INSOLVENCY LAW

INSOLVENCY LAW

PURPOSE

TO Effect equal distribution on the property of the bankrupts among its creditor allowing the debtor to
be discharge allowing him to start afresh. There are instances that is expressly provided by law

SUSPENSION OF PAYMENT
Is a remedy available under the insolvency law to a natural person who having sufficient assets to
meet his obligations foresees the impossibility of not paying the obligations when it falls due and
making such proposal of paying the same on later dates or later on the due dates by a petition filed
in a regional trial court.
Its not the same with insolvency law since the obligations is more than the asset.
Sa suspension of payments, sakto pa ang asset sa debtor,the assets are sufficient to meet his
obligation only that the debtor cannot pay this obligations when this obligation falls due and there is a
proposal to pay them on later dates.

PROCEDURE
Petition shall be filed which shall be accompanied by an inventory of assets and a detail schedule of
obligations amounts and their due dates
Issuance of court of an order setting the date and place of meeting of creditors
Then the order shall be published
There will be service of summons to all creditors listed in the petition
Creditors shall meet and approve the debtor’s proposal, such proposal will be approved if it agreed
2/3 in number and representing 3/5 of the liabilities.
Objections if any, of other creditors
Order of the court implementing the agreement

INSOLVENCY

VOLUNTARY INSOLVENCY
A proceeding taken by the debtor having obligations exceeding 1,000.00 whom his existing assets
cannot meet all of them obligations and making himself to be declared an INSOLVENT
In voluntary insolvency, the debtors asset is less than his obligations and its required in voluntary
insolvency that the obligation must exceed Php1000

PROCEDURE
Debtor shall file a petition accompanied by inventory of assets and schedule of liabilities.
The court issues order declaring him insolvent, The issuance of order declaring the debtor insolvent
is MANDATORY.

The order issued by court shall be published and the order shall be served on the creditors mentioned
in the petition

The creditor shall meet to elect and ASSIGNEE to whom are conveyed the debtor’s asset

FUNCTIONS AND OBLIGATIONS OF ASSIGNEE

The assignee collects all receivables of the insolvent compromises and settles them and pays off
the proceeds to the creditors following the rules on concurrence and preference of credit.

It’s the assignee who will collect whatever assets the debtor owes and after that he shall pay off the
proceeds to the creditors, following the rules on concurrence and preference of credit

Order discharge will be issued upon the insolvent

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EFFECTS
When issued, it will free the insolvent from taking the balance of his obligations,brought up in the
proceedings and frees his future acquisition of properties for the payment of his obligation involve in
the insolvency proceedings.
After acquired assets cannot be executed by the creditors.
Example:
Order of discharge was issued, and after executing the suppose obligations involve in the
insolvency proceedings the debtor acquires property and won the lottery, such subsequent
acquisitions cannot be the subject of payment of the obligations to the creditors.

COMPOSITION

It is an agreement between the creditors and debtor if agreed. It is a proceeding voluntary on both
sides by which a debtor offers to pay the creditor a certain percentage of their claims for the release
of their credits. It is effective from the time the majority number of creditors represented the majority
of number and the amounts of claims agreed to the composition

Example:
The debtor offers to pay the creditor 60% of their claims in exchange for the release of the
latter for the liability and said offer is accepted by creditors representing the amount of the claims.
When you are declared insolvent by the court and there will be an assignee, since the assets of the
debtor is insufficient to meet the obligations the actual amount receivable by the creditor is not the
whole amount of the debt specially when concurrence and preference of credit is applied.
Involuntary Insolvency

Is a proceeding filed by three or more creditors whose credits aggregates 1000 or by a

corporation or partnership to declare the debtor insolvent because the debtor committed any one of
the acts of the insolvency enumerated by law

The following shall be considered acts of insolvency, and the petition for insolvency shall set forth one
or more of insolvency such acts:
(1) That such person is about to depart or has departed from the Philippine Islands, with intent to
defraud his creditors;
(2) that being absent from the Philippine Islands, with intent to defraud his creditors, he remains
absent;
(3) that he conceals himself to avoid the service of legal process for purpose of hindering or delaying
or defrauding his creditors;
(4) that he conceals, or is removing, any of his property to avoid its being attached or taken on legal
process;
(5) that he has suffered his property to remain under attachment or legal process for three days for
the purpose of hindering or delaying or defrauding his creditors;
(6) that he has confessed or offered to allow judgment in favor of any creditor or claimant for the
purpose of hindering or delaying or defrauding any creditor or claimant;
(7) that he has willfully suffered judgment to be taken against him by default for the purpose of
hindering or delaying or defrauding his creditors;
(8) that he has suffered or procured his property to be taken on legal process with intent to give a
preference to one or more of his creditors and thereby hinder, delay, or defraud any one of his
creditors;
(9) that he has made any assignment, gift, sale, conveyance, or transfer of his estate, property, rights,
or credits with intent to delay, defraud, or hinder his creditors;
(10) that he has, in contemplation of insolvency, made any payment, gift, grant, sale conveyance, or
transfer of his estate, property, rights, or credits;
(11) that being a merchant or tradesman he has generally defaulted in the payment of his current
obligations for a period of thirty days;

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(12) that for a period of thirty days he has failed, after demand, to pay any moneys deposited with him
or received by him in a fiduciary capacity; and
(13) that an execution having been issued against him on final judgment for money, he shall have
been found to be without sufficient property subject to execution to satisfy the judgment.

