VOLUNTARY INSOLVENCY,

Insolvency Law- ACT NO. 1956

KINDS OF INSOLVENCY

1. Voluntary insolvencyan insolvent debtor owing debts exceeding in amount in the sum of
P1000, may apply to be discharged from his debts and liabilities by petition to the RTC of the
province or city in which he has resided for 6 months next preceding the filing of the petition

2. Involuntary insolvencyan adjudication of insolvency may be made by the petition of 3 or

more creditors, residents of the Philippines, whose credits or demands accrued in the
Philippines, for the amount of which credits or demands are in the aggregate of not less
than P1000.

STEPS IN VOLUNTARY INSOLVENCY

1. Filing of the petition by the debtor praying for the declaration of insolvency
2. Issuance of order of adjudication declaring the petitioner insolvent
3. Publication and service of the order
4. Meeting of the creditors to elect the assignee in insolvency

5. Conveyance of the debtors property by the clerk of court to the assignee

6. Liquidation of the debtors assets and payment of his debts
7. Composition, if agreed upon
8. Discharge of the debtor on his application, except a corporation
9. Objection, if any, to the discharge
10. Appeal to the SC in certain cases

REQUISITES OF PETITION FOR VOLUNTARY INSOLVENCY THE PETITION WHICH

MUST BE VERIFIED, IS TO BE FILED

1. By an insolvent debtor

2. Owing debts exceeding in amount of the sum of P1000

3. In the RTC of the province or city in which he has resided for 6 months next preceding the
filing of such petition

4. Setting forth in his petition the following

a. His place of residence
b. The period of residence therein immediately prior to filing said petition
c. His inability to pay all his debts in full
d. His willingness to surrender all his property, estate, and effects not exempt from
execution for
the benefit of creditors
e. An application to be adjudged an insolvent

REQUISITES OF PETITION FOR VOLUNTARY INSOLVENCY THE PETITION WHICH

Owing debts exceeding in amount of the sum of P1000

3. In the RTC of the province or city in which he has resided for 6 months next preceding the
filing of such petition

4. Setting forth in his petition the following

a. His place of residence
b. The period of residence therein immediately prior to filing said petition
c. His inability to pay all his debts in full
d. His willingness to surrender all his property, estate, and effects not exempt from
execution for
the benefit of creditors
e. An application to be adjudged an insolvent

EFFECT OF FILING OF PETITION

Once the petition is filed, it ipso facto takes away and deprives the debtor petitioner of
the right to do or commit any act of preference as to creditors, pending the final adjudication

DOCUMENTS TO ACCOMPANY THE PETITION

1. A verified schedule must contain

a. A full and true statement of all debts and liabilities of the insolvent debtor
b. An outline of the facts giving rise or which might give rise to a cause of action
against such in An accurate description of all the personal and real property of the insolvent
exempt or not from
execution including a statement as of its value, location and encumbrances thereon

b. An outline of the facts giving rise or which might give rise to a right of action in
favor of the insolvent debtor

FILING OF SCHEDULE AND INVENTORY, JURISDICTIONAL

On filing a petition for a discharge from his debts, an insolvent is required to

present a verified schedule of liabilities and a verified inventory of his properties
The presentation of such documents stating the amount of each creditors claim is a
jurisdictional requirement, without the proper performance of which his subsequent
discharge will be of no avail

EFFECT OF FILING OF PETITION

Once the petition is filed, it ipso facto takes away and deprives the debtor petitioner of
the right to do or commit any act of preference as to creditors, pending the final adjudication

DOCUMENTS TO ACCOMPANY THE PETITION

1. A verified schedule must contain

a. A full and true statement of all debts and liabilities of the insolvent debtor
b. An outline of the facts giving rise or which might give rise to a cause of action
against such in An accurate description of all the personal and real property of the insolvent
exempt or not from
execution including a statement as of its value, location and encumbrances thereon

b. An outline of the facts giving rise or which might give rise to a right of action in
favor of the insolvent debtor

a petition for a discharge from his debts, an insolvent is required to present a verified
schedule of liabilities and a verified inventory of his properties
The presentation of such documents stating the amount of each creditors claim is a
jurisdictional requirement, without the proper performa

EFFECT OF FILING OF PETITION

Once the petition is filed, it ipso facto takes away and deprives the debtor petitioner of
the right to do or commit any act of preference as to creditors, pending the final adjudication

DOCUMENTS TO ACCOMPANY THE PETITION

1. A verified schedule must contain

a. A full and true statement of all debts and liabilities of the insolvent debtor
b. An outline of the facts giving rise or which might give rise to a cause of action
against such insolvent debtor

2. A verified inventory which must contain

a. An accurate description of all the personal and real property of the insolvent exempt or
not from
execution including a statement as of its value, location and encumbrances thereon

b. An outline of the facts giving rise or which might give rise to a right of action in
favor of the insolvent debtor

FILING OF SCHEDULE AND INVENTORY, JURISDICTIONAL

On filing a petition for a discharge from his debts, an insolvent is required to

present a verified schedule of liabilities and a verified inventory of his properties
The presentation of such documents stating the amount of each creditors claim is a
jurisdictional requirement, without the proper performance of which his subsequent
discharge will be of no avail

EFFECT OF ERRORS IN DESCRIPTION OR OMISSION OF PROPERTY IN

INVENTORY

That the property is erroneously or ambiguously described in the insolvents inventory

will not affect the titof the insolvent passes to his assignee and is administered in the
insolvency proceedings regardless of errors in the insolvency.
If the insolvent omits property from his inventory, through either mistake or fraud, it is
the duty of the assign take possession and administer it
Even property exempt from execution must be included in order to preclude possible
fraudulent omissions under the pretext that such property is exempt. But where the
petitioner didnt attach an inventory to its petition for insolvency, alleging under oath that it
had no property to inventory, the lack of inventory was held not fatal to the petition
because it was assumed, until proven otherwise, that the petitioner was stating the truth.

EFFECT OF COURT ORDER DECLARING DEBTOR INSOLVENT

1. All the assets of the debtor not exempt from execution are taken possession of by the sheriff
until the appointment of a receiver or assignee
2. The payment to the debtor of any debts due to him and the delivery to the debtor or to
any person for him of any property belonging to him, and the transfer of any property to him
are forbidden
3. All civil proceedings pending against the insolvent debtor shall be stayed
4. Mortgages or pledges, attachments or executions on property of the debtor duly
recorded and not dissolved are not, however, affected by the order

IF YOU ARE THE DEBTOR, WHY WOULD YOU FILE FOR INSOLVENCY?

The debtor will get a discharge

A corporation doesnt get a discharge
The partners in a partnership will get a discharge