to increase your anxiety by relying on someone who is novice and inexperienced, for the simple reason that your problem might not be solved and your debt may keep hanging.

The intricacies of such legal matters as insolvency can be best tackled by professional firms who possess the infrastructure, resources, and tons of experience.

“Take MUDS advantage which will be with you, from the initiation to the closure of the matter, saving your time, energy and money.”
-Shweta Gupta, Founder, and CEO, MUDS

The post Steps For Corporate Insolvency Resolution Process appeared first on MUDS.

If your company/you are unfortunate to have been pitched against bad debt that seems unrecoverable, you must be facing immeasurable anxiety and at the same time looking for a recoverable solution.

Know Your Rights as a Debtor!

“The biggest hurdle in the recovery of bad debt is ‘ignorance’, as the aggrieved is either uninformed or misled!”
– Kritika Chabbra (Market Analyst, MUDS Management Pvt. Ltd.

The bad debt, imperative of whether it’s a financial debt or an operational debt, can be recovered by seeking the assistance of a capable debt recovery agency or a legal consultancy firm which can initiate a legal process against the defaulter.

Taking an Informed Decision is the Only Way Out!

Under such circumstances, it is best to opt for the most effective solution and that can be ascertained only if you are aware of the various remedies available to you.

A professional recovery agency or legal consultancy firm can be the best bet for fast recovery of bad debt as it tries all options available. At first, it tries to mediate between the creditor and the debtor, striving to bring about an amicable solution. Well trained professionals are put into this work who approach the defaulter and try to persuade him to repay or may have to face legalities.

Beware of Illegal or Fake Agents!

As the problem of bad debt is growing, many agents and agencies claiming to be authentic, have mushroomed. Most of them depend on muscle power and take the illegal route to coax the defaulter in repaying the debt. Hiring such agencies may land you into legal trouble.

Letter before Action (LBA)

The first logical step towards recovery is to present an LBA to the defaulter. LBA is a formal letter that is sent to the debtor from the creditor or his authorized representative; containing all the details of the debt that is to be covered and a request for the payment of the same.

Such a letter is drafted professionally as all details pertaining to the amount or services, relevant dates, etc. are to be mentioned. It is a final warning to the debtor and if no positive response is received, then the creditor can initiate legal proceedings against the debtor.

Effective Course of Action

If steps like arbitration, mediation and LBA do not solicit a positive step, then going for legal aid is the best option. If the creditor is unable to meet his financial obligation or a firm’s liabilities exceeds its assets, hence, leading to failure in repaying the debt, then action has to be initiated.

The Provincial Insolvency Act, 1920 and Insolvency and Bankruptcy Code, 2016 are the most effective tools in the recovery of the bad debt in a time-bound manner. If the default value exceeds one lakh rupees, then the creditor may initiate the insolvency process by applying to the NCLT.

Role of a Professional Legal Consultancy Firm

If you are finding a solution for bad debt recovery in Gurgaon or bad debt recovery in Delhi, then you are at the right stop. MUDS is one of India’s biggest debt recovery company. The online legal service assists consumers in resolving their debts. We will assist you with the entire cycle of money collecting. At Debt Money Recovery Agency, we assist you in recovering your money in a timely manner. We provide full debt collecting solutions for Indian and global firms in and around locations. We also offer services for share recovery, for share recovery firms in Gurugram or share recovery firms in Delhi, one can always trust MUDS Management.

Contacting an established legal consultancy firm will ensure that you are able to recover your bad debt within a stipulated time period and in a cost-effective manner. These firms have legal experts who have an abundance of experience in bringing such matters to a positive conclusion.

The initial step of drafting the insolvency petition will be done by them and then it will be filed before the NCLT. Their learned advocates will appear and plead the case and follow-up till the final order comes from the NCLT. After this, they will proceed to recover the financial or operational debt from the creditor in favour of the debtor.

“Bad debt is a problem of aplenty, but the debtor needs to be informed and aware as to how to recover it at the earliest.”
-Shweta Gupta, Founder and CEO, MUDS

The post How to Recover Bad Debt Through An Agency in Delhi? appeared first on MUDS.

A bad debt is a monetary amount owed by a person to a creditor that is now irrecoverable from that person who was supposed to pay the same. The reason for nonpayment by the debtors is that either they go bankrupt, have financial problems or collection by the creditors due to various reasons is not possible. For example – X Limited sells goods on retail to a retailer at 60 days credit.

