Designing a Personal Insolvency Regime: A Baseline Framework for India’s Insolvency and Bankruptcy Code

In December 2019, the Insolvency and Bankruptcy Board of India (IBBI) notified provisions for insolvencies of personal guarantors to corporate debtors under that country’s Insolvency and Bankruptcy Code, thereby putting those provisions into force. The IBBI has released regulations for cases involving guarantors and has indicated that it is moving toward notification of the provisions of the Code for other personal debtors. While the Code and regulations for personal guarantors set out a broad framework for the personal insolvency regime, it is still unclear whether there will be limits, requirements, or guidance for various aspects of repayment plans that debtors must propose in insolvency. This article, forthcoming in the Insolvency and Bankruptcy Board of India's publication, "The Evolving Insolvency and Bankruptcy Regime in India: A Narrative," proposes that repayment plans and other aspects of the insolvency process should be standardized enough to ensure a baseline treatment of both debtors and creditors, subject to some flexibility for unique or exceptional circumstances. While a generally negotiated process may be appropriate for commercial debtors under the Code, there are good reasons to believe that the process for personal debtors should be significantly more rule-bound. If the basic design of repayment plans can be specified, it might be best to dispense with the need for creditors to vote to approve plans, except perhaps to approve plans with more generous relief to debtors, and the Board or the adjudicating authorities might also adopt an approach to ‘fast-track’ debtors to bankruptcy who are unlikely to be able to repay any significant amount to creditors in insolvency.