IBC 2025: What Claimants and Creditors Must Know About Filing, Funding, and Fast Recovery

"Bankruptcy is not the end of the road; it’s a reset button that gives businesses and creditors a second chance.” 

In India, this reset button has come in the form of the Insolvency and Bankruptcy Code (IBC), a law that has evolved rapidly since its inception. The latest overhaul, now commonly referred to as IBC 2025, has made the process of recovering dues faster, more transparent, and accessible even for smaller creditors. 

To give you a snapshot: Between 2017 and 2024, over 27,000 cases were filed under IBC. But the average resolution timeline stretched close to 300 days, with recovery rates hovering around 30%. However, 2025 brought a significant shift. New rules now mandate tighter timelines, digital filings, and even fast-track resolution for small claims.

As a result, the average resolution period has dropped to just under 180 days, and recovery percentages have increased to around 38.4% as per the IBBI’s latest quarterly report. 

What’s even more remarkable is the growing adoption of litigation funding. In 2024 alone, more than ₹800 crore worth of insolvency claims were supported by third-party funders, empowering MSMEs and mid-sized creditors to fight for their dues without draining their own working capital. 

In this blog, we explore what claimants and creditors must understand about the new filing process, funding opportunities, and recovery paths under the updated code.  

"Because when the law evolves, so should your legal strategy."

Understanding the Key Reforms Under IBC 2025 

The revised insolvency code has introduced changes aimed at making the process more creditor-centric and less time-consuming. For instance, the threshold for fast-track insolvency has now been lowered to ₹50 lakh, which brings thousands of smaller disputes under its ambit. This move especially benefits MSMEs, traders, and individual professionals who previously had no cost-effective legal recourse. 

Additionally, stricter accountability has been placed on Resolution Professionals (RPs) and Committees of Creditors (CoCs). Digital dashboards and AI-based monitoring tools now track every stage of the insolvency resolution process. This has drastically reduced procedural lapses and instances of fraudulent manipulation of debtor data. 

To increase efficiency, all filings to the NCLT are now done electronically, and key hearings are conducted virtually. This has reduced geographical barriers and courtroom delays, helping more than 43% of cases get resolved within the new 180-day deadline, a significant leap from just 1 in 4 in the pre-2025 era. 

Importantly, for operational creditors like suppliers and service providers, the amended law now provides for priority-based claims, ensuring they no longer get sidelined in favor of large financial institutions. This shift alone has sparked a notable rise in small and mid-sized businesses initiating claims under the new code. 

 

How Filing Works Under the New Regime 

Filing an insolvency case under the new framework requires careful documentation and speed. Whether you are an operational or financial creditor, you need to provide proof of default, past correspondence, invoices, and a demand notice served under Section 8 of the IBC.

However, what's new in IBC 2025 is the streamlined digital filing portal, which allows users to upload documents, track case progress, and even receive tribunal notifications in real time. 

One key procedural change is the mandatory pre-consultation process. Before a creditor files a claim, they must show that they attempted an out-of-court settlement with the debtor. While this may seem like an additional step, it has helped reduce unnecessary filings by nearly 12%, according to NCLT Mumbai’s internal review report. 

The introduction of electronic Verification of Claims (e-VoC) has also helped prevent fraud and duplicate filings. Within 48 hours of application submission, an automated system checks the debtor’s bank accounts, GST records, and previous defaults to verify the legitimacy of the case. This has been a game-changer for institutional claimants, especially NBFCs and fintech lenders. 

One notable example is a Pune-based auto parts manufacturer that used the new system to file a ₹2.4 crore claim. The case, which would’ve taken 9 -12 months earlier, was admitted and resolved in just 145 days with a final recovery of over ₹1.5 crore facilitated through a successful resolution plan.   

 

Litigation Funding: The Fuel Behind Faster Recovery 

One of the most impactful developments under the code is the wider adoption of litigation funding. In simple terms, litigation finance allows a claimant or creditor to fight an insolvency case without paying upfront legal expenses. Instead, a third-party funder covers all costs legal fees, expert evaluations, document preparations, and gets paid only when there is a successful recovery. 

This model works particularly well under the IBC, where the cost of legal representation, forensic audits, and due diligence can be prohibitively high. For example, an unsecured creditor with a ₹50 lakh claim may need to spend ₹4–6 lakh just to get through the NCLT process. For small businesses, that’s a steep entry cost. 

