101.

This section outlines the effects of approving a proposed agreement during a creditors’
meeting in cases of insolvency of individual debtors. If the majority of creditors approve the
agreement, or if there are no objections, the court will order that the agreement be carried out,
binding all parties involved to comply with its terms. The court has the authority to issue
necessary orders to enforce the agreement upon the motion of any affected party. However, the
order confirming the approval of the agreement will not bind certain creditors, such as those with
claims for personal labor, maintenance, or expenses related to the debtor’s family in the 60 days
before filing the petition, as well as secured creditors who didn’t attend the meeting or abstained
from voting. This ensures that certain creditors are not unfairly affected by the agreement.
102. In this section, it becomes evident that it serves as a safeguard in case the individual debtor
fails to fulfill the terms of the agreement approved during the creditors’ meeting. In such an
event, all the rights that the creditors had against the debtor before the agreement will be restored
to them. This means that creditors regain their ability to pursue the debtor for the debts owed.
Additionally, it mentions that the individual debtor may be subject to insolvency proceedings as
outlined by the Act. Essentially, this section reinforces the importance of adherence to the agreed
terms and the potential consequences for failing to do so, emphasizing the legal recourse
available to creditors in such circumstances.
103 this section establishes the process through which an individual debtor with insufficient
assets to cover their liabilities, and owing debts exceeding Php500,000.00, can seek discharge
from their debts and liabilities. To initiate this process, the debtor must file a verified petition
with the court of the province or city where they have resided for at least six months prior to
filing the petition. Along with the petition, the debtor must submit a schedule detailing their
debts and liabilities, as well as an inventory of their assets. Importantly, the act of filing this
petition is considered an act of insolvency. This section outlines a formal avenue for individuals
facing overwhelming debt to seek relief through the legal system, providing specific criteria and
procedures for eligibility and application.
Section 104 specifies the immediate action taken by the court upon finding the debtor’s petition
to be sufficient in both form and substance. Within five working days of this determination, the
court is mandated to issue the Liquidation Order as mentioned in Section 112 of the Act. This
underscores the expeditious nature of the legal process in response to a debtor’s petition for
discharge from debts and liabilities. By swiftly issuing the Liquidation Order, the court initiates
the formal proceedings necessary for the orderly resolution of the debtor’s financial obligations.
Section 105 expands on acts of insolvency that warrant filing a petition for liquidation by any
creditor or group of creditors with claims totaling at least Php500,000. These acts include:
- Intentional departure from or absence from the Philippines to defraud creditors.
- Concealment to avoid legal process or hinder liquidation.
- Concealing or removing property to prevent attachment or legal process.
- Allowing property to remain under attachment to hinder liquidation.
- Confession or offering of judgment to hinder liquidation or defraud creditors.
- Willful default judgment to hinder liquidation or defraud creditors.
- Procuring property to be taken on legal process to give preference to certain creditors.
- Making assignments, gifts, sales, or transfers of property to hinder liquidation or defraud
creditors.
- Making payments or transfers of property in contemplation of insolvency.
- Defaulting in payment of current obligations for 30 days (if a merchant or tradesman).
- Failing to pay moneys deposited or received in a fiduciary capacity after demand for 30 days.
- Being unable to satisfy a judgment due to insufficient property subject to execution.
Additionally, the petitioning creditor(s) must post a bond determined by the court, ensuring
compensation to the debtor for costs, expenses, damages, and attorney’s fees if the petition is
dismissed, withdrawn, or if the debtor is not declared insolvent. This section provides a
comprehensive framework for creditors to address instances of insolvency and protect their
interests through legal recourse.
Section 106 details the legal process following the filing of a creditors’ petition. The court issues
an Order directing the individual debtor to appear and demonstrate why they should not be
declared insolvent. The time and place for this showing are determined by the court.
