Article 62Supplement v1, p. 62

COMMERCIAL LAWS SUPPLEMENT

had against the individual debtor before the agreement

shall revest in them. In such case the individual debtor

may be made subject to the insolvency proceedings in

the manner established by this Act.

(B) Voluntary Liquidation.

SECTION 103. Application. — An individual debtor whose

properties are not sufficient to cover his liabilities, and

owing debts exceeding Five hundred thousand pesos

(Php500,000.00), may apply to be discharged from his

debts and liabilities by filing a verified petition with the

court of the province or city in which he has resided for six

(6) months prior to the filing of such petition. He shall

attach to his petition a schedule of debts and liabilities

and an inventory of assets. The filing of such petition shall

be an act of insolvency.

SECTION 104. Liquidation Order. — If the court finds the

petition sufficient in form and substance, it shall, within

five

(5)

working

days,

issue

the

Liquidation

Order

mentioned in Section 112 hereof.

(C) Involuntary Liquidation.

SECTION 105. Petition; Acts of Insolvency. — Any creditor

or group of creditors with a claim of, or with claims

aggregating,

at

least

Five

hundred

thousand

pesos

(Php500,000.00) may file a verified petition for liquidation

with the court of the province or city in which the

individual debtor resides.

The following shall be considered acts of insolvency, and

the petition for liquidation shall set forth or allege at least

one of such acts:

(a) That such person is about to depart or has departed

from the Republic of the Philippines, with intent to

defraud his creditors;

(b)

That

being

absent

from

the

Republic

of

the

Philippines,

with

intent to defraud his creditors, he

remains absent;

(c) That he conceals himself to avoid the service of legal

process for the purpose of hindering or delaying the

liquidation or of defrauding his creditors;

(d) That he conceals, or is removing, any of his property to

avoid its being attached or taken on legal process;

(e) That he has suffered his property to remain under

attachment or legal process for three (3) days for the

purpose of hindering or delaying the liquidation or of

defrauding his creditors;

(f) That he has confessed or offered to allow judgment in

favor of any creditor or claimant for the purpose of

hindering or delaying the liquidation or of defrauding any

creditor or claimant;

(g) That he has willfully suffered judgment to be taken

against him by default for the purpose of hindering or

delaying the liquidation or of defrauding his creditors;

(h) 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 or delay

the liquidation or defraud any one of his creditors;

(i)

That

he

has

made

any

assignment,

gift,

sale,

conveyance or transfer of his estate, property, rights or

credits with intent to hinder or delay the liquidation or

defraud his creditors;

(j) That he has, in contemplation of insolvency, made any

payment, gift, grant, sale, conveyance or transfer of his

estate, property, rights or credits;

(k) That being a merchant or tradesman, he has generally

defaulted in the payment of his current obligations for a

period of thirty (30) days;

(l) That for a period of thirty (30) days, he has failed, after

demand, to pay any moneys deposited with him or

received by him in a fiduciary capacity; and

(m) 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.

The petitioning creditor/s shall post a bond in such sum

as the court shall direct, conditioned that if the petition

for liquidation is dismissed by the court, or withdrawn by

the petitioner, or if the debtor shall not be declared an

insolvent, the petitioners will pay to the debtor all costs,

expenses, damages occasioned by the proceedings, and

attorney's fees.

SECTION 106. Order to Individual Debtor to Show Cause.

— Upon the filing of such creditors' petition, the court

shall issue an Order requiring the individual debtor to

show cause, at a time and place to be fixed by the said

court, why he should not be adjudged an insolvent. Upon

good

cause

shown,

the

court

may

issue an Order

forbidding the individual debtor from making payments

of

any

of

his

debts,

and

transferring

any

property

belonging to him. However, nothing contained herein

shall affect or impair the rights of a secured creditor to

enforce his lien in accordance with its terms.

SECTION 107. Default. — If the individual debtor shall

default or if, after trial, the issues are found in favor of the

petitioning creditors, the court shall issue the Liquidation

Order mentioned in Section 112 hereof.

SECTION 108. Absent Individual Debtor. — In all cases

where the individual debtor resides out of the Republic of

the Philippines; or has departed therefrom; or cannot,

after due diligence, be found therein; or conceals himself

to avoid service of the Order to show cause, or any other

preliminary process or orders in the matter, then the

petitioning

creditors,

upon

submitting

the

affidavits

requisite

to

procure

an

Order

of

publication,

and

presenting

a

bond

in

double

the

amount

of

the

aggregate sum of their claims against the individual

debtor, shall be entitled to an Order of the court directing

the sheriff of the province or city in which the matter is

pending to take into his custody a sufficient amount of

property of the individual debtor to satisfy the demands

of

the

petitioning

creditors

and

the

costs

of

the

proceedings. Upon receiving such Order of the court to

take into custody property of the individual debtor, it shall

be the duty of the sheriff to take possession of the

property and effects of the individual debtor, not exempt

from execution, to an extent sufficient to cover the

amount provided for, and to prepare, within three (3) days

from the time of taking such possession, a complete

inventory of all the property so taken, and to return it to

the court as soon as completed. The time for taking the

inventory and making return thereof may be extended for

good cause shown to the court. The sheriff shall also

prepare a schedule of the names and residences of the

creditors, and the amount due each, from the books of

the debtor, or from such other papers or data of the

individual debtor available as may come to his possession,

and shall file such schedule or list of creditors and

inventory with the clerk of court.

SECTION 109. All Property Taken to be Held for All

Creditors; Appeal Bonds; Exceptions to Sureties. — In all

cases where property is taken into custody by the sheriff,

if it does not embrace all the property and effects of the

debtor not exempt from execution, any other creditor or

creditors of the individual debtor, upon giving bond to be

approved by the court in double the amount of their

claims, singly or jointly, shall be entitled to similar orders

and to like action, by the sheriff, until all claims be

provided for, if there be sufficient property or effects. All

property taken into custody by the sheriff by virtue of the

giving of any such bonds shall be held by him for the

benefit of all creditors of the individual debtor whose

claims shall be duly proved as provided in this Act. The

bonds provided for in this section and the preceding

section to procure the order for custody of the property

and effects of the individual debtor shall be conditioned

that if, upon final hearing of the petition in insolvency, the

court shall find in favor of the petitioners, such bonds and

all of them shall be void; if the decision be in favor of the

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