Law 107: Credit Transactions 2nd Semester, AY 2019-2020

Section II-E

Learning Benchmarks 5: Insolvency

1. Explain the concept of insolvency. What is illiquidity insolvency and what is balance sheet
insolvency? What is the purpose and nature of insolvency proceedings?

2. Explain the concept of concurrence of credits and preference of credits. Is there a difference
between a preferred credit and a lien?

3. Explain the concept of (a) special preferred credits; (b) ordinary preferred credits; (c) common
credits. What are the provisions that are covered by each type of credit?

4. Provide a brief summary on the order of preference of credits and how these credits should be
satisfied.

5. Under the FRIA, the remedies of suspension of payment, rehabilitation, and liquidation are
available. Provide a summary to briefly discuss the following for each remedy:

a. Concept, goal / expected outcome of the proceedings

b. Types, who may initiate and requirements for initiating

c. Main role of rehabilitation receiver / liquidator / committees

d. Effect of proceedings on management of the business and assets, and satisfaction of claims
and administrative expenses

5. What is the cram down power / effect and when does it apply?