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CS Professional · Insolvency and Bankruptcy - Law and Practice · Insolvency Resolution of Individuals and Partnership Firms

Meena, a street vendor in Pune, meets the income, asset and debt limits for a fresh start. She inherited a small flat, which is mortgaged to a cooperative bank for more than its value. She applies for a fresh start. What is the position?

Meena is not eligible. A debtor seeking a fresh start must not own a dwelling unit, and the Code says this applies irrespective of whether the unit is encumbered. The mortgage on her flat therefore does not remove the bar.

  1. AShe is ineligible, because owning a dwelling unit bars the application even if it is encumberedCorrect
  2. BShe is eligible, because the flat is fully encumbered and so has no value
  3. CShe is eligible if the flat's value is below Rs 20,000
  4. DShe is eligible if the mortgagee consents

Explanation

The eligibility condition says the debtor must not own a dwelling unit, irrespective of whether it is encumbered or not. The mortgage therefore does not help Meena. Her ownership of the flat bars the application whatever its value or the lender's consent.

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