FAMILY FIX: Filing Bankruptcy in the Philippines - An Option or Not for Debt-Stricken OFWs

A very concerned individual has asked this question in behalf of the many Filipina working as domestic workers in Hong Kong who had been taken advantage of by employment agencies and others, and many owe huge debts – far more than they are ever likely to be able to pay. The requestor of advice is a foreigner who is knowledgeable about bankruptcy law in his country. He wants to know, if under Philippine law, these Filipina women can file a bankruptcy and if the bankruptcy proceeding is a practical method for a person to get out of the burden of debts. He also wants to know if the person residing in Hong Kong would need to return to the Philippines in order to file bankruptcy.

My reply:

Please know that in my ten years of practice, I have not encountered this question so I honestly do not know the actual procedure in availing this remedy. The basis of my reply is book knowledge and not experience so I may not be the right person to advice you on the practicality of the approach.

Bankruptcy law in the Philippines is called the Insolvency Law under Act No. 1956 which took effect on May 20, 1909. The intention of the law-making power, in enacting the Insolvency Law, is to provide an adequate remedy for all creditors of a person who becomes insolvent. The law allows individuals or businesses ("debtors") who owe others ("creditors") more money than they're able to pay to either work out a plan to repay the money over time (or suspend payment) or completely eliminate ("discharge") most of the debts by filing either a Voluntary Insolvency or an Involuntary Insolvency.

In Voluntary Insolvency, an insolvent debtor, owing debts may apply to be discharged from his debts and liabilities by petition to the Regional Trial Court in the province or city in which he has resided for six months next preceding the filing of such petition. In his petition he shall set forth his of residence, the period of his residence therein immediately prior to filing said petition, his inability to pay all his debts in full, his willingness to surrender all his property, estate, and effects not exempt from execution for the benefit of his creditors, and an application to be adjudged an insolvent. He shall annex to his petition a schedule and inventory in the form herein-after provided. The filing of such petition shall be an act of insolvency.

The said schedule must contain a full and true statement of all his debts and liabilities, together with a list of all those to whom, to the best of his knowledge and belief, said debts or liabilities are due, the place of residence of his creditors and the sum due each the nature of the indebtedness or liability and whether founded on written security, obligation, contract or otherwise, the true cause and consideration thereof, the time and place when and where such indebtedness or liability accrued, a declaration of any existing pledge, lien, mortgage, judgment, or other security for the payment of the debt or liability, and an outline of the facts giving rise or which might give rise to a cause of action against such insolvent debtor.

The said inventory must contain, besides the creditors, an accurate description of all the real and personal property, estate, and effects of the petitioner, including his homestead, if any, together with a statement of the value of each item of said property, estate, and effects and its location, and a statement of the encumbrances thereon. All property exempt by law from execution 2 shall be set out in said inventory with a statement of its valuation, location, and the encumbrances thereon, if any. The inventory shall contain an outline of the facts giving rise, or which might give rise, to a right of action in favor of the insolvent debtor.

Based on my reading of the above cited provisions of the law, I frankly do not think that filing of an Insolvency proceeding is a practical approach. In fact, I wonder if this remedy is ever availed of at present times. You will note that the law was enacted in 1909, but when I checked the jurisprudence on the matter, the latest decision by the Supreme Court was dated way back 1940s. I found, however, a question on insolvency in the 2005 Bar Examinations. So my conclusion is this: no one is availing of the insolvency proceedings at present times and any reference to the law is only for educational exercise.

As provided in the provisions, the Insolvency proceeding is commenced by filing a petition in a Regional Trial Court in a province or city where the petitioner has resided for the six months prior to the filing of the petition. This means that the Filipina has to hire a lawyer to prepare the petition and for her to personally sign the petition. The signing of the petition cannot be delegated to a representative even if the attorney –in-fact is the lawyer himself. The court would not be able to acquire jurisdiction over the person until and unless a verified petition is filed in Court.