DISCHARGE in Insolvency - Act 1956

Category: Obligations and Contracts

DISCHARGE in Insolvency

DISCHARGE

     Formal and judicial release of an insolvent debtor from his debts  with  the  exception  of  those  expressly  reserved  by law
 

ACTS  OF  DEBTOR  OR  GROUNDS  WHICH  WILL  PREVENT  A DISCHARGE

1.   False swearing
2.   Concealment of any part of his estate or effects
3.   Fraud or willful neglect in the care of his property or in the delivery thereof to the assignee
4.   Procuring  his  properties  to  be  attached  or  seized  on execution  within  1  month  before  the  commencement  of insolvency proceedings
5.   Destruction,  mutilation,  alteration  or  falsification  of  his books, documents, and papers
6.   Giving fraudulent preference to a creditor
7.   Non-disclosure  to  the  assignee  of  a  proven  false  or fictitious debt within 1 month after acquiring knowledge
8.   Being a merchant, failure to keep proper books of accounts
9.   Influencing the action  of any  creditor, at  any state  of the proceedings, by any pecuniary consideration 
10. Effecting   any   transfer,   conveyance,   or   mortgage   in contemplation of insolvency
11. Conviction of any misdemeanor under the Insolvency Law
12. In  case  of  voluntary  insolvency,  he  has  received  the benefits  of  insolvency  within  6  years  next  preceding  his application for discharge
13. If  insolvency  proceedings  in  which  he  could  have  applied for a discharge are pending by or against him in the RTC of any other province or city
 

DEBTS RELEASED BY DISCHARGE

1.   All  claims,  debts,  and  liabilities  and  demands  set  forth  in the schedule
2.   All  claims,  debts,  and  liabilities  and  demands  which  were or  might  have  been  proved  against  the  estate  of  the insolvency
 

DEBTS NOT RELEASED BY DISCHARGE

1.   Taxes 
2.   Debts arising from any act of swindling (because you don’t reward a person who violated a law or a trust) 
3.   Debts of a surety, guarantor, indorser, or any person liable for the same debt, for or with the insolvent debtor (This is because  the  discharge  only  benefits  the  principal  debtor, not his co-debtors or guarantors). 
4.   Debts of a corporation 
5.   Claims for support 
6.   Debts  which  were  not  proved  and  could  not  have  been proved during the insolvency proceedings 
7.   Debts arising from tort 
8.   Claims of secured creditors 
9.   Debts  which  were  not  yet  existing  at  the  time  of  the discharge
10. Contingent claims
 

WHEN DISCHARGE MAY BE REVOKED 

1.   Whose debt was proved or provable against the estate in insolvency,   on   the   ground   that   the   discharge   was fraudulently obtained
2.   Who    has   discovered   facts   constituting   the    fraud subsequent to the discharge and provided,
3.   The  petition  is  filed  within  1  year  after  the  date  of  the discharge 

DISCHARGE - Act 1956
 
SECTION 64.    Discharge. — At any time after the expiration of  three  months  from  the  adjudication  of  insolvency,  but not later  than  one year from such adjudication, unless the
property  of  the  insolvent  has  not  been  converted  unto money,  the  debtor  may  apply  to  the  court  for  a  discharge from  his  debts, and the court shall thereupon  order notice
to be given to all creditors who have proved their debts to appear on a day appointed for that purpose and show cause why a discharge should  not  be granted to the  debtor; said notice shall be given by registered mail and by publication 28  at  least  once  a  week,  for  six  weeks,  in  a  newspaper published in the province  or city, or, if there be none, in a newspaper which, in the opinion of the judge, will best give notice to the creditors of the said insolvent: Provided, That if  no  debts  have  been  proven,  such  notice  shall  not  be required.
 