So basically the difference between voluntary and involuntary insolvency is that in the
involuntary insolvency the petitioner is filed by three or more creditors whose credit or by a corporation
or partnership to declare a debtor insolvent because he has committed anyone of the acts of
insolvency enumerated by law.
Take note of the acts of insolvency, this are EXCLUSIVE

PROCEDURE
 Filing of the petition, since of course since this is an involuntary insolvency case the defendant
has to answer,
 There shall be trial
 The court shall order adjudging the debtor as an insolvent which are supported by facts.
 After the order declaring the debtor insolvent, the same shall be published and the order shall
be served to all the creditors
 Creditors shall elect an assignee, the assignee shall take responsibility of all the assets of the
debtors
 Liquidation and payment of creditors and there is also a composition It is an agreement
between the creditors and debtor if agreed. It is a proceeding voluntary on both sides by which
a debtor offers to pay the creditor a certain percentage of their claims for the release of their
credits. It takes effect from the time the majority of the creditors representing majority in
number and the amount of the claims agreed in the composition
 Issuance of order of discharge of the insolvent

SUSPENSION OF VOLUNTARY INVOLUNTARY

PAYMENTS INSOLVENCY INSOLVENCY
The debtor has enough
assets to meet his liabilities Debtor has more obligations than his assets
only that, he cannot meet
them as they fall due
Petition is always initiated by It can be initiated by the creditors or by the debtor himself
the debtor

INVOLUNTARY INSOLVENCY VOLUNTARY INSOLVENCY

Three or more creditors are required One creditor will be sufficient

Creditors must be resident of the Philippines, This are not required

whose credits and demands accrued within
the Philippines and none of the creditors has
become a creditor by assignment within thirty
days prior to the filing of the petition
The debtor must done any acts of insolvency Debtor need not to do any of the acts of
enumerated by law insolvency
The amount of indebtedness must not be less Indebtedness must exceed Php 1000
than Php1000
Petition must be accompanied by a bond Bond is not required

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WHAT WOULD HAPPEN TO SUITS PENDING IN COURT FOR CASES WHICH ARE NOT YET
FILED IF THERE IS ALREADY AN ADJUDICATION OF INSOLVENCY MEANING THE DEBTOR IS
ALREADY DECLARED INSOLVENT BY THE COURT
FOR SUITS WHICH ARE PENDING IN COURT, TAKE NOTE WHETHER THEY ARE SECURED
OR UNSECURED OBLIGATIONS.

FOR CASES PENDING IN COURT FOR SECURED OBLIGATION, UPON THE ADJUDICATION OF
INSOLVENCY THEY ARE SUSPENDED UNTIL THE ASSIGNEE IS APPOINTED

FOR UNSECURED OBLIGATIONS, THE CASE PENDING IN COURT IS SUSPENDED EXCEPT

TO FIX THE AMOUNT OF THE OBLIGATION. THIS IS ONLY UPON THE ADJUDICATION OF
INSOLVENCY
BUT FOR FORECLOSURE CASES, THEY MAY CONTINUE

WITH RESPECT TO CASES NOT YET FILED, UPON THE ISSUANCE OF ORDER OF
INSOLVENCY DECLARING THE DEBTOR INSOLVENT, TAKE NOTE THAT THEY CANNOT
LONGER BE FILED ANYMORE, BUT THE CASE MAYBE PRESENTED TO THE ASSIGNEE AS
SOON AS HE IS APPOINTED.

ASSIGNEE- IS THE PERSON ELECTED BY THE MAJORITY OF THE CREDITORS

WHO HAVE PROVEN THEIR CLAIMS AND SUCH MAJORITY IS BEING
THE NUMBER AND AMOUNT, THE ONE WHO COLLECTS THE ASSETS OF
DEBTOR.