Additionally, the court has the authority, upon showing good cause, to issue an Order prohibiting
the debtor from making debt payments or transferring any property they own. However, it’s
important to note that this does not diminish the rights of secured creditors to enforce their liens
as per the terms agreed upon. Essentially, this section outlines the steps taken by the court to
compel the debtor to justify their financial situation and addresses potential measures to
safeguard creditors’ interests during the insolvency proceedings.
Section 107 stipulates the consequences if the individual debtor defaults or if, following a trial,
the court finds in favor of the petitioning creditors. In either scenario, the court is mandated to
issue the Liquidation Order as referenced in Section 112 of the Act. This underscores the legal
outcome of a default by the debtor or a favorable ruling for the petitioning creditors, which
initiates the liquidation process outlined in the subsequent section. It emphasizes the legal
mechanism through which insolvency proceedings progress following a default or a court
decision in favor of the creditors.
Section 108 addresses situations where the individual debtor is absent from the Philippines, has
departed from the country, cannot be found despite due diligence, or is intentionally concealing
themselves to avoid legal proceedings. In such cases, the petitioning creditors can seek an Order
from the court for publication and present a bond amounting to double the total sum of their
claims against the debtor. This entitles them to an Order directing the sheriff to seize a sufficient
amount of the debtor’s property to satisfy the creditors’ demands and cover the costs of the
proceedings. Essentially, this section outlines the legal recourse available to creditors when the
debtor is absent or intentionally evading legal processes related to insolvency proceedings.
Section 109 outlines the procedures regarding the custody of property taken by the sheriff in
cases of insolvency. If the property seized does not encompass all of the debtor’s non-exempt
assets, other creditors can seek similar orders by providing a bond approved by the court, double
the amount of their claims. This allows for fair distribution of assets among all creditors. The
bonds provided must ensure compensation for damages suffered by the debtor if the court
decides in their favor, with the amount determined by the court.
In cases of appeal, the appellant must provide a bond double the value of the property in question
and cover the costs of the proceedings. Any interested party can challenge the sufficiency of the
sureties on these bonds. If challenged, the petitioner’s sureties must justify their sufficiency
within a specified time frame. Failure to justify or replace insufficient sureties may result in the
court vacating the order to seize the debtor’s property or denying the appeal. This section ensures
transparency and fairness in the process of handling debtor’s assets during insolvency
proceedings.
Section 110 outlines the procedure for selling the debtor’s property under execution during
insolvency proceedings. If proper affidavits and bonds are submitted to the court or a judge,
along with an Order for publication and custody of the debtor’s property, and it is demonstrated
to the satisfaction of the court or judge that selling the property would benefit the parties
involved, the court may order the sale of the property. The sale would be conducted in a manner
similar to property sold under execution, with the proceeds deposited into the court to await the
outcome of the proceedings. This section provides a mechanism for realizing the value of the
debtor’s assets to address creditor claims in insolvency cases while ensuring transparency and
fairness in the process.
Section 111 clarifies the usage of the term “debtor” within Chapter VII of the Act, which
encompasses provisions common to the liquidation process in cases of insolvency involving both
individual and juridical debtors. In this context, “debtor” refers to both individual debtors as
defined in Section 4(o) and debtors as defined in Section 4(k) of the Act. This section ensures
consistency and inclusivity in the application of the term throughout the chapter, irrespective of
the type of debtor involved in the insolvency proceedings.
Section 112 outlines the provisions of the Liquidation Order in cases of insolvency:
(a) Declaration of the debtor’s insolvency.
(b) Ordering the liquidation of the debtor, and if the debtor is a juridical entity, declaring it
dissolved.
(c) Directing the sheriff to take possession and control of all the debtor’s property, except those
exempt from execution.
(d) Ordering the publication of the petition or motion in a newspaper of general circulation for
two consecutive weeks.
(e) Directing payments of any claims and conveyance of any property due to the debtor to the
liquidator.
(f) Prohibiting payments by the debtor and the transfer of any property.
(g) Directing all creditors to file their claims with the liquidator within a specified period.
