Can a personal guarantor propose a repayment plan instead of full insolvency resolution under IBC?

Question

I am facing insolvency proceedings as a guarantor and want to know if I can offer a repayment plan to avoid the full bankruptcy process. What I am unsure about is the procedure — where the application goes, what it costs, and how long repayment plan ibc matters usually take. A plain explanation of the steps, in order, would help more than a general answer.

MyVakeel Legal Desk · Accepted Answer

The law that applies to repayment plan ibc here is Insolvency and Bankruptcy Code 2016, Section 105 and Insolvency and Bankruptcy Code 2016, Section 114. The detail below matters, because Insolvency and Bankruptcy Code 2016, Section 105 draws the line differently depending on what your documents show.

Section 105 allows a debtor, including a personal guarantor, to propose a repayment plan for approval by creditors before the formal bankruptcy process is initiated.

The plan must be approved by a majority of creditors in value at a meeting convened by the Resolution Professional, and once approved, it binds all creditors.

If the plan is rejected or not approved within the timeline, the process moves to a formal bankruptcy application under Section 121 before the NCLT.

A repayment plan can restructure timelines and even scale down amounts, offering a less severe alternative than being adjudged bankrupt with associated disabilities.

Non-compliance with an approved repayment plan can lead creditors to seek its termination and revert to bankruptcy proceedings.

Practical steps: 1) Prepare a realistic and detailed repayment plan proposal with supporting financial documents; 2) Submit the plan to the Resolution Professional for circulation to creditors; 3) Negotiate terms with major creditors to secure the required majority approval; 4) Ensure strict compliance with the approved plan to avoid reversion to bankruptcy proceedings.

If the other side has already issued a notice, filed a case or set a deadline, treat the matter as time-sensitive — remedies under Insolvency and Bankruptcy Code 2016, Section 105 carry limitation periods, and unexplained delay weakens an otherwise strong case. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in banking law.