PROOF OF DEBTS - Insolvency Law


1.   All  debts due and  payable from the debtor  at the time  of the adjudication of the insolvency
2.   All  debts  existing  at  the  time  of  the  adjudication  of insolvency but not payable  until a  future time, a discount being  made  if  no  interest  is  payable  by  the  terms  of  the contract
3.   Any  debt  of  the  insolvent  arising  from  his  liability  as indorser,  surety,  bail  or  guarantor,  where  such  liability became  absolute  after  the  adjudication  of  insolvency  but before the final dividend shall have been declared

4.   Other contingent debts and contingent liabilities contracted by the insolvent if the contingency shall happen before the order of final dividend
5.   Any  debt  of  the  insolvent  arising  from  his  liability  to  any person liable as bail, surety, or guarantor or otherwise, for the  insolvent,  who  shall  have  paid  the  debt  in  full,  or  in part


> Claim in which liability depends on some future event that may  or  may  not  happen  and  which  makes  it  uncertain whether there will be any liability
> Such   claim  is   not  barred  merely  because  it   is   not presented  during  the  insolvency  proceedings.    After  the insolvency   proceedings   and   the   happening   of   the contingency,   the   creditor   may   pursue   any   available remedy for the collection of his claim


1.   Claims barred by the statute of limitations
2.   Claims  of  secured  creditors  with  a  mortgage  or  pledge  in their favor unless they surrender their security
3.   Claims  of  creditors  who  hold  an  attachment  or  execution on  the  property  of  the  debtor  duly  recorded  and  not dissolved

4.   Claims  on  account  of  which  a  fraudulent  preference  was made or given
5.   Support, as it doesn’t arise from any business transaction but from the relation of marriage
6.   A claim for unliquidated damages arising out of a pure tort which  neither constitutes a breach of an express  contract nor results in any unjust enrichment of the tortfeasor thay may form the basis of an implied contract


> This is the case of Uy-Tong v. Silva.  
> Compensation  can  be  set  up  against  the  insolvent  debtor but  only  for  those  debts  which  arose  at  least  30  days before  the  filing  of  the  insolvency  proceedings.    If  the claim  arose  within  the  30-day  period  before  the  filing  of the  petition,  there  can  be  no  compensation.    The  rule  on preferences  would  be  disregarded  if  the  set-off  were allowed.    It  would,  in  effect,  give  the  one  claiming compensation undue preference over other creditors. 

PROOF OF DEBTS - Insolvency Law

SECTION 53.    Class of debts. — All debts due and payable from   the   debtor   at   the   time   of   the   adjudication   of insolvency, and all debts then existing but not payable until a  future  time,  a  discount  being  made  if  no  interest  is payable by the terms of the contract, may be proved against the estate of the debtor.

SECTION 54.    Commercial paper. — If the debtor is bound as indorser, surety, bail, or guarantor, upon any bill, bond, note,  or  other  specialty  or  contract,  or  for  any  debt  any person,  and  his  liability  shall  not  have  become  absolute until after the adjudication  of insolvency, the  creditor  may prove the same after such liability shall have become fixed, and  before  the  final  dividend  shall  have  been  declared.

SECTION   55.      Contingent   debts.   —   In   all   cases   of contingent  debts  and  contingent  liabilities,  contracted  by the  debtor,  and  not  herein  otherwise  provided  for,  the
creditor  may  make  claim  therefor  and  have  his  claim allowed,  with  the  right  to  share  in  the  dividends,  if  the contingency  shall  happen  before  the  order  of  the  final dividend; or he may, at any time, apply to the court to have the  present  value  of  the  debt  or  liability  ascertained  and liquidated, which shall be done in such manner as the court shall  order,  and  it  shall  be  allowed  for  the  amount  so ascertained.

SECTION  56.     Bail,  surety,  etc.,  for  the  debtor.  —  Any person liable as bail, surety, or guarantor, or otherwise, for the  debtor,  who  shall  have  paid  the  debt,  or  any  part thereof, in discharge of the whole, shall be entitled to prove such debt, or to stand in the place of the creditor, if he shall have proved the same, although such payments shall have been   made   after   the   proceedings   in   insolvency   were commenced;  and  any  person  so  liable  for  the  debtor,  and who  has  not  paid  the  whole  of  said  debt,  but  is  still  liable for the same, or any part thereof, may, if the creditor shall fail or omit to prove such debt, prove the same in the name of the creditor.

SECTION 57.    Rents and periodical payments. — Where the debtor is liable to pay rent, or other debt falling due at fixed and   stated   periods,   the   creditor   may   prove,   for   a proportionate part thereof up to the time of the insolvency, as if the same became due from day to day, and not at such fixed and stated periods.

