LETTERS OF CREDIT the document was specified therein readily means that the document is of vital importance

to the buyer.
Article 2

Commercial transactions, be they performed by merchants or not, whether they are
specified in this Code or not, shall be governed by the provisions contained in the same; in
the absence of such provisions, by the commercial customs generally observed in each
place; and in the absence of both, by those of the common law.
Commercial transactions shall be considered those enumerated in this Code and any others
of a similar character.
Article 567
Accordingly, under Doctrine of Strict Compliance, the documents tendered by the
seller/beneficiary must strictly conform to the terms of the Letters of Credit. The tender of
documents must include all documents required by the letter. It is not a question of whether
or not it is fair or equitable to require submission of documents but whether or not the
documents were agreed upon.
Thus, a correspondent bank which departs from what has been stipulated under the Letters
of Credit acts on its own risk and may not thereafter be able to recover from the buyer or the
issuing bank, as the case may be, the money thus paid to the beneficiary.

Letters of credit are those issued by one merchant to another, or for purpose of attending to
Independence principle- the issuing bank's obligation to pay under the letter of credit is
a commercial transaction.
separate from the compliance of the parties in the main contract.
Article 568

The essential conditions of letters of credit shall be:

1. To be issued in favor of a determined person and not to order.

2. To be limited to a fixed and specified amount, or to one or more indeterminate
amounts, but all included in a maximum sum the limit of which must be exactly
stated.

Letters of credit which do not have one of these conditions shall be considered simply as
letters of recommendation.

Rule of strict compliance-

In the case of Feati Bank & Trust Company vs. The Court of Appeals (G.R. No. 94209,
April 30, 1991) the Court explained that: 

