May an Individual Debtor Defer the Payment of His Debts

With rapid speed, the COVID-19 pandemic has hit hard the global economy. In
Philippine setting, its economy may lose between P276.3 billion and P2.5 trillion,
depending on how the coronavirus pandemic develops in the next few months,
according to a state-run think tank (https://www.bworldonline.com/impact-of-covid-19-
on-key-philippine-economic-sectors/). Despite the calibrated lifting of the Enhanced
Community Quarantine (ECQ) throughout the country, the COVID-19 virus may
continue to hurt the global economy as it may still result in job losses, supply chain
problems, travel restrictions, and business disruptions across the country. This scenario
may cause issues relating to cash flow and eventually on illiquidity or insolvency
issues.

As early as July 18, 2010, Republic Act No. 10142, otherwise known as the “Financial
Rehabilitation and Insolvency Act (FRIA) of 2010” was signed into law to encourage
debtors, both juridical and natural persons, and their creditors to collectively and
realistically resolve and adjust competing claims and property rights. 

To help individual debtors to address this potential economic damage, the “Financial
Rehabilitation and Insolvency Act (FRIA) of 2010” provides for a measure on how may
an individual debtor lawfully defer the payment of debts until he/she is able to convert
his/her properties to cash or acquire the needed cash to pay his/her debts.

Section 94 of Financial Rehabilitation and Insolvency Act provides that “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 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 assets; and (c) a proposed agreement with his creditors.”

This measure refers only to individual debtor who is a natural person and a resident and
citizen of the Philippines that have sufficient assets to cover liabilities but cannot meet
their liabilities as they fall due. Through this law, it allows an individual debtor to put
his/her financial life back in order.

Should you have any further question about the filing of the verified petition to be
declared in the state of suspension of payment of debts and its procedure or if you need
the Firm’s assistance, please feel free to contact us at: Tel. No. (02) 8 256-2252 or
Cellphone No. +63905-2870-464 or you can visit our office at Unit 2802 Cityland
Pasong Tamo Tower, 2210 Chino Roces Avenue, Pio del Pilar, Makati City.