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Bankruptcy law in Karachi, as in the rest of Pakistan, is primarily governed by the Companies Act of 2017 and targets both individual and corporate bankruptcies. In simple terms, it is a process that allows insolvent individuals or corporations, unable to pay their debts, to wipe their financial slate clean by liquidating assets to pay their debts or create a repayment plan. Bankruptcy in Pakistan is complex and navigating it without a knowledgeable legal aid can prove challenging.
Bankruptcy is a serious legal matter that can have long-lasting implications for an individual or business. You might require a lawyer's assistance in various situations like filing for bankruptcy, understanding complex legal matters, negotiating with creditors, or if you're facing a lawsuit by creditors. Lawyers can offer expertise and guidance to navigate the complicated bankruptcy process, ensuring your rights and interests are protected throughout the procedure.
The Companies Act of 2017 is the principal law governing bankruptcy in Karachi. According to the law, a creditor can file a bankruptcy petition if a company owes them over PKR 10,000 and has defaulted. An insolvent company or individual also has the right to file for their bankruptcy. However, the law requires approval from court to commence bankruptcy proceedings, after which the court either liquidates the company’s assets to repay the debt or develops a repayment plan. Quite crucially, when a company is declared bankrupt, the directors are dismissed and the Official Assignee takes over.
Typically, your assets become part of the bankruptcy estate and are sold to pay off your debts. However, certain assets may be exempted depending on the bankruptcy type and Pakistan's laws.
In most cases, bankruptcy proceedings in Pakistan take around six months to finalize. However, complex cases may run longer.
Bankruptcy can clear most kinds of debt, but not all. Obligations like child support, alimony, certain taxes, and student loans usually can't be discharged.
After you've been declared bankrupt and have fulfilled your obligations, there's usually no restriction on setting up a business. You may, however, find it challenging to acquire funds.
Alternatives to bankruptcy include negotiating directly with creditors, entering into a debt management plan, or trying debt settlement. A financial advisor or lawyer can help decide the best course of action for you.
Individuals seeking legal advice on bankruptcy can contact the Securities and Exchange Commission of Pakistan (SECP) or the Official Assignee's office which operates under the Law and Justice Division. The Pakistan Bar Council and various legal aid societies can also provide assistance.
If you are in need of legal assistance for bankruptcy, the next step would be to consult with experienced bankruptcy lawyers or a legal aid society. Begin gathering your financial documents including any outstanding debt, property, income, and expenses. Legal professionals can give you advice tailored to your situation and assist you through the process.