(h) Authorizing the payment of administrative expenses as they become due.
(i) Stating that the debtor and non-petitioner creditors may submit nominees for the position of
liquidator.
(j) Setting a hearing date for the election and appointment of the liquidator, within a specified
timeframe.
These provisions establish the framework for the orderly liquidation of the debtor’s assets and
the fair treatment of creditors during the insolvency process.
113 Upon issuance of the Liquidation Order, the following effects take place:
(a) Juridical debtors are dissolved, and their corporate or juridical existence ends.
(b) Legal title to and control of all debtor assets (except those exempt from execution) are vested
in the liquidator or, if not yet elected or appointed, with the court.
(c) All contracts of the debtor are terminated or breached by default, unless the liquidator, within
90 days of assuming office, declares otherwise and the contracting party agrees.
(d) No separate action for the collection of unsecured claims is allowed. Pending actions are
transferred to the liquidator for acceptance, settlement, or contestation. If contested, the court
resolves such disputes, except when already on appeal, in which case the case may proceed to
judgment.
(e) Foreclosure proceedings are prohibited for 180 days.
These effects ensure the orderly administration of the debtor’s estate and protect the interests of
both the debtor and creditors during the liquidation process.
Section 114 specifies the rights of secured creditors following the issuance of the Liquidation
Order:
1. The Liquidation Order does not affect a secured creditor’s right to enforce their lien according
to the contract or applicable law.
2. A secured creditor has the option to:
(a) Waive their right under the security or lien, prove their claim in the liquidation proceedings,
and participate in the distribution of the debtor’s assets; or
(b) Maintain their rights under the security or lien.
If the secured creditor chooses to maintain their rights under the security or lien, the following
options are available:
1. The value of the property may be determined by agreement between the creditor and the
liquidator. If the property’s value is less than the claim it secures, the property may be conveyed
to the secured creditor, who will then become a creditor for the balance in the liquidation
proceedings. If the property’s value exceeds the claim secured, the excess may be received by the
liquidator after conveying the property to the creditor.
2. The liquidator may sell the property and use the proceeds to satisfy the secured creditor’s
entire claim.
3. The secured creditor may enforce the lien or foreclose on the property in accordance with
applicable laws.
These provisions ensure that secured creditors have options for the treatment of their claims and
the realization of their security interests in the debtor’s assets during the liquidation process.
Section 115 delineates the process for electing a liquidator in insolvency proceedings. It
stipulates that only creditors who have filed their claims within the court-set period and whose
claims are not barred by the statute of limitations are eligible to vote. Secured creditors, typically
excluded from voting, may do so if they either waive their security or lien or agree with the
liquidator on the value of their secured property and are admitted for the remaining claim
balance.
Eligible creditors participate in an open court election to choose the liquidator. The nominee who
garners the highest number of votes based on the amount of claims and meets the qualifications
outlined in Section 118 is appointed as the liquidator.
This process ensures that creditors with valid claims have a say in selecting the individual tasked
with administering the liquidation proceedings. By allowing only eligible creditors to vote and
employing a transparent election process, the section aims to maintain fairness and integrity in
the appointment of the liquidator, thereby safeguarding the interests of all parties involved in the
insolvency proceedings.
Section 116 outlines circumstances under which the court may appoint a liquidator:
(a) If, on the designated date for the election of the liquidator, creditors do not attend.
(b) If attending creditors fail or refuse to elect a liquidator.
(c) If a duly elected liquidator fails to qualify.
(d) If a vacancy in the position of liquidator arises for any reason.
In any of these situations, the court may schedule another hearing for the election of the
liquidator. Additionally, the section clarifies that a rehabilitation receiver, who previously
administered the debtor before liquidation proceedings commenced, may be appointed as a
liquidator.
This provision ensures that the liquidation process can proceed smoothly even if creditors fail to
elect a liquidator or if circumstances require a replacement. It also allows for continuity by
permitting a previously appointed rehabilitation receiver to transition into the role of liquidator,
if appropriate.
