If you are genuinely out of options when it comes to repaying your loan, you can file insolvency. But you can file an insolvency petition only if your liabilities exceed your assets, making it impossible for you to repay your debts. If a petition is filed on flimsy grounds, or if you are unable to prove that you cannot pay off your debt, the petition will be dismissed.
On filing a petition of insolvency, the court will fix a date for hearing and you will be required to file all books of accounts, income statements, details of your assets etc. The court will investigate on this to ensure that you are genuine and has made full disclosure of your assets.The treatment of the debt will be as per the court’s verdict. However, if the loan is having collateral, the lender still has all the rights to acquire the mortgaged asset. For non-collateralized loans like personal loans or credit card loans, the lender will have to follow the court's directives.On being declared as insolvent, the court will appoint an officer who will take charge of the property and take decisions on dividing it among the lender(s) to settle your debts.
There is no fixed period for legal recourses and the proceedings depend upon the complexity of each case.The advantage in declaring insolvency is that the lenders will no longer be behind you for recovery. Also, while the matter is in the court, the lenders cannot file separate suits against you without the court’s permission.
Hope this answer helps you.