SECTION  58.     Mutual  debts  and  credits.  —  In  all  cases  of mutual  debts  and  mutual  credits  between  the  parties,  the account between them shall be stated, and one debt set off against the other, and the balance only shall be allowed of a claim   in   its   nature   not   provable   against   the   estate: Provided,  That  no  set-off  or  counterclaim  shall  be  allowed in favor of any debtor to the insolvent of a claim purchased by   or   transferred   to   such   debtor   within   thirty   days immediately  preceding  the  filing,  or  after  the  filing  of  the petition by or  against the insolvent.

SECTION  59.     Mortgages,  pledges,  liens,  etc.;  Release  or sale  by  assignee.  —  When  a  creditor  has  a  mortgage,  or pledge of real or personal property  of the debtor, or a lien thereon,  for  securing  the  payment  of  a  debt  owing  to  him from the debtor, or an attachment or execution on property of  the  debt  or  duly  recorded  and  not  dissolved  under  this Act, he shall be admitted as a creditor for the balance of the debt only, after deducting the value of such property, such value to be ascertained by agreement between him and the receiver, if any, and if no receiver, then  upon  such sum as the  court  or  a  judge  thereof  may  decide  to  be  fair  and reasonable, before the election of an assignee, or by a sale thereof,  to  be  made  in  such  manner  as  the  court  or  judge thereof  shall  direct;  or  the  creditor  may  release  or  convey his claim to the receiver, if any, or if no receiver then to the
sheriff,  before  the  election   of  an  assignee,  or  to  the assignee   if   an   assignee   has   been   elected,   upon   such property,  and  be  admitted  to  prove  his  whole  debt.  If  the value  of  the  property  exceeds  the  sum  for  which  it  is  so held  as  security,  the  assignee  may  release  to  the  creditor the debtor's right of redemption thereon on receiving such excess; or he may sell the property, subject to the claim of the  creditor  thereon,  and  in  either  case  the  assignee  and creditor,  respectively,  shall  execute  all  deeds  and  writings necessary or proper to consummate the transaction. If the property  is  not  sold  or  released,  and  delivered  up,  or  its value fixed, the creditor shall  not be allowed to prove  any part  of  his  debt,  but  the  assignee  shall  deliver  to  the creditor  all  such  property  upon  which  the  creditor  holds  a mortgage,   pledge,   or   lien,   or   upon   which   he   has   an attachment or execution.

SECTION 60.    Creditors proving claims cannot use; Stay of action.  —  No  creditor,  proving  his  debt  or  claim,  shall  be allowed  to  maintain  any  suit  therefor  against  the  debtor, but shall be deemed to have waived all right of action and suit  against  him,  and  all  proceedings  already  commenced, or any unsatisfied judgment already obtained thereon, shall be deemed to be discharged and surrendered thereby; and after  the  debtor's  discharge,  upon  proper  application  and proof to the court having jurisdiction, all such  proceedings shall   be,   dismissed,   and   such   unsatisfied   judgments satisfied  of  record:  Provided,  That  no  valid  lien  existing  in good faith thereunder shall be thereby affected. A creditor proving his debt or claim shall not be held to  have  waived his  right  of  action  or  suit  against  the  debtor  when  a discharge  has  have  been  refused  or  the  proceedings  have been  determined  to  the  without  a  discharge.  No  creditor whose  debt  is  provable  under  this  Act  shall  be  allowed, after  the  commencement  of  proceedings  in  insolvency,  to prosecute to final judgment any action therefor against the debtor  until  the  question  of  the  debtor's  discharge  shall ave been determined, and any such suit proceeding shall, upon the application of the debtor or of any creditor, or the assignee, be stayed to await the determination of the court on the question of discharge: Provided, That if the amount due the creditor is in dispute, the suit, by leave of the court in  insolvency,  may  proceed  to  judgment  for  purpose  of ascertaining   the   amount   due,   which   amount,   when adjudged,  may  be  allowed  in  the  insolvency  proceedings, but execution shall be stayed aforesaid.

SECTION 61.    Preferences knowingly accepted contrary to this  Act.  —  Any  person  who  shall  have  accepted  any preference,  having  reasonable  cause  to  believe  that  the same  was  made  or  given  by  the  debtor  contrary  to  any provision of this Act, shall not be allowed to prove the debt or  claim  on  account  of  which  the  preference  was  made  or given,  nor  shall  he  receive  any  dividend  thereon,  until  he shall have surrendered to the assignee all property, money, benefit,   or   advantage   received   by   him   under   such preference.

SECTION  62.     Examinations  under  oath  by  court.  —  The court may, upon the application of the assignee,  or of any creditor,   or   without   any   application,   before   or   after adjudication in insolvency, examine upon oath the debtor in relation to his property and his estate and may examine any other  person  tending  or  making  proof  of  claims,  and  may subpoena   witnesses  to  give  evidence   relating  to  such matters.  All  examinations  of  witnesses  shall  be  had  and depositions  shall  be  taken  in  accordance  with  and  in  the same manner as is provided by the Code of Civil Procedure.