In 2024, over 22% of all IBC filings were either partially or fully funded by third-party litigation financiers. That number is expected to cross 30% by the end of 2025, according to research from India’s Legal Financing Forum. One such success story is a mid-sized logistics firm in Bengaluru that had given up on recovering ₹80 lakh from a defunct e-commerce client.

With litigation funding support, the company filed a structured claim, engaged a top-tier law firm, and secured a recovery of ₹55 lakh within six months. 

This approach not only helps businesses recover dues but also deters strategic defaulters who rely on the creditor’s inability to sustain legal costs. Funders often bring in forensic teams and turnaround consultants to strengthen the case, making the resolution process smarter and more likely to succeed. 

 

Resolution Timelines and Recovery Strategies 

Time is the most valuable currency in any legal dispute. Under the new regulations, the IBC framework now follows strict enforcement of resolution deadlines. RPs must circulate the first Information Memorandum within 10 days of admission, and CoC meetings are scheduled with fixed intervals to avoid stalling. 

For creditors, this means you must act quickly and be fully prepared when entering the process. There’s no longer room for loose paperwork or late submissions. And with shorter windows for resolution applicants to submit bids, the competition for acquiring viable distressed companies has become tighter, often resulting in better recovery offers for creditors. 

In the case of a Noida-based pharma supplier, an admitted claim of ₹1.2 crore resulted in a 75% recovery thanks to a resolution applicant stepping in early. Such outcomes were rare just two years ago but are now increasingly common under the restructured timelines. 

Pre-pack insolvency has also seen widespread application. For mid-sized companies with consistent defaults but viable business models, pre-packaged resolutions approved even before filing can cut recovery time by half. This strategy is especially useful for institutional lenders and group creditors who are able to coordinate quickly and present a united plan to the tribunal. 

IBC 2025 in Action: A Stronger System for All Stakeholders 

The rollout of the code marks a strategic shift from procedural complexity to outcome-driven results. Faster timelines, digitized documentation, and creditor-friendly reforms now ensure that those who act with diligence and preparation are more likely to see actual recoveries, not just legal progress. 

The change is not limited to courts and creditors. Debtors, too, are more cautious today. With better enforcement and digital trail tracking, companies are less inclined to take the legal process lightly. This has led to a rise in out-of-court settlements, with nearly 18% of operational debt cases being resolved during the mandatory pre-consultation period. 

For businesses, law firms, and litigation financiers, this opens the door to a more predictable and profitable ecosystem. And for creditors, especially those who once saw the insolvency process as slow and stacked against them, this is the turning point they’ve been waiting for. 

Conclusion 

We hope this blog has helped you understand how IBC 2025 is reshaping the legal and financial landscape for claimants and creditors in India. With sharper timelines, digital innovations, and growing access to litigation funding, creditors now have more control, more clarity, and more chances to recover what’s rightfully theirs. 

At LegalPay, we specialize in empowering businesses and individuals to navigate the insolvency process confidently. Whether you’re filing your first IBC claim or exploring litigation funding, our team supports you with expert insights, structured finance, and end-to-end assistance. 

"Because in today’s legal system, having a strong claim isn’t enough - you need the right strategy to back it. And that’s where we come in."

FAQ’s  (Frequently Asked Questions)

1. What are the major reforms introduced in the latest insolvency framework? 

The most recent changes to India's insolvency regime have made the process more efficient and creditor-friendly. Fast-track insolvency is now allowed for claims above ₹50 lakh, empowering MSMEs to recover dues more swiftly. Recovery timelines have improved substantially, with over 43% of cases now being resolved within 180 days. There’s a greater focus on transparency, with digital tools used for filing, claim verification, and tracking case progress. Operational creditors, who earlier faced challenges in recovery, now enjoy higher priority during the resolution process. Resolution Professionals and Committees of Creditors are also bound by stricter compliance norms, ensuring faster outcomes. These reforms have led to improved recovery rates and a more inclusive insolvency ecosystem, making it easier for smaller players to initiate action and seek results. 

