Section 54: Bankruptcy proceedings may be initiated

1) If a person’s debts and other liabilities to be borne by him or her exceed his or her assets, bankruptcy proceedings may be initiated for payment or recovery of debts or settlement of liabilities from such assets.

2) Notwithstanding anything contained in sub-section (1), no bankruptcy proceedings may be initiated in the following circumstances:

(a) If a person who has regular income or is certain to earn income in the future proves that his or her income can pay or set off debts or other liabilities in a certain period, or the creditor is satisfied in such matter,

(b) If a person likely to be a bankrupt asks for a period of up to five years specifying the period of time to repay the debts of creditors and sources thereof from the date of origin of conditions necessitating the commencement of bankruptcy proceedings in order to enjoin or cause to be enjoined from initiating those proceedings,

(c) If the creditor does not agree to initiate, or cause to be initiated, bankruptcy proceedings.

Explanation:

(1) For the purposes of this Chapter, the term “assets” means the concerned person’s property standing for the time being or to be earned or likely to be earned up to the time prior to the completion of bankruptcy proceedings pursuant to this Chapter.

(2) For the purposes of clause (c), the term “creditor” means, where there is more than one creditor, creditors or a group of creditors who hold fifty percent or more debts out of the total debts of the person likely to become bankrupt.

3) If a debtor’s claim against a creditor is settled from the assets of a person under this Chapter, such a person shall be deemed to become a bankrupt.

4) The court shall send the record of the person being bankrupt pursuant to sub-section (3) to the bankruptcy administration office established for that purpose.

5) The bankruptcy administration office shall update the records referred to in sub-section (4).

6) Any person declared bankrupt pursuant to sub-section (3) shall not be required to repay debt or fulfil the obligation other than the debt or obligation he or she has to pay or fulfil and settle under this Chapter.

7) Notwithstanding anything contained in sub-section (6), the following obligation shall be fulfilled from the trade, business or transaction he or she starts after his or her declaration of being bankrupt:

(a) Tax, fee or charge to be paid to the Government of Nepal, Province Government or Local Government

(b) Amount of penalty or fine to be paid according to the order of a court,

(c) Amount to be paid for the embezzlement of property of the person under his or her guardianship or curatorship,

(d) Amount to be paid for the goods stolen,

(e) Amount to be paid for the embezzlement of property of a trust.

8) Notwithstanding anything contained elsewhere in this Section, if any person becomes bankrupt, he or she may carry on any trade, business or transaction other than any act or activity he or she is prohibited from doing or taking in that capacity according to law.