Video: Breaking down bankruptcy; the steps involved in filing for it

If a company's finances are in a mess and its liabilities are too high compared to its assets, it is possibly inching towards bankruptcy. Indian mobile carrier Aircel Ltd, under a high debt pile worth Rs 15,500 crore and mounting losses, filed for bankruptcy recently. Absconding diamonatire Nirav Modi's company Firestar Diamond Inc. filed a case of bankruptcy at a New York court, following the disclosure of the Rs 12,600 crore PNB fraud case.   What is BankruptcyBankruptcy is a legal proceeding involving a person or business that is unable to repay outstanding debts. The process starts with a petition filed by the debtor in a court of law. Following which, all of the debtor's assets are measured and evaluated, and the assets may be used to repay a portion of the outstanding debt. How to file for bankruptcyFiling for bankruptcy is like a restart button as it might give the person or business a chance to plan their future. However, filing for bankruptcy does not go down well with credit ratings, which means that getting a new loan to start a new business or venture can be tough. Those who file for bankruptcy follow these steps:> File a petition with the National Company Law Tribunal> Following which an insolvency professional takes control of the defaulting company and assist the process> A creditors committee is formed that looks into the interests of lenders and other parties involved> A time period of 180 days is given to find a feasible solution on the default issue> The timeline can be extended by another 90 days, but if the matter goes beyond 270 days, a liquidator is appointed> The defaulter or the defaulting company can also opt for voluntary liquidation