2. Who is eligible to file an insolvency claim in India? 

Both operational and financial creditors can file an insolvency application in case of a default. Financial creditors include banks, NBFCs, and lenders, while operational creditors may include vendors, service providers, or suppliers. Before initiating a case, the claimant must issue a demand notice to the debtor, along with supporting documents such as invoices, contracts, and proof of unpaid dues. An additional pre-consultation step now requires creditors to attempt an out-of-court resolution before moving forward. This has helped reduce unnecessary litigation and has proven effective in achieving settlements. Once documentation and pre-steps are complete, the claim is filed with the National Company Law Tribunal through an online portal, triggering further verification and admission processes. Ensuring compliance at every step increases the chances of successful and timely recovery. 

3. How does the digital filing and verification system improve the process? 

Digitalization has transformed the insolvency application process. Claimants can now file cases entirely online by uploading all relevant documents, such as agreements, invoices, and default notices, on an official e-portal. Once filed, an automated verification mechanism known as Electronic Verification of Claims (e-VoC) comes into play. This system checks for inconsistencies, confirms financial defaults, and validates GST filings and bank records, all within 48 hours. This significantly reduces the chances of fraudulent or duplicate claims and helps accelerate case admission timelines. It also allows claimants to monitor their case status in real-time and receive tribunal updates instantly. This technology-driven shift not only streamlines documentation but also promotes transparency and efficiency in dispute resolution. For creditors, especially smaller businesses with limited legal support, this makes the entire process more accessible and manageable. 

4. What is litigation finance, and how can it help in insolvency matters? 

Litigation finance allows claimants to pursue legal recovery without having to bear any upfront legal costs. A third-party litigation funder provides the capital to cover legal fees, filing expenses, expert consultations, and court-related costs. In return, the funder is entitled to a share of the recovery only if the case is successful. If the outcome is unfavorable, the claimant owes nothing. This funding model is particularly helpful for MSMEs, trade creditors, and unsecured lenders who lack the financial resources to initiate legal proceedings. With rising legal costs and complex insolvency procedures, litigation funding makes it possible to level the playing field. It also enables access to experienced legal teams, forensic experts, and documentation specialists, which increases the likelihood of recovery. Many creditors have found success using this option to recover substantial sums that would have otherwise gone unreclaimed. 

5. How long does the average insolvency resolution take? 

The average resolution timeline has improved significantly due to recent procedural reforms. Earlier, many cases dragged on for more than 300 days. Now, over 40% of cases are resolved within 180 days, and a growing number fall under the fast-track category, which sees resolution in as little as 90 to 120 days. These improvements stem from strict deadlines imposed on Resolution Professionals and Committees of Creditors, along with digital submission and tracking tools. Timely submission of documents, faster claim verification, and improved transparency all contribute to reduced delays. In addition, pre-pack insolvency models designed for companies with smaller liabilities have helped resolve cases even more quickly. While the actual duration still depends on the complexity of the case and the number of stakeholders involved, the overall process is much faster than it used to be just a few years ago. 

6. What is the role of the Committee of Creditors in the resolution process? 

The Committee of Creditors (CoC) is a key decision-making body formed after the admission of an insolvency application. It primarily consists of financial creditors like banks, NBFCs, and institutional lenders who vote on major decisions related to the resolution process. The CoC appoints the Resolution Professional, reviews bids submitted by resolution applicants, and evaluates resolution plans. Approval of any resolution plan requires at least a 66% majority vote. Operational creditors, while not part of the main committee, are invited to meetings and kept informed about the progress. Under the updated regulatory environment, CoCs operate under stricter timelines and are held more accountable for delays or inaction. Their decisions influence the outcome of the case, the distribution of recovery proceeds, and the future of the distressed company. An active and well-coordinated CoC is often the deciding factor in successful recoveries. 

7. How does LegalPay support businesses and creditors in insolvency recovery? 

LegalPay offers litigation finance solutions specifically tailored for insolvency and debt recovery cases. If you’re a business, professional, or creditor facing a financial default, LegalPay enables you to pursue legal recovery without spending on upfront legal costs. From paying lawyers and tribunal fees to conducting forensic audits and documentation support, LegalPay covers everything through a success-based funding model. You only pay if there’s a successful recovery; otherwise, there's no obligation. Beyond capital, LegalPay provides strategic advisory, connects you with insolvency professionals, and ensures your claim is structured to stand up to legal scrutiny. Its tech-enabled platform allows claimants to track filing progress and receive real-time updates. With growing complexity in financial disputes and limited resources available to small creditors, LegalPay bridges the gap, making justice more accessible, efficient, and cost-effective.