VOLUNTARY INSOLVENCY

An insolvent debtor owing debts exceeding in amount the sum of P1,000 may apply to be discharged from his debts and liabilities by petition to the Regional Trial Court of the province or city in which he has resided for 6 months next preceding the filing of the petition. (Sec. 14)

PROCEDURE FOR VOLUNTARY INSOLVENCY:

The procedure is as follows:
1. Filing of petition by the debtor praying for the declaration of insolvency (Sec. 14);
2. Issuance of an order of adjudication declaring the petitioner insolvent (Sec. 18);
3. Publication and service of the order (Sec. 19);
4. Meeting of the creditors to elect the assignee in insolvency (Sec. 30);
5. Conveyance of the debtor’s property by the clerk of court to the assignee (Sec. 32);
6. Liquidation of the debtor’s assets and payment of his debts (Sec. 33);
7. Composition, if agreed upon (Sec. 63);
8. Discharge of the debtor on his application (Sec. 64), except a corporation (Sec. 52);
9. Objection, if any, to the discharge (Sec. 66);
10. Appeal to the Supreme Court in certain Cases (Sec. 62).

Effect of Filing of Petition:
Phil. Trust Co. vs. National Bank, 42 Phil. 413 (1921)
Once the petition is filed, ipso facto takes away and deprives the debtor petitioner of the right to do or commit any act of preference as to creditors, pending the final adjudication.

EFFECT OF COURT ORDER DECLARING DEBTOR INSOLVENT:
1. All the assets of the debtor not exempt from execution are taken possession of by the
sheriff until the appointment of a receiver or assignee;
2. The payment to the debtor of any debts due to him and the delivery to the debtor or to
any person for him of any property belonging to him, and the transfer of any property by
him are forbidden;
3. All civil proceedings pending against the insolvent debtor shall be stayed;
4. Mortgages or pledges, attachments or executions on property of the debtor duly
recorded and not dissolved are not, however, affected by the order