Filing for individual bankruptcy

Question: I am deep in debt. My income is not anymore enough to pay even the minimum amounts required under my loans. I have resorted to borrowing my way out of debt and it just made my situation worse. Can you help me file for bankruptcy? Asked at “Ask a Friend, Ask Efren” FREE service at www.personalfinance.ph, SMS and Facebook

Answer: In the Philippines, there is the Financial Rehabilitation and Insolvency Act, or FRIA. Under FRIA, the filing for insolvency covering debts of individuals can be made through one of the following ways:

1. Suspension of payments – A restructuring of debt payments is allowed by the court provided that: a) an individual debtor who, possessing sufficient property to cover all his debts, foresees the impossibility of meeting debt payments when they respectively fall due; b) the individual debtor presents a feasible restructuring program; and c) in a meeting attended by creditors holding claims amounting to at least three-fifths, or 60 percent, of the liabilities of the individual debtor, the majority of the creditors approve of the restructuring program.

2. Voluntary liquidation – This covers any individual debtor whose properties are not sufficient to cover his liabilities, and who has debts exceeding P500,000. Should the court find the petition for voluntary liquidation sufficient in form and substance, it shall, within five working days, issue the liquidation order.

3. Involuntary liquidation – “Any creditor or group of creditors with a claim of, or with claims aggregating at least P500,000 may file a verified petition for liquidation with the court of the province or city in which the individual debtor resides.” If the individual debtor shall default or if, after trial,

the court finds merit in favor of the petitioning creditors, the court shall issue the liquidation order.

Of the three, the first two are initiated by the borrower. And while only involuntary liquidation is the option for creditors under FRIA, creditors may also file civil small claims cases before the Metropolitan Trial Courts, which are nonappealable and where no lawyers are allowed to appear. The small claims cases provide a simpler, more inexpensive and expeditious means of settling disputes on purely money claims up to P400,000.

Please note that filing for suspension of payments or voluntary insolvency will involve much more details that are too numerous to include in this article. However, the most important thing to note about filing for insolvency on the part of the borrower is that it is an expensive process that does not lead to an instant solution.

The better solution is to follow not the law of man but divine law, which says, “Settle with your opponent quickly while on the way to court with him. Otherwise your opponent will hand you over to the judge, and the judge will hand you over to the guard, and you will be thrown into prison.” (Matthew 5:25) In other words, go for an out-of-court settlement.

Article 3, Section 20 of the Philippine Constitution does say that, “No person shall be imprisoned for debt or nonpayment of a poll tax.” However, a person can still go to jail under Batas Pambansa Blg. 22, which penalizes the making or drawing and issuance of a check without sufficient funds or credit, and Republic Act No. 8484, which prohibits fraudulent acts committed relative to access devices like credit cards.

Now, if in the process of negotiating with your creditors and the agencies that they hire, they undertake unfair collection practices, you can report them to the Bangko Sentral ng Pilipinas for the traditional lenders in the financial services industry or to the Securities and Exchange Commission for the small lenders.

So, follow the divine law.

Efren Ll. Cruz is a registered financial planner of RFP Philippines, seasoned investment adviser, bestselling author of personal finance books in the Philippines. Help others by becoming a YAMAN coach. Details can be found at www.personalfinance.ph/coach.html. To learn more about personal financial planning, attend the 82nd RFP program this March 2020. To inquire, email [email protected] or text at 0917-9689774.