Concurrence and Preference of Credits

1. Define Concurrence of Credits

This implies the possession by two or more creditors of equal rights or privileges over the same
property or all of the property of the debtor.

2. Define Preference of Credits

This is the right held by the creditor to be preferred in the payment of his claim above the
others out of the debtor’s assets. It is a right to be paid first

3. When does the rule of preference apply?

a) There are two or more creditors;
b) With separate and distinct claims;
c) Against the same debtor; and
d) Who has insufficient property.

4.-5. Preference of Credit versus Lien

Preference of credit applies only to claims which do not attach to specific properties.
Lien, on the other hand, creates a charge on a particular property.

Lien shall refer to the statutory or contractual claim or judicial charge on real or personal
property for payment of the claim or debt secured by such lien.

6. What are the properties exempted from debtor’s liability in the fulfillment of his obligations?
General Rule:
Debtor is liable with all his property, present and future, for the fulfillment of his obligations.

Exempted properties are the following:

1. Present property
2. Future property
3. Property under legal custody and those owned by municipal corporations necessary for
governmental purposes

7.-8. Explain the two-tier order of preference of credit

a. The first-tier includes only taxes, duties and fees due on a specific movable of immovable
property.

b. Second-tier- All other special preferred (non-tax) credits. These credits are to be satisfied pari
passu (equally) and pro rata, out of any residual value of the specific property to which such other
credits relate.

9-10. Enumerate the classifications of credits and briefly explain

a. Specified preferred credits
i. Considered as mortgages or pledges or real or personal property or liens
within the purview of legal provisions governing insolvency.
ii. Taxes due to the State shall first be satisfied
b. Ordinary preferred credits – preferred in the order given by law
c. Common credits- Credits of any other kind or class, or by any other right or title not
comprised under Art. 2241-2244 shall enjoy no preference.