RA 10142 – FINANCIAL

REHABILITATION AND
INSOLVENCY ACT (FRIA) OF
2010
INSOLVENCY LAW FOR INSOLVENT INDIVIDUAL DEBTORS
WHO ARE NOT BUSINESSMEN
 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.
 NOT COVERED INSTITUTION

• BANKS
• INSURANCE COMPANY
• PRE NEED COMPANY
• NATIONAL GOVT AGENCIES
• LOCAL GOVERNMENT AGENCIES AND UNIT
 INSOLVENCY

• FINANCIAL CONDITION OF A DEBTOR THAT IS GENERALLY UNABLE TO PAY ITS

OR HIS LIABILITIES AS THEY FALL DUE IN THE ORDINARY COURSE OF BUSINEE
• LIABILITIES > ASSETS
 PROCEDURES FOR SUSPENSION OF PAYMENTS
BY AN INSOLVENT INDIVIDUAL DEBTOR
• 1. FILING PETITION FOR DECLARATION OF STATEMENT OF SUSPENSION OF PAYMENTS –
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 RESIDED FOR 6 MONTHS PRIOR TO FILING OF HIS PETITION. HE SHALL
ATTACH TO HIS PETITION : 1. SCHEDULE OF DEBTS AND LIABILITIES ; 2. INVENTORY OF
ASSETS ; 3. PROPOSED AGREEMENT WITH HIS CREDITORS.
• 2. ACTION BY THE COURT ON PETITION – WITHIN 5 WORKING DAYS ISSUE ORDER
• CALLING A MEETING OF ALL CREDITORS NAMED IN THE SCHEDULE AT SUCH TIME
NOT LESS THAN 15 DAYS NOR MORE THAN 40 DAYS FROM DATE OF SUCH ORDER
• DIRECTING SUCH CREDITORS TO PREPARE AND PRESENT WRITTEN EVIDENCE OF
THEIR CLAIMS
• DIRECTING PUBLICATION OF SAID ORDER IN AN NEWSPAPER OF GENERAL
CIRCULATION PUBLISHED IN THE PROVINCE OR CITY IN WHICH PETITION IS FILED
ONCE A WEEK FOR 2 CONSECUTIVE WEEKS --- 1ST PUBLICATION BE MADE WITHIN 7
DAYS FROM TIME OF ISSUANCE OF ORDER
• DIRECTING 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
• FORBIDDING THE INDIVIDUAL DEBTOR FROM SELLING, TRANSFERRING,
ENCUMBERING OR DISPOSING IN ANY MANNER OF HIS PROPERTY EXCEPT THOSE
USED IN ORDINARY OPERATIONS
• PROHIBITING THE INDIVIDUAL DEBTOR FROM MAKING ANY PAYMENT OUTSIDE
THE NECESSARY OR LEGITIMATE EXPENSES OF HIS BUSINESS OR INDUSTRY
• APPOINTING A COMMISSIONER TO PRESIDE OVER THE CREDITORS’MEETING
• 3. EFFECTS OF ISSUANCE BY COURT OF AN ORDER SUSPENDING ANY PENDING
EXECUTIONAGAINST INDIVIDUALUPON MOTION FIELD BY INSOLVENT DEBTOR
• NO CREDITOR SHALL SUE OR INSTITUTE PROCEEDINGS TO COLLECT CLAIM FROM
DEBTOR FROM TIME OF PETITION AND AS LONG AS PROCEEDING REMAIN PENDING
EXCEPT:
• SECURED CREDITORS
• CREDITORS CLAIMING FOR PERSONAL LABOR , MAINTENANCE, EXPENSE OF ILLNESS AND
FUNERAL OF THE WIFE OR CHILDREN OF DEBTOR INCURRED IN THE 60 DAYS IMMEDIATELY
PRIOR TO THE FILING OF THE PETITION
• PROPERTIES HELD AS SECURITY BY SECURED CREDITORS SHALL NOT BE SUBJECT OF
SUCH SUSPENSION ORDER
• 4. DURATION OF SUSPENSION OF PAYMENTS OR SUSPENSION ORDER BY THE
TRIAL COURT
• THE ORDER SHALL LAPSE WHEN THREE MONTHS SHALL HAVE PASSED WITHOUT
PROPOSED AGREEMENT BEING ACCEPTED BY CREDITORS AS SOON AS SUCH
AGREEMENT IS DENIED.