Section 117 mandates that before assuming their powers, duties, and responsibilities, the
liquidator must undertake two key requirements:
1. **Taking an Oath:** The liquidator must take an oath, affirming their commitment to fulfill
their duties faithfully and responsibly.
2. **Filing a Bond:** Additionally, the liquidator must file a bond with the court. The bond’s
amount is determined by the court and is conditioned upon the proper and faithful discharge of
the liquidator’s powers, duties, and responsibilities.
These measures are put in place to ensure that the liquidator carries out their obligations
diligently and in accordance with the law, providing reassurance to creditors and stakeholders
involved in the insolvency proceedings.
Section 118 outlines the qualifications necessary for a liquidator:
1. The liquidator must meet the qualifications enumerated in Section 29 of the Act. These
qualifications include being:
(a) A citizen of the Philippines or a resident of the Philippines for the six months preceding
their nomination.
(b) Of good moral character, possessing acknowledged integrity, impartiality, and
independence.
(c) Knowledgeable about insolvency and relevant commercial laws, rules, and procedures, with
the necessary training and/or experience to discharge the duties of a liquidator effectively.
(d) Free from conflicts of interest, although such conflicts may be waived by a party who may
be affected.
Additionally, the court retains the authority to remove the liquidator at any time for cause, either
on its own initiative or upon motion by any creditor eligible to vote for the liquidator’s election.
These qualifications ensure that the appointed liquidator is competent, ethical, and capable of
impartially executing their duties, thereby safeguarding the integrity of the insolvency
proceedings and protecting the interests of all parties involved.
Section 119 outlines the extensive powers, duties, and responsibilities of the liquidator in
insolvency proceedings:
1. **Preserving and Maximizing Asset Value:** The liquidator is tasked with preserving and
maximizing the value of the debtor’s assets to facilitate their recovery and discharge as much of
the debtor’s obligations as possible.
2. **Asset Recovery:** The liquidator has the authority to sue and recover all assets, debts, and
claims owed to the debtor.
3. **Asset Management:** They are empowered to take possession of all debtor property, except
those exempt by law, and to sell such property with court approval.
4. **Debt Settlement:** The liquidator is responsible for settling accounts between the debtor
and creditors, subject to court approval.
5. **Fraudulent Conveyance:** They are authorized to recover any property or its value that was
fraudulently conveyed by the debtor.
6. **Creditor Committee:** The liquidator can recommend to the court the establishment of a
creditors’ committee to assist in their functions.
7. **Engagement of Professionals:** With court approval, the liquidator can engage
professionals to aid in their duties.
8. **Maximizing Asset Proceeds:** The liquidator is obligated to manage and dispose of the
debtor’s assets in a manner that maximizes proceeds for creditors and shareholders, ultimately
leading to the termination of the debtor’s legal existence.
Additionally, the liquidator can be removed following procedures similar to those for removing a
rehabilitation receiver.
These powers and duties underscore the critical role of the liquidator in efficiently managing the
insolvency process, realizing asset value, and ensuring equitable distribution to creditors and
stakeholders.
Section 120 addresses the compensation of the liquidator and individuals or entities assisting
them in fulfilling their duties:
1. **Reasonable Compensation:** The liquidator and those assisting them are entitled to
reasonable compensation determined by the liquidation court.
2. **Prescribed Maximum Amount:** The compensation awarded to the liquidator and their
team cannot exceed the maximum amount set by the Supreme Court.
This provision ensures that those involved in the insolvency proceedings receive fair
compensation for their services while also preventing excessive remuneration. It strikes a
balance between recognizing the value of their contributions and ensuring that resources are
appropriately allocated during the liquidation process.
Section 121 outlines the reporting requirements for the liquidator in insolvency proceedings:
1. **Record Keeping:** The liquidator is responsible for maintaining a record of all funds
received and disbursed by them or under their authority as liquidator.