Letters of credit are to be strictly complied with which documents, and shipping documents
must be followed as stated in the letter. There is no discretion in the bank or trust company
to waive any requirements. The terms of the letter constitute an agreement between the
purchaser and the bank.
Since a bank deals only with documents, it is not in a position to determine whether or not
the documents required by the letter of credit are material or superfluous. The mere fact that
TRUST RECEIPTS
PROVIDING FOR THE REGULATION OF TRUST RECEIPTS TRANSACTIONS
WHEREAS, the utilization of trust receipts, as a convenient business device to assist
importers and merchants solve their financing problems, had gained popular acceptance in
international and domestic business practices, particularly in commercial banking
transactions;
WHEREAS, there is no specific law in the Philippines that governs trust receipt transactions,
especially the rights and obligations of the parties involved therein and the enforcement of
the said rights in case of default or violation of the terms of the trust receipt agreement;
WHEREAS, the recommendations contained in the report on the financial system which
have been accepted, with certain modifications by the monetary authorities included, among
others, the enactment of a law regulating the trust receipt transactions;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by virtue of
the powers vested in me by the Constitution, as Commander-in-Chief of all the Armed
Forces of the Philippines, and pursuant to Proclamation No. 1081, dated September 21,
1972, and General Order No. 1, dated September 22, 1972, as amended, and in order to
effect the desired changes and reforms in the social, economic, and political structure of our
society, do hereby order and decree and make as part of the law of the land the following:
Section 1. Short Title. This Decree shall be known as the Trust Receipts Law.
Section 2. Declaration of Policy. It is hereby declared to be the policy of the state (a) to
encourage and promote the use of trust receipts as an additional and convenient aid to
commerce and trade; (b) to provide for the regulation of trust receipts transactions in order
to assure the protection of the rights and enforcement of obligations of the parties involved
therein; and (c) to declare the misuse and/or misappropriation of goods or proceeds realized
from the sale of goods, documents or instruments released under trust receipts as a criminal
offense punishable under Article Three hundred and fifteen of the Revised Penal Code.
Section 3. Definition of terms. As used in this Decree, unless the context otherwise
requires, the term
(a) "Document" shall mean written or printed evidence of title to goods.
(b) "Entrustee" shall refer to the person having or taking possession of goods,
documents or instruments under a trust receipt transaction, and any successor in
interest of such person for the purpose or purposes specified in the trust receipt
agreement.
(c) "Entruster" shall refer to the person holding title over the goods, documents, or
instruments subject of a trust receipt transaction, and any successor in interest of
such person.
(d) "Goods" shall include chattels and personal property other than: money, things in
action, or things so affixed to land as to become a part thereof.
(e) "Instrument" means any negotiable instrument as defined in the Negotiable
Instrument Law; any certificate of stock, or bond or debenture for the payment of
money issued by a public or private corporation, or any certificate of deposit,
participation certificate or receipt, any credit or investment instrument of a sort
marketed in the ordinary course of business or finance, whereby the entrustee, after
the issuance of the trust receipt, appears by virtue of possession and the face of the
instrument to be the owner. "Instrument" shall not include a document as defined in
this Decree.
(f) "Purchase" means taking by sale, conditional sale, lease, mortgage, or pledge,
legal or equitable.
(g) "Purchaser" means any person taking by purchase.
(h) "Security Interest" means a property interest in goods, documents or instruments
to secure performance of some obligations of the entrustee or of some third persons
to the entruster and includes title, whether or not expressed to be absolute,
whenever such title is in substance taken or retained for security only.
(i) "Person" means, as the case may be, an individual, trustee, receiver, or other
fiduciary, partnership, corporation, business trust or other association, and two more
persons having a joint or common interest.
 (j) "Trust Receipt" shall refer to the written or printed document signed by the
entrustee in favor of the entruster containing terms and conditions substantially
complying with the provisions of this Decree. No further formality of execution or
authentication shall be necessary to the validity of a trust receipt.
(k) "Value" means any consideration sufficient to support a simple contract.
Section 4. What constitutes a trust receipt transaction. A trust receipt transaction, within
the meaning of this Decree, is any transaction by and between a person referred to in this
Decree as the entruster, and another person referred to in this Decree as entrustee,
whereby the entruster, who owns or holds absolute title or security interests over certain
specified goods, documents or instruments, releases the same to the possession of the
entrustee upon the latter's execution and delivery to the entruster of a signed document
called a "trust receipt" wherein the entrustee binds himself to hold the designated goods,
documents or instruments in trust for the entruster and to sell or otherwise dispose of the
goods, documents or instruments with the obligation to turn over to the entruster the
proceeds thereof to the extent of the amount owing to the entruster or as appears in the trust
receipt or the goods, documents or instruments themselves if they are unsold or not
otherwise disposed of, in accordance with the terms and conditions specified in the trust
receipt, or for other purposes substantially equivalent to any of the following:
1. In the case of goods or documents, (a) to sell the goods or procure their sale; or
(b) to manufacture or process the goods with the purpose of ultimate sale: Provided,
That, in the case of goods delivered under trust receipt for the purpose of
manufacturing or processing before its ultimate sale, the entruster shall retain its title
over the goods whether in its original or processed form until the entrustee has
complied fully with his obligation under the trust receipt; or (c) to load, unload, ship or
tranship or otherwise deal with them in a manner preliminary or necessary to their
sale; or
2. In the case of instruments,
a) to sell or procure their sale or exchange; or
b) to deliver them to a principal; or
c) to effect the consummation of some transactions involving delivery to a
depository or register; or
d) to effect their presentation, collection or renewal
The sale of goods, documents or instruments by a person in the business of selling
goods, documents or instruments for profit who, at the outset of the transaction, has,
as against the buyer, general property rights in such goods, documents or
instruments, or who sells the same to the buyer on credit, retaining title or other
interest as security for the payment of the purchase price, does not constitute a trust
receipt transaction and is outside the purview and coverage of this Decree.
