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- Title
Legal Shock or False Start? The Uncertain Future of India's New Consumer Insolvency and Bankruptcy Regime.
- Authors
Feibelman, Adam
- Abstract
In May of 2016, India adopted a regime for personal insolvencies and bankruptcies as part of a comprehensive new Insolvency and Bankruptcy Code. The Code's provisions for individual debtors have not yet gone into force, and it is not clear when, or even if, this will happen or whether significant changes might be made to the regime before it does. The regime, as enacted, represents a dramatic change in the legal framework affecting consumer debtors in India, providing previously unavailable tools to both creditors and debtors. Assuming it comes into force in its current form, it will be a legal shock to financial markets and social systems in that country. It is not clear, however, how that legal shock will be absorbed by Indian society and its economy. The function and impact of the regime will be determined by how it is implemented and how it is utilized by stakeholders. This Article describes India's new personal insolvency and bankruptcy regime in some detail and anticipates the function and impact of the regime as enacted. The regime was something of an afterthought for policymakers, who were primarily motivated to reform the restructuring and liquidation schemes for corporate debtors. Perhaps as a result, it strikes an uncertain balance of various policy goals. On paper, it significantly expands the availability of relief and protection available to individuals and households, especially for those poorest debtors who qualify for its fresh start process, essentially a loan waiver program. Yet, it also gives creditors the power to force all other debtors into a relatively burdensome insolvency process. Furthermore, there are reasons to be concerned that many debtors who might benefit from the regime will not utilize it. This Article proposes that the regime will, at least initially, function primarily as a creditor's remedy and provide suboptimal insurance for individual and household debtors. If so, then it might fall short of its potential for helping individual debtors, including entrepreneurs, recover from financial distress and would exacerbate some of the social costs of consumer over-indebtedness. It might also distort the development of consumer financial markets in India by promoting the expansion of lending without effectively insuring against systemic household indebtedness.
- Subjects
INDIA; PERSONAL bankruptcy; CONSUMER credit; DEBTOR &; creditor; BANKRUPTCY; DEBT
- Publication
American Bankruptcy Law Journal, 2019, Vol 93, Issue 3, p429
- ISSN
0027-9048
- Publication type
Article