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. I have been reading conflicting things online and I would like to understand what Indian law actually says about this, which Act and Section applies, what the realistic timelines and costs are, and what I should be doing right now to protect my position. If the matter can be resolved without litigation I would prefer that route, but I want to know what my rights are before I agree to anything or sign any document.

MyVakeel Legal Desk · Accepted Answer

Can a personal guarantor propose a repayment plan instead of full insolvency resolution under IBC? is governed in India primarily by Insolvency and Bankruptcy Code 2016, Section 105 and Insolvency and Bankruptcy Code 2016, Section 114. The short answer is set out below, followed by the practical steps most people in this situation need to take. Read it alongside the specific provisions named, because the exact relief available to you turns on the facts you can prove on paper.

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.

What to do next: 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 — most remedies under Insolvency and Bankruptcy Code 2016, Section 105 carry limitation periods, and a delay you cannot explain 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 this practice area.