The Insolvency and Bankruptcy Board of India (IBBI) is targeting individual insolvency as the next big reform area. The insolvency regulator has decided to appoint an external institution/organization/agency for undertaking a research study on individual indebtedness and insolvency. This external agency, if selected by IBBI, will have a maximum of one year to complete the research report.

The research questions that the external agency may expect to be asked to look at include: the levels and category of personal debts that could be covered under the individual insolvency framework, whether the lack of health insurance is associated with personal insolvency, whether individual bankruptcy offers families a better financial future, and whether the law as laid out in the Code is needed to be revisited, to ensure its better usage by individuals.

With its focus on rehabilitation of the debtor, as opposed to adjudging him as insolvent, the Code: (a) provides an objective trigger for initiation of insolvency resolution process instead of relying on the commission of an ‘act of insolvency’; (b) mandates a moratorium which provides a breathing space for the debtor and creditors to negotiate a repayment plan; (c) uses independent and qualified professionals to assist the stakeholders and the Adjudicating Authority (AA) in conduct of processes; (d) prescribes a linear process, in which bankruptcy typically follows the failure of the insolvency resolution process; (e) enables automatic discharge instead of requiring that discharge be granted by the AA on the satisfaction that the insolvent has conducted himself well in the run-up to and during insolvency; (f) provides a more comprehensive regime, including a debt relief in the form of ‘fresh start’, and keeps certain assets of the debtor beyond the reach of creditors for the subsistence of the debtor.