Section 5. Form of trust receipts; contents. A trust receipt need not be in any particular
form, but every such receipt must substantially contain (a) a description of the goods,
documents or instruments subject of the trust receipt; (2) the total invoice value of the goods
and the amount of the draft to be paid by the entrustee; (3) an undertaking or a commitment
of the entrustee (a) to hold in trust for the entruster the goods, documents or instruments
therein described; (b) to dispose of them in the manner provided for in the trust receipt; and
(c) to turn over the proceeds of the sale of the goods, documents or instruments to the
entruster to the extent of the amount owing to the entruster or as appears in the trust receipt
or to return the goods, documents or instruments in the event of their non-sale within the
period specified therein.
The trust receipt may contain other terms and conditions agreed upon by the parties in
addition to those hereinabove enumerated provided that such terms and conditions shall not
be contrary to the provisions of this Decree, any existing laws, public policy or morals, public
order or good customs.
Section 6. Currency in which a trust receipt may be denominated. A trust receipt may be
denominated in the Philippine currency or any foreign currency acceptable and eligible
as part of international reserves of the Philippines, the provisions of existing law, executive
orders, rules and regulations to the contrary notwithstanding: Provided, however, That in the
case of trust receipts denominated in foreign currency, payment shall be made in its
equivalent in Philippine currency computed at the prevailing exchange rate on the date the
proceeds of sale of the goods, documents or instruments held in trust by the entrustee are
turned over to the entruster or on such other date as may be stipulated in the trust receipt or
other agreements executed between the entruster and the entrustee.
Section 7. Rights of the entruster. The entruster shall be entitled to the proceeds from
the sale of the goods, documents or instruments released under a trust receipt to the
entrustee to the extent of the amount owing to the entruster or as appears in the trust
receipt, or to the return of the goods, documents or instruments in case of non-sale, and to
the enforcement of all other rights conferred on him in the trust receipt provided such are not
contrary to the provisions of this Decree.
The entruster may cancel the trust and take possession of the goods, documents or
instruments subject of the trust or of the proceeds realized therefrom at any time upon
default or failure of the entrustee to comply with any of the terms and conditions of the trust
receipt or any other agreement between the entruster and the entrustee, and the entruster in
possession of the goods, documents or instruments may, on or after default, give notice to
the entrustee of the intention to sell, and may, not less than five days after serving or
sending of such notice, sell the goods, documents or instruments at public or private sale,
and the entruster may, at a public sale, become a purchaser. The proceeds of any such
sale, whether public or private, shall be applied (a) to the payment of the expenses thereof;
(b) to the payment of the expenses of re-taking, keeping and storing the goods, documents
or instruments; (c) to the satisfaction of the entrustee's indebtedness to the entruster. The
entrustee shall receive any surplus but shall be liable to the entruster for any deficiency.
Notice of sale shall be deemed sufficiently given if in writing, and either personally served on
the entrustee or sent by post-paid ordinary mail to the entrustee's last known business
address.
Section 8. Entruster not responsible on sale by entrustee. The entruster holding a security
interest shall not, merely by virtue of such interest or having given the entrustee liberty of
sale or other disposition of the goods, documents or instruments under the terms of the trust
receipt transaction be responsible as principal or as vendor under any sale or contract to sell
made by the entrustee.
Section 9. Obligations of the entrustee. The entrustee shall (1) hold the goods, documents
or instruments in trust for the entruster and shall dispose of them strictly in accordance with
the terms and conditions of the trust receipt; (2) receive the proceeds in trust for the
entruster and turn over the same to the entruster to the extent of the amount owing to the
entruster or as appears on the trust receipt; (3) insure the goods for their total value against
loss from fire, theft, pilferage or other casualties; (4) keep said goods or proceeds thereof
whether in money or whatever form, separate and capable of identification as property of the
entruster; (5) return the goods, documents or instruments in the event of non-sale or upon
demand of the entruster; and (6) observe all other terms and conditions of the trust receipt
not contrary to the provisions of this Decree.
Section 10. Liability of entrustee for loss. The risk of loss shall be borne by the entrustee.
Loss of goods, documents or instruments which are the subject of a trust receipt, pending
their disposition, irrespective of whether or not it was due to the fault or negligence of the
entrustee, shall not extinguish his obligation to the entruster for the value thereof.
Section 11. Rights of purchaser for value and in good faith. Any purchaser of goods from an
entrustee with right to sell, or of documents or instruments through their customary form of
transfer, who buys the goods, documents, or instruments for value and in good faith from the
entrustee, acquires said goods, documents or instruments free from the entruster's security
interest.
Section 12. Validity of entruster's security interest as against creditors. The entruster's
security interest in goods, documents, or instruments pursuant to the written terms of a trust
receipt shall be valid as against all creditors of the entrustee for the duration of the trust
receipt agreement.
Section 13. Penalty clause. The failure of an entrustee to turn over the proceeds of the sale
of the goods, documents or instruments covered by a trust receipt to the extent of the
amount owing to the entruster or as appears in the trust receipt or to return said goods,
documents or instruments if they were not sold or disposed of in accordance with the terms
of the trust receipt shall constitute the crime of estafa, punishable under the provisions of
Article Three hundred and fifteen, paragraph one (b) of Act Numbered Three thousand eight
hundred and fifteen, as amended, otherwise known as the Revised Penal Code. If the
violation or offense is committed by a corporation, partnership, association or other juridical
entities, the penalty provided for in this Decree shall be imposed upon the directors, officers,
employees or other officials or persons therein responsible for the offense, without prejudice
to the civil liabilities arising from the criminal offense.
Section 14. Cases not covered by this Decree. Cases not provided for in this Decree shall
be governed by the applicable provisions of existing laws.
Section 15. Separability clause. If any provision or section of this Decree or the application
thereof to any person or circumstance is held invalid, the other provisions or sections hereof
and the application of such provisions or sections to other persons or circumstances shall
not be affected thereby.