After 60 days, the company realizes that the debtors have gone bankrupt and now recovery of money is not possible. Thus, where the recovery of money lent seems impossible, it is considered as a bad debt.

Recovery of Bad Debt

Sometimes a debtor whose account had earlier been written off by a creditor as a bad debt may decide to make a payment either wholly or partly, this is called recovery of bad debts. Since it is considered as a loss when it is written off, recovery of bad debts is an income for the creditor and is recorded on the credit side of the income statement. Bad debts can also be recovered from the sale of borrower’s collateral. For instance – X limited sells its goods to Y limited on credit basis.

Later they find out that Y limited is being liquidated and the possibilities of recovering it’s (X’s) dues are very less, hence they write off their receivables. However, the person assigned to oversee the liquidation of Y limited instructs to pay 50% of the total amount in full settlement of its dues. Therefore, the recovery of money is 50%.

Letter Before Action

A Letter before Action (LBA) is a formal letter sent to the debtor by creditor or creditor’s authorized agent, requesting him to pay his debt before commencing any legal action against him. This letter serves as a final reminder and it includes all the necessary information like the date on which the debt was to be paid, any interest that is to be paid etc. Thus, this is a final warning to the debtor to avoid any legal proceedings.

How to recover my bad debts when the debtor becomes insolvent?

Insolvency is a situation when an individual or an organization is unable to meet its financial obligations with its lenders. In legal terms, it is a situation when a firm’s or person’s liabilities exceed their assets and they fail to pay their debt on the due date.

There are various methods for the recovery of money which are earlier written off. Some of the methods are listed below:

How to Recover My Bad Debt from an Insolvent Person?

The insolvency laws in India are provided under a statute called the Provincial Insolvency Act, 1920. It protects the insolvent debtors from being harassed by the creditors whose claim they fail to meet. The statute also provides machinery for the satisfaction of creditors.

The central rule to deal with the insolvency of debtors is derived from the Roman Principle “cessio bonorum” where a debtor voluntarily surrenders his goods to the creditors in lieu of exemption from court proceedings.

If debtors fail to pay their debts, an insolvency petition can be presented before the court by the debtor or creditor. An insolvency petition can be preferred only when the debt amount exceeds five hundred rupees. When an insolvency petition is presented by the debtor, it is considered as an act of insolvency and court may make an order of adjudication where his property may be attached and used to fulfill the debts which are due by him.

The creditor can also file an insolvency petition. However, it must be filed within three months from the act of insolvency.

The insolvency petition can be filed in the district court which exercises jurisdiction over the area where the debtor resides or carries on business or personally works for gain. The order of discharge by the court releases the insolvent from all current and provable debts. Once the person is declared an insolvent, the court appoints an official administrator to oversee the liquidation, take charge on the property of the insolvent and then divide them among the creditors to pay back their debts.

How to Recover My Bad Debt through Alternative Dispute Resolution Methods?

One of the most convenient method of recovery of bad debt is mediation. Mediators are trained professionals appointed to settle the matter between the creditors and the debtors. The mediator is completely neutral and tries to understand each party’s position. He focuses on the issue and then tries to find a solution that suits both the parties. This is a faster process as compared to courtroom litigation and a mediator can be arranged within a day if both the parties agree to resolve their issues through mediation.

How to Recover My Bad Debt? – Debt Collection Agency

The problem of recovery of bad debt can also be solved by contacting a debt collecting agency. These agencies specialize in the recovery of bad debts. Outsourcing of debt collection helps the creditors to save their own time and lay focus on their business. The debt collecting agencies contacts the debtors via phone, emails, notice and other legitimate mediums, in order to recover the debts of their clients. After all amicable methods are exhausted, they may issue legal proceedings against debtors on behalf of the creditors.

Conclusion

In addition to legal proceedings under The Provisional Insolvency Act, 1920, mediation and debt recovery agencies are viable options which can be relied on to recover bad debts. Mediation is a comparatively faster and cheaper option which must be preferred before initiating legal proceedings. This will help the parties save both, time and money. Where it seems that reaching a settlement between the parties is impossible, the parties can always initiate legal proceedings.

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