Bankruptcy by Debtors Under the Bangladesh Bankruptcy Act, 1997

Bankruptcy in Bangladesh is governed by the Bankruptcy Act, 1997, which allows an individual debtor to file for bankruptcy when they are unable to pay their debts. A debtor may petition the court after committing an “act of bankruptcy,” such as failing to pay debts or having property attached. The petition must include a full statement of debts, assets, property valuation, and a declaration to surrender all property to the court-appointed receiver.

Under the Act, an individual may voluntarily approach the court when they are no longer able to repay their debts. This process is triggered when a debtor commits an “act of bankruptcy”—such as non-payment or attachment of property—as defined in Section 9.

A voluntary petition can then be filed under Section 13, provided the debtor owes at least Tk. 20,000 or meets additional conditions like arrest or property attachment.

What the Debtor Must Submit

According to Section 15, the bankruptcy petition must include:

1. A complete list of all debts and creditors

2. A statement of all assets and liabilities

3. A valuation of the debtor’s property

4. Any previous bankruptcy history

5. A declaration of willingness to hand over property and financial records

Under Section 16, the debtor must surrender all property and books of accounts to the court-appointed Official Receiver.

Protections for the Debtor

Once the petition is accepted, the debtor receives legal protections:

Halt on creditor actions: Creditors cannot file lawsuits or take action against the debtor’s property without court permission (Section 28).

Protection from arrest: Debtors can obtain a Protection Order preventing arrest or civil detention for debt (Section 31).

Exempted property: Essential items like household goods, tools for work, clothing, and some portion of the home are protected from seizure (Section 107).

Discharge from debt: The court may discharge the debtor from most past liabilities after the process (Section 82).
 

Limitations and Challenges

Despite protections, the law has several limitations:

Restrictions on undischarged bankrupts: They face limitations on travel abroad, holding public office, working in government, being a company director, or taking new loans (Sections 104–106).

Limited scope: The Act only applies to individuals, not corporations, and doesn’t cover cross-border insolvency.

Vague reorganisation rules: Sections 42–47 provide for repayment plans, but the rules are unclear and often inconsistently applied.

Social stigma: Many debtors avoid filing because being “bankrupt” is seen negatively in society.

Step-by-Step Process of Debtor-Initiated Bankruptcy in Bangladesh

Step 1: Determine Eligibility

The debtor must have committed an “act of bankruptcy” (Section 9), such as:

Failure to pay a debt

Property attachment by a creditor

Avoiding debt repayment by leaving the country
The debt should generally be Tk. 20,000 or more (Section 13).
 

Step 2: Prepare Voluntary Bankruptcy Petition

The debtor files a petition under Section 13 at the Bankruptcy Court.

The petition must include (Sections 15–16):

Full list of debts and creditors

Complete details of assets and liabilities

Valuation of property

Previous bankruptcy history

Declaration to surrender property and accounts to the Official Receiver

Step 3: Submission to Court

Petition is submitted to the Bankruptcy Court.

Court reviews the petition for completeness and compliance with the law.

If acceptable, the court issues a notice to creditors.

Step 4: Court Evaluation & Official Receiver Appointment

The Official Receiver is appointed to take control of the debtor’s assets.

Debtor is required to hand over property, bank accounts, and financial records.

The Receiver assesses:

Total assets

Total debts

Any possibility of repayment under reorganisation

Step 5: Creditor Communication & Protection

Section 28 protects the debtor: creditors cannot take independent legal action without court permission.

Section 31 allows the debtor to obtain a Protection Order, stopping arrest or detention for debt.

Some property is exempt (Section 107) — essentials like household goods, tools, clothing, and sometimes part of the home.

Step 6: Hearing & Reorganisation (if applicable)

Court may schedule hearings to consider:

Repayment or restructuring plan (Sections 42–47)

Objections from creditors


The debtor can propose a reorganisation plan for partial repayment if feasible.
 

Step 7: Court Decision on Discharge

After evaluation, the court decides whether to:

Discharge the debtor (Section 82) — freeing them from most past liabilities

Partially discharge or reject the petition based on circumstances


Step 8: Restrictions for Undischarged Bankrupts

If not discharged, debtor faces restrictions (Sections 104–106):

Travel abroad limitations

Restrictions on government jobs

Cannot be a company director

Limited access to new loans

Step 9: Post-Bankruptcy Monitoring

The Official Receiver may supervise the debtor’s financial conduct for a certain period.

Discharged debtors can legally restart financial activities, obtain loans, and rebuild credit.