• 5. QUORUM IN MEETING IF CREDITORS FOR APPROVAL OF THE PROPOSAL OF

INSOLVENT INDIVIDUAL
• THE PRESENCE OF CREDITOR HOLDING CLAIMS AMOUNTING TO AT LEAST 3/5 OF THE
LIABILITIES SHALL BE NECESSARY FOR HOLDING OF MEETING

• 6. REQUIRED VOTE BY THE CREDITORS FOR THE APPROVAL OF THE PROPOSAL OF

INSOVENT DEBTOR
• 2/3 OF CREDITORS VOTING UNITE UPON THE SAME PROPOSITIONS
• CLAIMS REPRESENTED BY SAID MAJORITY VOTE AMOUNT TO AT LEAST 3/5 OF TOTAL
LIABILITIES OF THE DEBTOR MENTIONED IN THE PETITION
• 7. INSTANCES WHEN THE PROPOSED AGREEMENT BY THE INSOLVENT DEBTOR IS
DEEMED REJECTED BY THE CREDITORS
• IF THE NUMBER OF CREDITORS REQUIRED TO HOLD A MEETING DO NOT ATTEND
THEREAT
• IF THE DOUBLE MAJORITIES REQUIRED FOR THE APPROVAL OF THE PROPOSED
AGREEMENT HAVE NOT MADE
• 8. EFFECTS OF APPROVAL OF PROPOSED AGREEMENT BY THE INSOLVENT
DEBTOR
• THE COURT SHALL ORDER THAT THE AGREEMENT BE CARRIED OUT AND ALL
PARTIES BOUND THEREBY TO COMPLY WITH ITS TERM
• THE COURT MAY ALSO ISSUE ALL ORDERS WHICH MAY BE NECESSARY OR PROPER TO
ENFORCE THE AGREEMENT ON MOTION OF ANY AFFECTED PARTY
• 9.EFFECTS OF FAILURE TO PERFORM THE APPROVED AGREEMENT
• ALL THE RIGHTS WHICH THE CREDITORS HAD AGAINST THE INDIVIDUAL DEBTOR
BEFORE AGREEMENT SHALL REVEST TO THEM
• INDIVIDUAL DEBTOR MAY BE MADE SUBJECT TO THE INSOLVENCY PROCEEDINGS IN
THE MANNER ESTABLISHED BY THIS ACT.
 VOLUNTARY LIQUIDATION
I. APPLICATION --- LIABILITIES > ASSETS AND LIABILITIES > 500,000
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 6 MONTHS PRIOR TO SUCH PETITION.
ATTACHMENT : SCHEDULE OF DEBTS AND LIABILITIES AND AN INVENTORY
OF ASSETS
II. IF COURT FINDS PETITION SUFFICIENT IN FORM AND SUBSTANCE----WITHIN 5
DAYS ISSUED LIQUIDATION ORDER
III. REQUIREMENTS FOR VOLUNTARY LIQUIDATION
LIABILITIES > ASSETS AND LIABILITIES > 500,000
 INVOLUNTARY LIQUIDATION

I. APPLICATION --- ANY CREDITOR OR GROUP OF CREDITORS WITH A CLAIM OF

OR WITH CLAIMS AGGREGATING AT LEAST 500,000 MAY FILE A VERIFIED
PETITION FOR LIQUIDATION WITH THE COURT OF THE PROVINCE OR CITY IN
WHICH THE INDIVIDUAL DEBTOR RESIDES
II. II. ACTS OF INSOLVENCY
III. POSTING OF BOND BY CREDITORS
THE PETITIONING CREDITORS SHALL POST A BOND IN SUCH A SUM AS THE COURT
DIRECT CONDITIONED THAT IF THE PETITION FOR LIQUIDATION IS DISMISSED BY THE
COURT OR WITHDRAWN BY THE DEBTOR ALL COSTS, EXPENSES, DAMAGES BY THE
PROCEEDINGS, AND ATTORNEY’S FEES.

IV. ORDERS THE COURT MAY ISSUE DURING THE INVOLUNTARY LIQUIDATION
THE COURT SHALL ISSUE A SHOW CAUSE ORDER
IF GOOD CAUSE SHOWN, COURT MAY ISSUE AN ORDER FORBIDDING THE
INDIVIDUAL DEBTOR FROM MAKING PAYMENTS OF ANY OF HIS DEBTS AND
TRANSFERRING ANY PROPERTY BELONGING TO HIM EXCEPT SECURED CREDITORS

V. DEFAULT BY INDIVIDUAL INSOLVENT DEBTOR

THE COURT SHALL ISSUE LIQUIDATION ORDER