Section 16. Repealing clause. All Acts inconsistent with this Decree are hereby repealed.

Section 17. This Decree shall take effect immediately.


INSOLVENCY AND PREFERENCE OF CREDITS
Article 2236. The debtor is liable with all his property, present and future, for the fulfillment
of his obligations, subject to the exemptions provided by law. (1911a)
Article 2237. Insolvency shall be governed by special laws insofar as they are not
inconsistent with this Code. (n)
Section 2. Declaration of Policy. - It is the policy of the State to encourage debtors, both juridical
and natural persons, and their creditors to collectively and realistically resolve and adjust
competing claims and property rights. In furtherance thereof, the State shall ensure a timely, fair,
transparent, effective and efficient rehabilitation or liquidation of debtors. The rehabilitation or
liquidation shall be made with a view to ensure or maintain certainly and predictability in
commercial affairs, preserve and maximize the value of the assets of these debtors, recognize
creditor rights and respect priority of claims, and ensure equitable treatment of creditors who are
similarly situated. When rehabilitation is not feasible, it is in the interest of the State to facilities a
speedy and orderly liquidation of these debtor's assets and the settlement of their obligations.
Section 3. Nature of Proceedings. - The proceedings under this Act shall be in rem. Jurisdiction
over all persons affected by the proceedings shall be considered as acquired upon publication of
the notice of the commencement of the proceedings in any newspaper of general circulation in
the Philippines in the manner prescribed by the rules of procedure to be promulgated by the
Supreme Court.
The proceedings shall be conducted in a summary and non-adversarial manner consistent with
the declared policies of this Act and in accordance with the rules of procedure that the Supreme
Court may promulgate.
Section 4. Definition of Terms. - As used in this Act, the term:
(a) Administrative expenses shall refer to those reasonable and necessary expenses:
(1) incurred or arising from the filing of a petition under the provisions of this Act;
(2) arising from, or in connection with, the conduct of the proceedings under this
Act, including those incurred for the rehabilitation or liquidation of the debtor;
(3) incurred in the ordinary course of business of the debtor after the
commencement date;
(4) for the payment of new obligations obtained after the commencement date to
finance the rehabilitation of the debtor;
(5) incurred for the fees of the rehabilitation receiver or liquidator and of the
professionals engaged by them; and
(6) that are otherwise authorized or mandated under this Act or such other
expenses as may be allowed by the Supreme Court in its rules.
(b) Affiliate shall refer to a corporation that directly or indirectly, through one or more
intermediaries, is controlled by, or is under the common control of another corporation.
(c) Claim shall refer to all claims or demands of whatever nature or character against the
debtor or its property, whether for money or otherwise, liquidated or unliquidated, fixed or
contingent, matured or unmatured, disputed or undisputed, including, but not limited to;
(1) all claims of the government, whether national or local, including taxes, tariffs and
customs duties; and (2) claims against directors and officers of the debtor arising from
acts done in the discharge of their functions falling within the scope of their
authority: Provided, That, this inclusion does not prohibit the creditors or third parties
from filing cases against the directors and officers acting in their personal capacities.
(d) Commencement date shall refer to the date on which the court issues the
Commencement Order, which shall be retroactive to the date of filing of the petition for
voluntary or involuntary proceedings.
(e) Commencement Order shall refer to the order issued by the court under Section 16 of
this Act.
(f) Control shall refer to the power of a parent corporation to direct or govern the financial
and operating policies of an enterprise so as to obtain benefits from its activities. Control
is presumed to exist when the parent owns, directly or indirectly through subsidiaries or
affiliates, more than one-half (1/2) of the voting power of an enterprise unless, in
exceptional circumstances, it can clearly be demonstrated that such ownership does not
constitute control. Control also exists even when the parent owns one-half (1/2) or less of
the voting power of an enterprise when there is power:
(1) over more than one-half (1/2) of the voting rights by virtue of an agreement
with investors;
(2) to direct or govern the financial and operating policies of the enterprise under
a statute or an agreement;
(3) to appoint or remove the majority of the members of the board of directors or
equivalent governing body; or
(4) to cast the majority votes at meetings of the board of directors or equivalent
governing body.
(g) Court shall refer to the court designated by the Supreme Court to hear and
determine, at the first instance, the cases brought under this Act.
(h) Creditor shall refer to a natural or juridical person which has a claim against the
debtor that arose on or before the commencement date.
(i) Date of liquidation shall refer to the date on which the court issues the Liquidation
Order.
(j) Days shall refer to calendar days unless otherwise specifically stated in this Act.
(k) Debtor shall refer to, unless specifically excluded by a provision of this Act, a sole
proprietorship duly registered with the Department of Trade and Industry (DTI), a
partnership duly registered with the Securities and Exchange Commission (SEC), a
corporation duly organized and existing under Philippine laws, or an individual debtor
who has become insolvent as defined herein.
(l) Encumbered property shall refer to real or personal property of the debtor upon which
a lien attaches.
(m) General unsecured creditor shall refer to a creditor whose claim or a portion thereof
its neither secured, preferred nor subordinated under this Act.
(n) Group of debtors shall refer to and can cover only: (1) corporations that are financially
related to one another as parent corporations, subsidiaries or affiliates; (2) partnerships
that are owned more than fifty percent (50%) by the same person; and (3) single
proprietorships that are owned by the same person. When the petition covers a group of
debtors, all reference under these rules to debtor shall include and apply to the group of
debtors.
(o) Individual debtor shall refer to a natural person who is a resident and citizen of the
Philippines that has become insolvent as defined herein.
(p) Insolvent shall refer to the financial condition of a debtor that is generally unable to
pay its or his liabilities as they fall due in the ordinary course of business or has liabilities
that are greater than its or his assets.
(q) Insolvent debtor's estate shall refer to the estate of the insolvent debtor, which
includes all the property and assets of the debtor as of commencement date, plus the
property and assets acquired by the rehabilitation receiver or liquidator after that date, as
well as all other property and assets in which the debtor has an ownership interest,
whether or not these property and assets are in the debtor's possession as of
commencement date: Provided, That trust assets and bailment, and other property and
assets of a third party that are in the possession of the debtor as of commencement
date, are excluded therefrom.
(r) Involuntary proceedings shall refer to proceedings initiated by creditors.
(s) Liabilities shall refer to monetary claims against the debtor, including stockholder's
advances that have been recorded in the debtor's audited financial statements as
advances for future subscriptions.
(t) Lien shall refer to a statutory or contractual claim or judicial charge on real or personal
property that legality entities a creditor to resort to said property for payment of the claim
or debt secured by such lien.
(u) Liquidation shall refer to the proceedings under Chapter V of this Act.
(v) Liquidation Order shall refer to the Order issued by the court under Section 112 of this
Act.
(w) Liquidator shall refer to the natural person or juridical entity appointed as such by the
court and entrusted with such powers and duties as set forth in this Act: Provided, That, if
the liquidator is a juridical entity, it must designated a natural person who possesses all
the qualifications and none of the disqualifications as its representative, it being
understood that the juridical entity and the representative are solidarity liable for all
obligations and responsibilities of the liquidator.