SECTION  65.     Invalid  discharge.  —  No  discharge  shall  be granted, or if granted shall be valid, (1) if the debtor shall have  sworn  falsely  in  his  affidavit  annexed  to  his  petition,
schedule,  or  inventory,  or  upon  any  examination  in  the course  of  the  proceedings  in  insolvency,  in  relation  to  any material  fact  concerning  his  estate  or  his  debts  or  to  any
other  material  fact;  or  (2)  if  he  has  concealed  any  part  of his  estate  or  effects,  or  any  books  or  writing  relating thereto;  or  (3)  if  he  has  been  guilty  of  fraud  or  willful neglect  in  the  care  or  custody  of  his  property  or  in  the delivery to the assignee of the property belonging to him at the  time  of  the  presentation  of  his  petition  and  inventory, excepting such property as he is permitted to retain under the provisions of this Act; or (4) if, within one month before the  commencement  of  such  proceedings,  he  has  procured his real estate, goods, moneys, or chattels to be attached or seized on execution;  or  (5) if he  has destroyed, mutilated, ltered,  or  falsified  any  of  his  books,  documents,  papers, writings,  or  securities,  or  has  made,  or  been  privy  to  the making  of,  any  false  or  fraudulent  entry  in  any  book  of account  or  other  document  with  intent  to  defraud  his creditors; or (6) if he has given any fraudulent preference, contrary  to  the  provisions  of  this  Act,  or  has  made  any fraudulent    payment,    gift,    transfer,    conveyance,    or assignment  of  any  part  of  his  property,  or  has  admitted  a false  or  fictitious  debt  against  his  estate;  or  (7)  if,  having
knowledge  that  any  person  has  proven  such  false   or fictitious  debt,   he   has   not   disclosed  the   same  to   his assignee within one month after such knowledge; or (8) if,
being  a  merchant  or  tradesman,  he  has  not  kept  proper books of account in Arabic numerals and in accordance with the provisions of the Code of Commerce; or (9) if he, or any
other person on his account, or in his behalf, has influenced the action of any creditor, at any stage of the proceedings, by any  pecuniary consideration  or obligation;  or (10) if  he
has,  in  contemplation  of  becoming  insolvent,  made  any pledge,  payment,  transfer,  assignment,  or  conveyance  of any part of his property, directly or indirectly, absolutely or
conditionally,  for  the  purpose  of  preferring  any  creditor  or person  having  a  claim  against  him,  or  who  is,  or  may  be, under liability for him, or for the purpose of preventing the
property from coming into the hands of the assignee, or of being distributed under this Act in satisfaction of his debts; or (11) if he has been convicted of any misdemeanor under this  Act,  or  has  been  guilty  of  fraud  contrary  to  the  true intent  of  this  Act;  or  (12)  in  case  of  voluntary  insolvency, has   received  the  benefit  of  this   or  any  other   Act   of insolvency  or  bankruptcy  within  six  years  next  preceding his   application   for   discharge;   or   (13)   if   insolvency proceedings in which he could have applied for a discharge are pending by or against him in the Court of First Instance of  any  other  province  or  city  in  the  Philippine  Islands.
Before any  discharge is granted, the  debtor  shall take and subscribe  an  oath  to  the  effect  that  he  has  not  done, suffered, or been privy to any act, matter, or thing specified
in this Act as grounds for withholding such discharge or as invalidating          such          discharge,          if          granted.
 
SECTION  66.     Any  creditor  opposing  the  discharge  of  a debtor  shall  file  his  objections  thereto,  specifying  the grounds of his opposition, and after the debtor has filed and served his answer thereto which pleadings shall be verified, the  court  shall  try  the  issue  or  issues  raised,  according  to the     practice     provided     by     law     in     civil     actions.
 
SECTION  67.     Discharge  of  debtor  by  court.  —  If  it  shall appear  to  the  court  that  the  debtor  has  in  all  things conformed to his duty under this Act, and that he is entitled
under  the  provisions  thereof  to  receive  a  discharge,  the court shall grant him a discharge from all his debts, except as  hereinafter  provided,  and  shall  give  him  a  certificate thereof, under the seal of the court, in substance as follows: "In  the  Court  of  First  Instance  of  the  _____________, Philippine  Islands.  Whereas,  ______________,  has  been duly adjudged an insolvent under the Insolvency Law of the Philippine Islands, and appears to have conformed to all the requirements  of  law  in  that  behalf,  it  is  therefore  ordered by   the   court   that   said   _______________   be   forever discharged   from   all   debts   and   claims,   which   by   said Insolvency  Law  are  made  provable  against  his  estate,  and which existed on the _______ day of _________, on which the  petition  of  adjudication  was  filed  by  (or  against)  him, excepting such debts, if any, as are by said Insolvency Law excepted  from  the  operation  of  a  discharge  in  insolvency. Given  under my hand, and the seal  of the court, this ____ day  of  ______________,  anno  Domini  ______________ Attest:    ____________,    clerk.    (Seal)    _____________, judge." 

SECTION 68.    Debts not released under this Act — No tax or  assessment  due  the  Insular  Government  29  or  any provincial or municipal government, whether proved or not as  provided  for  in  this  Act,  shall  be  discharged.  Nor  shall any  debt  created  by  the  fraud  or  embezzlement  of  the debtor,  or  by  his  defalcation  as  a  public  officer  or  while acting in a fiduciary capacity, be discharged under this Act, but the debt may be proved, and the dividend thereon shall be a payment on account of said debt. No discharge solvent granted  under  this  Act  shall  release,  discharge,  or  affect any person liable for the same debt, for or with the debtor, either  as  partner,  joint  contractor,  indorser,  surety,  or otherwise. 30
 
SECTION  69.     Effect  of  discharge  under  this  Act  —  A discharge,  duly  granted  under  this  Act,  shall,  with  the exceptions  aforesaid,  release  the  debtor  from  all  claims, debts, liabilities, and demands set forth in his schedule, or which were or might have been proved against his estate in insolvency, and may be pleaded by a simple averment that on  the  day  of  its  date  such  discharge  was  granted  to  him, setting  forth  the  same  in  full,  and  the  same  shall  be  a complete bar to all suits brought on any such debts, claims, liabilities,  or  demands,  and  the  certificate  shall  be  prima facie evidence in favor of such fact and of the regularity of such   discharge:   Provided,   however,   That   any   creditor whose  debt  was  proved  or  provable  against  the  estate  in insolvency  who shall see fit to contest the  validity  of such discharge  on  the  ground  that  it  was  fraudulently  obtained and  who  has  discovered  the  facts  constituting  the  fraud subsequent  to  the  discharge,  may,  at  any  time  within  one year  after  the  date  thereof,  apply  to  the  court  which granted it to set it aside and annul the same.