PROOF OF DEBTS - Insolvency Law
DEBTS THAT MAY BE PROVED
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
DEBTS THAT MAY NOT BE PROVED
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
CAN A CREDITOR SET UP COMPENSATION/OFFSET HIS OWN DEBTS AGAINST THE INSOLVENT DEBTOR?
> 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.