(x) Officer shall refer to a natural person holding a management position described in or
contemplated by a juridical entity's articles of incorporation, bylaws or equivalent
documents, except for the corporate secretary, the assistant corporate secretary and the
external auditor.
(y) Ordinary course of business shall refer to transactions in the pursuit of the individual
debtor's or debtor's business operations prior to rehabilitation or insolvency proceedings
and on ordinary business terms.
(z) Ownership interest shall refer to the ownership interest of third parties in property held
by the debtor, including those covered by trust receipts or assignments of receivables.
(aa) Parent shall refer to a corporation which has control over another corporation either
directly or indirectly through one or more intermediaries.
(bb) Party to the proceedings shall refer to the debtor, a creditor, the unsecured creditors'
committee, a stakeholder, a party with an ownership interest in property held by the
debtor, a secured creditor, the rehabilitation receiver, liquidator or any other juridical or
natural person who stands to be benefited or injured by the outcome of the proceedings
and whose notice of appearance is accepted by the court.
(cc) Possessory lien shall refer to a lien on property, the possession of which has been
transferred to a creditor or a representative or agent thereof.
(dd) Proceedings shall refer to judicial proceedings commenced by the court's
acceptance of a petition filed under this Act.
(ee) Property of others shall refer to property held by the debtor in which other persons
have an ownership interest.
(ff) Publication notice shall refer to notice through publication in a newspaper of general
circulation in the Philippines on a business day for two (2) consecutive weeks.
(gg) Rehabilitation shall refer to the restoration of the debtor to a condition of successful
operation and solvency, if it is shown that its continuance of operation is economically
feasible and its creditors can recover by way of the present value of payments projected
in the plan, more if the debtor continues as a going concern than if it is immediately
liquidated.
(hh) Rehabilitation receiver shall refer to the person or persons, natural or juridical,
appointed as such by the court pursuant to this Act and which shall be entrusted with
such powers and duties as set forth herein.
(ii) Rehabilitation Plan shall refer to a plan by which the financial well-being and viability
of an insolvent debtor can be restored using various means including, but not limited to,
debt forgiveness, debt rescheduling, reorganization or quasi-reorganization, dacion en
pago, debt-equity conversion and sale of the business (or parts of it) as a going concern,
or setting-up of new business entity as prescribed in Section 62 hereof, or other similar
arrangements as may be approved by the court or creditors.
(jj) Secured claim shall refer to a claim that is secured by a lien.
(kk) Secured creditor shall refer to a creditor with a secured claim.
(ll) Secured party shall refer to a secured creditor or the agent or representative of such
secured creditor.
(mm) Securities market participant shall refer to a broker dealer, underwriter, transfer
agent or other juridical persons transacting securities in the capital market.
(nn) Stakeholder shall refer, in addition to a holder of shares of a corporation, to a
member of a nonstock corporation or association or a partner in a partnership.
(oo) Subsidiary shall refer to a corporation more than fifty percent (50%) of the voting
stock of which is owned or controlled directly or indirectly through one or more
intermediaries by another corporation, which thereby becomes its parent corporation.
(pp) Unsecured claim shall refer to a claim that is not secured by a lien.
 (qq) Unsecured creditor shall refer to a creditor with an unsecured claim.
(rr) Voluntary proceedings shall refer to proceedings initiated by the debtor.
(ss) Voting creditor shall refer to a creditor that is a member of a class of creditors, the
consent of which is necessary for the approval of a Rehabilitation Plan under this Act.
Section 6. Designation of Courts and Promulgation of Procedural Rules. - The Supreme Court
shall designate the court or courts that will hear and resolve cases brought under this Act and
shall promulgate the rules of pleading, practice and procedure to govern the proceedings
brought under this Act.
Section 7. Substantive and Procedural Consolidation. - Each juridical entity shall be considered
as a separate entity under the proceedings in this Act. Under these proceedings, the assets and
liabilities of a debtor may not be commingled or aggregated with those of another, unless the
latter is a related enterprise that is owned or controlled directly or indirectly by the same
interests: Provided, however, That the commingling or aggregation of assets and liabilities of the
debtor with those of a related enterprise may only be allowed where:
(a) there was commingling in fact of assets and liabilities of the debtor and the related
enterprise prior to the commencement of the proceedings;
(b) the debtor and the related enterprise have common creditors and it will be more
convenient to treat them together rather than separately;
(c) the related enterprise voluntarily accedes to join the debtor as party petitioner and to
commingle its assets and liabilities with the debtor's; and
(d) The consolidation of assets and liabilities of the debtor and the related enterprise is
beneficial to all concerned and promotes the objectives of rehabilitation.
Provided, finally, That nothing in this section shall prevent the court from joining other entities
affiliated with the debtor as parties pursuant to the rules of procedure as may be promulgated by
the Supreme Court.
Section 10. Liability of Individual Debtor, Owner of a Sole Proprietorship, Partners in a
Partnership, or Directors and Officers. - Individual debtor, owner of a sole proprietorship,
partners in a partnership, or directors and officers of a debtor shall be liable for double the value
of the property sold, embezzled or disposed of or double the amount of the transaction involved,
whichever is higher to be recovered for benefit of the debtor and the creditors, if they, having
notice of the commencement of the proceedings, or having reason to believe that proceedings
are about to be commenced, or in contemplation of the proceedings, willfully commit the
following acts:
(a) Dispose or cause to be disposed of any property of the debtor other than in the
ordinary course of business or authorize or approve any transaction in fraud of creditors
or in a manner grossly disadvantageous to the debtor and/or creditors; or
(b) Conceal or authorize or approve the concealment, from the creditors, or embezzles or
misappropriates, any property of the debtor.
The court shall determine the extent of the liability of an owner, partner, director or officer under
this section. In this connection, in case of partnerships and corporations, the court shall consider
the amount of the shareholding or partnership or equity interest of such partner, director or
officer, the degree of control of such partner, director or officer over the debtor, and the extent of
the involvement of such partner, director or debtor in the actual management of the operations of
the debtor.
Section 145. Penalties. - An owner, partner, director, officer or other employee of the debtor who
commits any one of the following acts shall, upon conviction thereof, be punished by a fine of not
more than One million pesos (Php 1, 000,000.00) and imprisonment for not less than three(3)
months nor more than five (5) years for each offense;
(a) if he shall, having notice of the commencement of the proceedings, or having reason
to believe that proceedings are about to be commented, or in contemplation of the
proceedings hide or conceal, or destroy or cause to be destroyed or hidden any property
belonging to the debtor or if he shall hide, destroy, after mutilate or falsify, or cause to be
hidden, destroyed, altered, mutilated or falsified, any book, deed, document or writing
relating thereto; if he shall, with intent to defraud the creditors of the debtor, make any
payment sale, assignment, transfer or conveyance of any property belongings to the
debtor
(b) if he shall, having knowledge belief of any person having proved a false or fictitious
claim against the debtor, fail to disclose the same to the rehabilitation receiver of
liquidator within one (1) month after coming to said knowledge or belief; or if he shall
attempt to account for any of the debtors property by fictitious losses or expense; or
 (c) if he shall knowingly violate a prohibition or knowingly fail to undertake an obligation
established by this Act.

