Debt Counselling: Sanjay Agarwal

My monthly salary is Rs 20,000. I took a personal loan to buy a laptop six months ago and paid the first two equated monthly instalments (EMIs) on time. Then, my expenses increased and I was forced to make withdrawals from my credit card to repay the loan. My monthly systematic investment plan’s (SIP’s) instalments are also being paid by the card. Am I into a debt trap? How can I get out of it?

When we start borrowing more to pay our loans, the debt starts spiralling and we get into a debt trap. Golden rules to avoid getting into this situation:

• Monthly expenses, including EMIs, must remain within your salary
• No fresh loans to repay old ones, except to retire high-cost loans
• No investments in financial products from borrowed funds, particularly costly credit card debt
• Save regularly and reduce expenses. Close loan, may be by selling some unused asset, and invest from your savings, not borrowings

I am a self-employed individual. My business has not been doing well for a few years, and I have a debt of Rs 3 crore. I am not in a position to pay back and want to file for bankruptcy. My personal assets include a flat worth Rs 80 lakh (jointly owned with my wife), investments in equities at Rs 50 lakh and debt at Rs 25 lakh (with my wife). Can the debtors seek dissolution of these investments to retire the debt? What can I do to ensure that my personal assets are not liquidated, when I file for bankruptcy?

At the outset, I must tell you the debt counselling column gives no advise on how not to repay your debt, even by declaring yourself bankrupt. As borrowers, we are duty-bound to settle our dues with the lenders. All creditors have a right to seek decree from competent court of law to recover their dues, including attachment and sale of all assets owned by an individual.

For the jointly-owned assets, in case of husband and wife, the court has to verify the sources from which these assets have been created. The assets of the borrowers, co-borrowers and guarantors are attachable by the creditors by following due process of law, and according to the direction of the competent courts, excepting assets that have been given protection under Section 60 of Civil Procedure Code.

The writer is senior vice-president & group head (retail strategy & branding), Arcil. Send your queries to yourmoney@bsmail.in