Personal insolvency under the IBC in 2026: who can use Part III and what changed
Which parts of IBC Part III are in force for individuals in 2026: personal guarantors since 2019, the 2026 amendment ending the interim moratorium, fresh start status, old insolvency Acts.
Part III of the Insolvency and Bankruptcy Code, 2016 (IBC) covers insolvency resolution and bankruptcy for individuals and partnership firms, but in October 2026 it is in force only for personal guarantors to corporate debtors. They are people, often promoters or directors, who personally guaranteed a company's loans. That part was notified from 1 December 2019. The provisions for other individuals and partnership firms, including the fresh start process for very small debtors, have not been notified. Most individuals with personal loan or card debts therefore cannot file under the IBC. Their insolvency is still governed by the Provincial Insolvency Act, 1920 or, in the former presidency towns, the Presidency Towns Insolvency Act, 1909. The IBC (Amendment) Act, 2026 changed the guarantor process: from 26 May 2026 a personal guarantor's application no longer brings an interim moratorium.
This guide is part of the overview of debt options. It is general information, not legal advice; insolvency proceedings have serious consequences, so take advice.
What is in force and what is not
| Part III element | Status in October 2026 | Forum |
|---|---|---|
| Insolvency resolution process for personal guarantors to corporate debtors | In force since 1 Dec 2019 | National Company Law Tribunal (NCLT) |
| Bankruptcy process for personal guarantors | In force since 1 Dec 2019 | NCLT |
| Fresh start process (Chapter II) | Not notified | Would be the Debt Recovery Tribunal |
| Insolvency resolution and bankruptcy for other individuals and partnership firms | Not notified | Would be the Debt Recovery Tribunal |
| Repeal of the 1909 and 1920 insolvency Acts | Not in force, as the repeal was not notified | – |
The notification of 15 November 2019 applied Part III only "in so far as" it relates to personal guarantors to corporate debtors. The Supreme Court upheld it in Lalit Kumar Jain v. Union of India (2021). The Court also held that a company's resolution plan does not automatically discharge the guarantor. In Dilip B. Jiwrajka v. Union of India (2023), it upheld Sections 95 to 100, the stage where a resolution professional examines the application.
Before relying on this table, check the IBBI website and the e-Gazette for any later notification. A commencement notification could change the position for ordinary individuals.
How the personal guarantor process works
- Application. The guarantor (Section 94) or a creditor (Section 95) applies to the NCLT, through a resolution professional. Part III applies where the default is at least ₹1,000, a threshold the government can raise.
- Resolution professional's report. The professional examines the application and recommends acceptance or rejection. The 2026 Amendment Act lengthened the time for this report from 10 to 21 days, with effect from 26 May 2026.
- Admission. The NCLT admits or rejects the application. On admission, a moratorium applies to legal actions on the debts.
- Repayment plan. The debtor proposes a repayment plan to creditors, who vote on it. Under the 2026 amendment, if no plan is submitted, the process is terminated and the debtor or creditors may apply for bankruptcy.
- Bankruptcy. If the plan fails or is rejected, bankruptcy may follow. A bankruptcy trustee then takes over the estate and distributes it to creditors. A bankrupt person faces restrictions until discharged.
What changed in 2026
| Change | Effect |
|---|---|
| New Section 96(4) and corresponding change to Section 124, in force 26 May 2026 | Filing by or against a personal guarantor no longer brings an interim moratorium on other legal actions |
| IBBI circular of 21 September 2026 | Relying on Bombay and Delhi High Court judgments, IBBI says the interim moratorium ceased from 26 May 2026 even in applications already pending |
| IBBI regulation amendments of 1 June 2026 | The bankruptcy trustee needs the guarantor's committee of creditors to approve asset transfers, and must coordinate with the company's resolution professional |
| Section 99 timeline, in force 26 May 2026 | The resolution professional's report period is extended from 10 to 21 days |
Before 2026, guarantors often filed under Part III to obtain the interim moratorium and pause SARFAESI or DRT action. That route is closed. Lenders can continue recovery until the NCLT admits the application.
The fresh start process that is not yet available
Chapter II of Part III was designed for very poor debtors. Under Section 80, a debtor with gross annual income up to ₹60,000, assets up to ₹20,000, qualifying debts up to ₹35,000 and no house could seek a moratorium and then a discharge of qualifying debts. Because the chapter is not notified, there is no way to use it in 2026. Websites that offer to "file fresh start" for a fee are misleading.
Insolvency for everyone else: the old Acts
For an individual who is not a personal guarantor, the main statutes are:
- the Presidency Towns Insolvency Act, 1909, for the cities of Kolkata, Mumbai and Chennai, through the High Court;
- the Provincial Insolvency Act, 1920, elsewhere, through the district court.
Under these Acts, a debtor or creditor may file an insolvency petition. The court may appoint a receiver for the debtor's property. Being adjudged insolvent carries disqualifications and lasts until discharge. The process is slow, and courts look closely at the debtor's conduct. In practice, few salaried borrowers use it. Restructuring, settlement or contesting the claim are usually more practical. Speak to a lawyer before filing.
Who this matters for
| You are… | Practical route in 2026 |
|---|---|
| A salaried person with personal loans and cards | Restructuring or settlement; IBC not available |
| A sole proprietor with business loans | Lender negotiation, restructuring, DRT defence; IBC Part III for proprietors not notified |
| A partner in a firm | Not covered by the 2019 notification; old Acts and negotiation |
| A director who guaranteed company loans | IBC Part III before the NCLT, without interim moratorium since 26 May 2026 |
| A borrower under SARFAESI action | DRT application under Section 17 within 45 days; see SARFAESI rights |
Related guides
When to consult a professional
Always, before any insolvency filing. A personal guarantor should speak to an insolvency professional or lawyer as soon as the company is in default, because the protection available has changed. Others should get advice before using the 1909 or 1920 Acts.
Frequently asked questions
Can I declare bankruptcy to get rid of credit card debt?
Not under the IBC in 2026, because Part III is not in force for ordinary individuals. Petitions under the old Acts are possible in principle but rarely practical. Negotiation and settlement are the usual routes.
Does the IBC moratorium still protect personal guarantors?
The moratorium after the NCLT admits an application still applies. The interim moratorium on filing stopped applying from 26 May 2026, including in pending cases, according to the IBBI circular of 21 September 2026.
Who is the adjudicating authority for individuals?
For personal guarantors to corporate debtors, the NCLT. For other individuals and firms, the Code names the Debt Recovery Tribunal, but those provisions are not in force.
Will the rest of Part III be notified soon?
No date has been announced in the sources we checked. Watch the IBBI website and the e-Gazette.
Sources
- Insolvency and Bankruptcy Board of India: the Code as amended, the IBC (Amendment) Act, 2026, regulations and circulars
- e-Gazette of India: commencement notifications
- Ministry of Corporate Affairs: IBC policy and notifications