Section 146. Application to Pending Insolvency, Suspension of Payments and Rehabilitation

Cases. - This Act shall govern all petitions filed after it has taken effect. All further proceedings in
insolvency, suspension of payments and rehabilitation cases then pending, except to the extent
that in opinion of the court their application would not be feasible or would work injustice, in
which event the procedures set forth in prior laws and regulations shall apply.

Section 147. Application to Pending Contracts. - This Act shall apply to all contracts of the
debtor regardless of the date of perfection.

Section 148. Repeating Clause. - The Insolvency Law (Act No. 1956). As amended is hereby
repealed. All other laws, orders, rules and regulations or parts thereof inconsistent with any
provision of this Act are hereby repealed or modified accordingly.

CONCURRENCE AND PREFERENCE OF CREDITS
REPUBLIC ACT No. 1956
AN ACT AMENDING ARTICLE ONE HUNDRED AND EIGHTY-SIX OF THE REVISED PENAL
CODE, CONCERNING MONOPOLIES AND COMBINATIONS IN RESTRAINT OF TRADE.
Section 1. Article one hundred and eighty-six of the Revised Penal Code is amended to read as
follows:
"Art. 186. Monopolies and combinations in restraint of trade. The penalty of prison correctional in its
minimum period of a fine ranging from two hundred to six thousand pesos, or both, shall be imposed
upon:
"1. Any person who shall enter into any contract or agreement or shall take part in any
conspiracy or combination in the form of a trust or otherwise, in restraint of trade or
commerce or to prevent by artificial means free competition in the market;
"2. Any person who shall monopolize any merchandise or object of trade or commerce, or
shall combine with any other person or persons to monopolize said merchandise or object in
order to alter the price thereof by spreading false rumors or making use of any other artifice to
restrain free competition in the market;
"3. Any person who, being a manufacturer, producer, or processor of any merchandise or
object of commerce or an importer of any merchandise or object of commerce from any
foreign country, either as principal or agent, wholesaler or retailer, shall combine, conspire or
agree in any manner with any person likewise engaged in the manufacture, production,
processing, assembling or importation of such merchandise or object of commerce or with
any other persons not so similarly engaged for the purpose of making transactions prejudicial
to lawful commerce, or of increasing the market price in any part of the Philippines, of any
such merchandise or object of commerce manufactured, produced, processed, assembled in
or imported into the Philippines, or of any article in the manufacture of which such
manufactured, produced, processed, or imported merchandise or object of commerce is
used.
"If the offense mentioned in this Article affects any food substance, motor fuel or lubricants, or other
articles of prime necessity, the penalty shall be that of prison mayor in its minimum and medium
periods, it being sufficient for the imposition thereof that the initial steps have been taken toward
carrying out the purposes of the combination.
"Any property possessed under any contract or by any combination mentioned in the preceding
paragraphs, and being the subject thereof, shall be forfeited to the Government of the Philippines.
"Whenever any of the offenses described above is committed by a corporation or association, the
president and each one of the directors or managers of said corporation or association or its agent or
representative in the Philippines in case of a foreign corporation or association, who shall have
knowingly permitted or failed to prevent the commission of such offenses, shall be held liable as
principals thereof."
RA 386 “NCC”
TITLE XII
CONCURRENCE AND PREFERENCE OF CREDITS
CHAPTER 1. General Provisions
Article 2236. The debtor is liable with all his property, present and future, for the fulfillment of his
obligations, subject to the exemptions provided by law. (1911a)
Article 2237. Insolvency shall be governed by special laws insofar as they are not inconsistent with
this Code. (n)
Article 2238. So long as the conjugal partnership or absolute community subsists, its property shall
not be among the assets to be taken possession of by the assignee for the payment of the insolvent
debtor's obligations, except insofar as the latter have redounded to the benefit of the family. If it is the
husband who is insolvent, the administration of the conjugal partnership or absolute community may,
by order of the court, be transferred to the wife or to a third person other than the assignee. (n)
Article 2239. If there is property, other than that mentioned in the preceding article, owned by two or
more persons, one of whom is the insolvent debtor, his undivided share or interest therein shall be
among the assets to be taken possession of by the assignee for the payment of the insolvent debtor's
obligations. (n)
Article 2240. Property held by the insolvent debtor as a trustee of an express or implied trust, shall
be excluded from the insolvency proceedings. (n)
________
CHAPTER 2. Classification of Credits
Article 2241. With reference to specific movable property of the debtor, the following claims or
liens shall be preferred:
(1) Duties, taxes and fees due thereon to the State or any subdivision thereof;
(2) Claims arising from misappropriation, breach of trust, or malfeasance by public officials committed
in the performance of their duties, on the movables, money or securities obtained by them;
(3) Claims for the unpaid price of movables sold, on said movables, so long as they are in the
possession of the debtor, up to the value of the same; and if the movable has been resold by the
debtor and the price is still unpaid, the lien may be enforced on the price; this right is not lost by the
immobilization of the thing by destination, provided it has not lost its form, substance and identity;
neither is the right lost by the sale of the thing together with other property for a lump sum, when the
price thereof can be determined proportionally;
(4) Credits guaranteed with a pledge so long as the things pledged are in the hands of the creditor, or
those guaranteed by a chattel mortgage, upon the things pledged or mortgaged, up to the value
thereof;
(5) Credits for the making, repair, safekeeping or preservation of personal property, on the movable
thus made, repaired, kept or possessed;
(6) Claims for laborers' wages, on the goods manufactured or the work done;
(7) For expenses of salvage, upon the goods salvaged;
(8) Credits between the landlord and the tenant, arising from the contract of tenancy on shares, on
the share of each in the fruits or harvest;
(9) Credits for transportation, upon the goods carried, for the price of the contract and incidental
expenses, until their delivery and for thirty days thereafter;
(10) Credits for lodging and supplies usually furnished to travellers by hotel keepers, on the movables
belonging to the guest as long as such movables are in the hotel, but not for money loaned to the
guests;
(11) Credits for seeds and expenses for cultivation and harvest advanced to the debtor, upon the
fruits harvested;
(12) Credits for rent for one year, upon the personal property of the lessee existing on the immovable
leased and on the fruits of the same, but not on money or instruments of credit;
(13) Claims in favor of the depositor if the depositary has wrongfully sold the thing deposited, upon
the price of the sale.
In the foregoing cases, if the movables to which the lien or preference attaches have been wrongfully
taken, the creditor may demand them from any possessor, within thirty days from the unlawful
seizure. (1922a)
Article 2242. With reference to specific immovable property and real rights of the debtor , the
following claims, mortgages, and liens shall be preferred, and shall constitute an encumbrance on the
immovable or real right:
(1) Taxes due upon the land or building;
(2) For the unpaid price of real property sold, upon the immovable sold;
(3) Claims of laborers, masons, mechanics and other workmen, as well as of architects, engineers
and contractors, engaged in the construction, reconstruction or repair of buildings, canals or other
works, upon said buildings, canals or other works;
(4) Claims of furnishers of materials used in the construction, reconstruction, or repair of buildings,
canals or other works, upon said buildings, canals or other works;
(5) Mortgage credits recorded in the Registry of Property, upon the real estate mortgaged;
(6) Expenses for the preservation or improvement of real property when the law authorizes
reimbursement, upon the immovable preserved or improved;
(7) Credits annotated in the Registry of Property, in virtue of a judicial order, by attachments or
executions, upon the property affected, and only as to later credits;
(8) Claims of co-heirs for warranty in the partition of an immovable among them, upon the real
property thus divided;
(9) Claims of donors or real property for pecuniary charges or other conditions imposed upon the
donee, upon the immovable donated;
(10) Credits of insurers, upon the property insured, for the insurance premium for two years. (1923a)
Article 2243. The claims or credits enumerated in the two preceding articles shall be considered as
mortgages or pledges of real or personal property, or liens within the purview of legal provisions
governing insolvency. Taxes mentioned in No. 1, article 2241, and No. 1, article 2242, shall first be
satisfied. (n)
Article 2244. With reference to other property, real and personal, of the debtor, the following claims
or credits shall be preferred in the order named:
(1) Proper funeral expenses for the debtor, or children under his or her parental authority who have
no property of their own, when approved by the court;

(2) Credits for services rendered the insolvent by employees, laborers, or household helpers for one
year preceding the commencement of the proceedings in insolvency;
(3) Expenses during the last illness of the debtor or of his or her spouse and children under his or her
parental authority, if they have no property of their own;
(4) Compensation due the laborers or their dependents under laws providing for indemnity for
damages in cases of labor accident, or illness resulting from the nature of the employment;
(5) Credits and advancements made to the debtor for support of himself or herself, and family, during
the last year preceding the insolvency;
(6) Support during the insolvency proceedings, and for three months thereafter;
(7) Fines and civil indemnification arising from a criminal offense;
(8) Legal expenses, and expenses incurred in the administration of the insolvent's estate for the
common interest of the creditors, when properly authorized and approved by the court;
CHAPTER 3
Order of Preference of Credits
Article 2246. Those credits which enjoy preference with respect to specific movables, exclude all
others to the extent of the value of the personal property to which the preference refers.
Article 2247. If there are two or more credits with respect to the same specific movable property, they
shall be satisfied pro rata, after the payment of duties, taxes and fees due the State or any
subdivision thereof. (1926a)
Article 2248. Those credits which enjoy preference in relation to specific real property or real rights,
exclude all others to the extent of the value of the immovable or real right to which the preference
refers.
Article 2249. If there are two or more credits with respect to the same specific real property or real
rights, they shall be satisfied pro rata, after the payment of the taxes and assessments upon the
immovable property or real right. (1927a)

(9) Taxes and assessments due the national government, other than those mentioned in articles
2241, No. 1, and 2242, No. 1;
(10) Taxes and assessments due any province, other than those referred to in articles 2241, No. 1,
and 2242, No. 1;
(11) Taxes and assessments due any city or municipality, other than those indicated in articles 2241,
No. 1, and 2242, No. 1;
(12) Damages for death or personal injuries caused by a quasi-delict;
(13) Gifts due to public and private institutions of charity or beneficence;
Article 2250. The excess, if any, after the payment of the credits which enjoy preference with respect
to specific property, real or personal, shall be added to the free property which the debtor may have,
for the payment of the other credits. (1928a)
Article 2251. Those credits which do not enjoy any preference with respect to specific property, and
those which enjoy preference, as to the amount not paid, shall be satisfied according to the following
rules:
(1) In the order established in article 2244;
(2) Common credits referred to in article 2245 shall be paid pro rata regardless of dates. (1929a)

