DISCHARGE in Insolvency
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
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.