2. **Quarterly Reports:** They must submit quarterly reports of these financial transactions to
the court. These reports are to be made available to all interested parties involved in the
proceedings.
3. **Additional Reports:** The liquidator is also obligated to submit any other reports as may be
required by the court periodically. Additionally, they must provide a final report at the conclusion
of the liquidation proceedings.
These reporting requirements ensure transparency and accountability in the management of
funds during the insolvency process. They provide stakeholders with regular updates on the
financial status of the proceedings, promoting trust and confidence in the liquidator's actions.

Section 122 describes the process for the discharge of the liquidator in preparation for the final
settlement of claims against the debtor:
1. **Notification to Creditors:** The liquidator is required to notify all creditors of their
intention to settle their account and seek discharge from liability as the liquidator. This
notification can be done through publication in a newspaper of general circulation or through any
other mode directed or allowed by the court.
2. **Final Accounting:** The liquidator must file a final accounting with the court, accompanied
by proof of notice to all creditors.
3. **Hearing:** The final accounting is then scheduled for a hearing.
4. **Discharge:** If the court determines that the final accounting is in order, it will discharge
the liquidator from their duties and liabilities.
This process ensures that the liquidator's actions are reviewed by the court, creditors are
informed, and appropriate steps are taken for the final settlement of claims against the debtor
before the liquidator is discharged.
Section 123 establishes the creation of a registry of claims by the liquidator:
1. **Preliminary Registry of Claims:** Within twenty days of assuming office, the liquidator
must prepare a preliminary registry of claims. This registry encompasses both secured and
unsecured creditors.
2. **Treatment of Secured Creditors:** Secured creditors who have waived their security or lien,
or have agreed with the liquidator on the value of the secured property and are admitted as
unsecured creditors for the remaining balance, are treated as unsecured creditors in the registry.
3. **Public Inspection and Notice:** The liquidator is required to make the registry available for
public inspection and provide notice of publication to creditors, individual debtors, partners of
partnership-debtors, and shareholders or members of corporation-debtors. This notice informs
them where and when they may inspect the registry.
4. **Claims Verification:** All claims listed in the registry must be duly proven before they can
be paid.
This section ensures transparency in the insolvency process by allowing stakeholders to access
information about the claims against the debtor. It also establishes procedures for verifying and
addressing these claims, contributing to the orderly administration of the insolvency proceedings.
Section 124 addresses the right of set-off in insolvency proceedings:
1. **Mutual Debts:** If the debtor and creditor owe each other money, their debts can be set off
against each other.
2. **Balance Consideration:** Only the balance, if any, remaining after setting off the mutual
debts will be allowed in the liquidation proceedings.
This provision ensures fairness by preventing a situation where both the debtor and creditor are
simultaneously owed money, which could complicate the resolution of claims in the liquidation
process. Instead, it streamlines the process by allowing the net balance to be considered in the
proceedings.

Section 125 outlines the process for opposition or challenge to claims in insolvency proceedings:
1. **Submission of Challenge:** Within thirty days after the deadline for filing applications for
the recognition of claims, interested parties such as creditors, individual debtors, owners of sole
proprietorships, partners of partnerships, and shareholders or members of corporations may
submit a challenge to a claim or claims to the court.
2. **Notification:** A certified copy of the challenge must be served on both the liquidator and
the creditor holding the challenged claim.
3. **Submission of Registry of Claims:** Upon the expiration of the thirty-day period, the
rehabilitation receiver (liquidator) is required to submit to the court the registry of claims
containing undisputed claims that have not been challenged.
4. **Finalization of Claims:** Claims listed in the registry that have not been subject to
challenge become final upon the filing of the register. Subsequently, they may only be set aside
on grounds of fraud, accident, mistake, or inexcusable neglect.
This section ensures a mechanism for resolving disputes regarding claims in insolvency
proceedings, allowing interested parties to challenge claims they deem invalid or inaccurate. It
also provides a timeframe for the finalization of claims, promoting the efficient administration of
the liquidation process.