(14) Credits which, without special privilege, appear in (a) a public instrument; or (b) in a final
judgment, if they have been the subject of litigation. These credits shall have preference among
themselves in the order of priority of the dates of the instruments and of the judgments, respectively.
(1924a)

Article 2245. Credits of any other kind or class, or by any other right or title not comprised in the four
preceding articles, shall enjoy no preference. (1925)

PD 442, Article 110. Worker preference in case of bankruptcy. In the event of bankruptcy or
liquidation of an employer’s business, his workers shall enjoy first preference as regards their
wages and other monetary claims, any provisions of law to the contrary notwithstanding. Such
unpaid wages and monetary claims shall be paid in full before claims of the government and other
creditors may be paid. (As amended by Section 1, Republic Act No. 6715, March 21, 1989).
RA 6715, Section 1. Article 110 of Presidential Decree No. 442, amended, otherwise known as the
Labor Code of the Philippines, is hereby further amended to read as follows:
"Article 110. Worker preference in case of bankruptcy. - In the event of bankruptcy or liquidation of
an employer's business, his workers shall enjoy first preference as regards their unpaid wages and
other monetary claims, any provision of law to the contrary notwithstanding. Such unpaid wages and
monetary claims shall be paid in full before the claims of the Government and other creditors may be
paid."
Section 62.Contents of a Rehabilitation Plan. – The Rehabilitation Plan shall, as a minimum:
(a) specify the underlying assumptions, the financial goals and the procedures proposed to
accomplish such goals;
(b) compare the amounts expected to be received by the creditors under the Rehabilitation
Plan with those that they will receive if liquidation ensues within the next one hundred twenty
(120) days;
(c) contain information sufficient to give the various classes of creditors a reasonable basis
for determining whether supporting the Plan is in their financial interest when compared to the
immediate liquidation of the debtor, including any reduction of principal interest and penalties
payable to the creditors;
(d) establish classes of voting creditors;
(e) establish subclasses of voting creditors if prior approval has been granted by the court;
(f) indicate how the insolvent debtor will be rehabilitated including, but not limited to, debt
forgiveness, debt rescheduling, reorganization or quasi-reorganization. dacion en pago, debt-
equity conversion and sale of the business (or parts of it) as a going concern, or setting-up of
a new business entity or other similar arrangements as may be necessary to restore the
financial well-being and visibility of the insolvent debtor;
(g) specify the treatment of each class or subclass described in subsections (d) and (e);
(h) provide for equal treatment of all claims within the same class or subclass, unless a
particular creditor voluntarily agrees to less favorable treatment;
(i) ensure that the payments made under the plan follow the priority established under the
provisions of the Civil Code on concurrence and preference of credits and other applicable
laws;
(j) maintain the security interest of secured creditors and preserve the liquidation value of the
security unless such has been waived or modified voluntarily;
(k) disclose all payments to creditors for pre-commencement debts made during the
proceedings and the justifications thereof;
(1) describe the disputed claims and the provisioning of funds to account for appropriate
payments should the claim be ruled valid or its amount adjusted;
(m) identify the debtor's role in the implementation of the Plan;
(n) state any rehabilitation covenants of the debtor, the breach of which shall be considered a
material breach of the Plan;
(o) identify those responsible for the future management of the debtor and the supervision
and implementation of the Plan, their affiliation with the debtor and their remuneration;
(p) address the treatment of claims arising after the confirmation of the Rehabilitation Plan;
(q) require the debtor and its counter-parties to adhere to the terms of all contracts that the
debtor has chosen to confirm;
(r) arrange for the payment of all outstanding administrative expenses as a condition to the
Plan's approval unless such condition has been waived in writing by the creditors concerned;
(s) arrange for the payment" of all outstanding taxes and assessments, or an adjusted
amount pursuant to a compromise settlement with the BlR Or other applicable tax authorities;
 (t) include a certified copy of a certificate of tax clearance or evidence of a compromise
settlement with the BIR;

(u) include a valid and binding r(,solution of a meeting of the debtor's stockholders to increase
the shares by the required amount in cases where the Plan contemplates an additional
issuance of shares by the debtor;

(v) state the compensation and status, if any, of the rehabilitation receiver after the approval
of the Plan; and

(w) contain provisions for conciliation and/or mediation as a prerequisite to court assistance
or intervention in the event of any disagreement in the interpretation or implementation of the
Rehabilitation Plan.

Section 133. Concurrence and Preference of Credits. - The Liquidation Plan and its Implementation
shall ensure that the concurrence and preference of credits as enumerated in the Civil Code of the
Philippines and other relevant laws shall be observed, unless a preferred creditor voluntarily waives
his preferred right. For purposes of this chapter, credits for services rendered by employees or
laborers to the debtor shall enjoy first preference under Article 2244 of the Civil Code, unless the
claims constitute legal liens under Article 2241 and 2242 thereof.

(F) Liquidation of a Securities Market Participant.

Section 136. Liquidation of a Securities Market Participant. - The foregoing provisions of this chapter
shall be without prejudice to the power of a regulatory agency or self- regulatory organization to
liquidate trade-related claims of clients or customers of a securities market participant which, for
purposes of investor protection, are hereby deemed to have absolute priority over other claims of
whatever nature or kind insofar as trade-related assets are concerned.