DUTIES OF THE ASSIGNEE

Inventory the property To account the money receive at

To collect all assets To distribute the money to the creditors
To convert all assets to cash

Duty is vested upon him actions with the end view of bringing back the insolvents estate assets
over which undue preference they may have at the meantime created by the acts of the creditors
done in contemplation with the insolvency

POWERS OF THE ASSIGNEE

To sue and possess assets and collected debts of the debtor

To sell in an auction of the assets
To redeem all mortgages
To compromise with the insolvents debtor
To recover properties fraudulently conveyed by the debtor

SECTION 32. Transfer of property to assignee. – As soon as an assignee is elected or appointed and
qualified, the clerk of the court shall, by an instrument under his hand and seal of the court, assign
and convey to the assignee all the real and personal property, estate, and effects of the debtor with
all his deeds, books, and papers relating thereto, and such assignment shall relate back to the
commencement of the proceedings in insolvency, and shall relate back to the acts upon which the
adjudication was founded, and by operation of law shall vest the title to all such property, estate, and
effects in the assignee, although the same is then attached on mesne process, as the property of the
debtor. Such assignment shall operate to vest in the assignee all of the estate of the insolvent debtor
not exempt by law from execution. It shall also dissolve any attachment levied within one month next
preceding the commencement of the insolvency proceedings and vacate and set aside any judgment
entered in any action commenced within thirty days immediately prior to the commencement of

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insolvency proceedings and shall vacate and set aside any execution issued thereon and shall vacate
and set aside any judgment entered by default or consent of the debtor within thirty days immediately
prior to the commencement of the insolvency proceedings.

THE ASSIGNMENT OF THE ASSIGNEE OF ALL REAL AND PERSONAL PROPERTY, ESTATE
AND EFFECTS OF THE DEBTOR MADE BY THE CLERK OF COURT SHALL VACATE AND SET
ASIDE ANY JUDGMENT ENTERED IN ANY ACTION WITHIN 30 DAYS IMMEDIATELY PRIOR TO
THE COMMENCEMENT OF THE INSOLVENCY PROCEEDINGS.

TAKE NOTE 30 DAYS BEFORE THE FILING OF CASES IN INSOLVENCY PROCEEDINGS

EXAMPLE

insolvency case was filed on May 8, 2017, 30 days prior to this date maybe April 9, 2017, any case
filed in between of this date and all decision that will be rendered by court with respect to this cases
shall be vacated, ONCE THERE IS ALREADY AN ASSIGNMENT OF THE REAL AND PERSONAL
PROPERTY TO THE ASSIGNEE, EVEN THE DECISION HAS ALREADY RENDERED LATER ON,
SUCH DECISION WILL BE VACATED,
Ang inyuha lang bantayan is that the case is filed 30 days prior to the insolvency case,
The reckoning and important question is that WHETHER OR NOT THE CASE WAS FILED THIRTY
DAYS PRIOR TO THE COMMENCEMENT OF THE INSOLVENCY PROCEEDINGS.
But the decision shall only be vacated, once there was already an assignment of real and
personal property to the assignee

Take note also of the debts that are cannot be proof against the insolvent state

ALSO WITHIN THIRTY DAYS AFTER THE COMMENCEMENT OF THE INSOLVENCY

PROCEEDINGS ANY ATTACHMENT AND WRIT OF ATTACHMENT ISSUED WITHIN THIRTY
DAYS AFTER SHALL ALSO BE DISSOLVED

SO, THIRTY DAYS PRIOR THE RECKONING POINT IS THE COMMENCEMENT OF THE
INSOLVENCY PROCEEDINGS ANY CASE FILED TO THIS DATES SHALL BE VACATED

ANY WRIT OF ATTACHMENT AND ISSUED AFTER THIS DATE SHALL BE SET ASIDE AND
DISSOLVED

DISCHARGE
Is the release of the debtor of all the obligations prior to the insolvency the conditions to be
satisfied are as follows.

The application must be filed within three months nor more than one year after the adjudication of the
insolvent and that he has not committed any acts enumerated by law to prevent the discharge

EFFECTS OF DISCHARGE

It discharges the debtor from the debts set forth in the schedule and those which might been
proved in the insolvency proceedings

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Kadtung utang na gilista niya sa inventory, ug kadtung utang na maprove sa proceedings free na siya
adtu.

Then operate that as discharge on the person and its future acquisitions, to the effect that after
acquired properties cannot be obtain by its creditor, BUT THE DISCHARGE OF THE INSOLVENT
WILL NOT BENEFIT THE SURETY, THE SURETY WILL BE ANSWERABLE FOR WHATEVER
AMOUNT UNSATISFIED BY THE DISPOSITION BY THE INSOLVENTS PROPERTIES WITH THE
RIGHT TO GO AGAINST THE INSOLVENT DEBTOR AFTER IT HAS MADE THE NECESSARY
PAYMENT TO THE CREDITOR.

Take note also of the debts that cannot be discharged

 Tax and assessment due to the Government whether proved or unproved

 Debt created by fraud or embezzlement of the debtor, defalcation as a public officer or
while acting in fiduciary capacity
 Person liable for the same debt for or with the debtor, either as partner, joint contractor,
indorser and surety