For purposes of this section, trade -related assets include cash, securities, trading right and other
owned and used by the securities market participant in the ordinary course of this business.
SUSPENSION OF PAYMENTS- Financial Rehabilitation and Insolvency Act (FRIA) of
2010".
Section 2. Declaration of Policy. - It is the policy of the State to encourage debtors, both juridical
and natural persons, and their creditors to collectively and realistically resolve and adjust
competing claims and property rights. In furtherance thereof, the State shall ensure a timely, fair,
transparent, effective and efficient rehabilitation or liquidation of debtors. The rehabilitation or
liquidation shall be made with a view to ensure or maintain certainly and predictability in
commercial affairs, preserve and maximize the value of the assets of these debtors, recognize
creditor rights and respect priority of claims, and ensure equitable treatment of creditors who are
similarly situated. When rehabilitation is not feasible, it is in the interest of the State to facilities a
speedy and orderly liquidation of these debtor's assets and the settlement of their obligations.
CHAPTER VI
INSOLVENCY OF INDIVIDUAL DEBTORS
(A) Suspension of Payments.
Section 94. Petition. - An individual debtor who, possessing sufficient property to cover all his
debts but foreseeing the impossibility of meeting them when they respectively fall due, may file a
verified petition that he be declared in the state of suspension of payments by the court of the
province or city in which he has resides for six (6) months prior to the filing of his petition. He
shall attach to his petition, as a minimum: (a) a schedule of debts and liabilities; (b) an inventory
of assess; and (c) a proposed agreement with his creditors.
Section 95. Action on the Petition. - If the court finds the petition sufficient in form and
substance, it shall, within five (5) working days from the filing of the petition, issue an Order:
(a) calling a meeting of all the creditors named in the schedule of debts and liabilities at
such time not less than fifteen (15) days nor more than forty (40) days from the date of
such Order and designating the date, time and place of the meeting;
(b) directing such creditors to prepare and present written evidence of their claims before
the scheduled creditors' meeting;
(c) directing the publication of the said order in a newspaper of general circulation
published in the province or city in which the petition is filed once a week for two (2)
consecutive weeks, with the first publication to be made within seven (7) days from the
time of the issuance of the Order;
(d) directing the clerk of court to cause the sending of a copy of the Order by registered
mail, postage prepaid, to all creditors named in the schedule of debts and liabilities;
(e) forbidding the individual debtor from selling, transferring, encumbering or disposing in
any manner of his property, except those used in the ordinary operations of commerce or
of industry in which the petitioning individual debtor is engaged so long as the
proceedings relative to the suspension of payments are pending;
(f) prohibiting the individual debtor from making any payment outside of the necessary or
legitimate expenses of his business or industry, so long as the proceedings relative to
the suspension of payments are pending; and
(g) appointing a commissioner to preside over the creditors' meeting.
Section 96. Actions Suspended. - Upon motion filed by the individual debtor, the court may
issue an order suspending any pending execution against the individual debtor. Provide, That
properties held as security by secured creditors shall not be the subject of such suspension
order. The suspension order shall lapse when three (3) months shall have passed without the
proposed agreement being accepted by the creditors or as soon as such agreement is denied.
No creditor shall sue or institute proceedings to collect his claim from the debtor from the time of
the filing of the petition for suspension of payments and for as long as proceedings remain
pending except:
(a) those creditors having claims for personal labor, maintenance, expense of last illness
and funeral of the wife or children of the debtor incurred in the sixty (60) days
immediately prior to the filing of the petition; and
(b) secured creditors.
Section 97. Creditors' Meeting. - The presence of creditors holding claims amounting to at least
three-fifths (3/5) of the liabilities shall be necessary for holding a meeting. The commissioner
appointed by the court shall preside over the meeting and the clerk of court shall act as the
secretary thereof, subject to the following rules:
 (a) The clerk shall record the creditors present and amount of their respective claims;
(b) The commissioner shall examine the written evidence of the claims. If the creditors
present hold at least three-fifths (3/5) of the liabilities of the individual debtor, the
commissioner shall declare the meeting open for business;
(c) The creditors and individual debtor shall discuss the propositions in the proposed
agreement and put them to a vote;
(d) To form a majority, it is necessary:
(1) that two-thirds (2/3) of the creditors voting unite upon the same proposition;
and
(2) that the claims represented by said majority vote amount to at least three-
fifths (3/5) of the total liabilities of the debtor mentioned in the petition; and
(e) After the result of the voting has been announced, all protests made against the
majority vote shall be drawn up, and the commissioner and the individual debtor together
with all creditors taking part in the voting shall sign the affirmed propositions.
No creditor who incurred his credit within ninety (90) days prior to the filing of the petition shall be
entitled to vote.
Section 98. Persons Who May Refrain From Voting. - Creditors who are unaffected by the
Suspension Order may refrain from attending the meeting and from voting therein. Such persons
shall not be bound by any agreement determined upon at such meeting, but if they should join in
the voting they shall be bound in the same manner as are the other creditors.
Section 99. Rejection of the Proposed Agreement. - The proposed agreement shall be deemed
rejected if the number of creditors required for holding a meeting do not attend thereat, or if the
two (2) majorities mentioned in Section 97 hereof are not in favor thereof. In such instances, the
proceeding shall be terminated without recourse and the parties concerned shall be at liberty to
enforce the rights which may correspond to them.
Section 100. Objections. - If the proposal of the individual debtor, or any amendment thereof
made during the creditors' meeting, is approved by the majority of creditors in accordance with
Section 97 hereof, any creditor who attended the meeting and who dissented from and protested
against the vote of the majority may file an objection with the court within ten (10) days from the
date of the last creditors' meeting. The causes for which objection may be made to the decision
made by the majority during the meeting shall be: (a) defects in the call for the meeting, in the
holding thereof and in the deliberations had thereat which prejudice the rights of the creditors; (b)
fraudulent connivance between one or more creditors and the individual debtor to vote in favor of
the proposed agreement; or (c) fraudulent conveyance of claims for the purpose of obtaining a
majority. The court shall hear and pass upon such objection as soon as possible and in a
summary manner.
In case the decision of the majority of creditors to approve the individual debtor's proposal or any
amendment thereof made during the creditors' meeting is annulled by the court, the court shall
declare the proceedings terminated and the creditors shall be at liberty to exercise the rights
which may correspond to them.
Section 101. Effects of Approval of Proposed Agreement. - If the decision of the majority of the
creditors to approve the proposed agreement or any amendment thereof made during the
creditors' meeting is uphold by the court, or when no opposition or objection to said decision has
been presented, the court shall order that the agreement be carried out and all parties bound
thereby to comply with its terms.
The court may also issue all orders which may be necessary or proper to enforce the agreement
on motion of any affected party. The Order confirming the approval of the proposed agreement
or any amendment thereof made during the creditors' meeting shall be binding upon all creditors
whose claims are included in the schedule of debts and liabilities submitted by the individual
debtor and who were properly summoned, but not upon: (a) those creditors having claims for
personal labor, maintenance, expenses of last illness and funeral of the wife or children of the
debtor incurred in the sixty (60) days immediately prior to the filing of the petition; and (b)
secured creditors who failed to attend the meeting or refrained from voting therein.
Section 102. Failure of Individual Debtor to Perform Agreement. - If the individual debtor fails,
wholly or in part, to perform the agreement decided upon at the meeting of the creditors, all the
rights which the creditors 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.