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What is a lien?
A rehabilitation plan can include the setting-up of a new business entity.
True
What is the primary role of a rehabilitation receiver?
To oversee the rehabilitation process and ensure the accuracy of the debtor's financial situation.
The __________ refers to a plan aimed at restoring the financial well-being of an insolvent debtor.
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Match the following terms with their definitions:
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Which of the following is NOT a responsibility of the rehabilitation receiver?
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The rehabilitation receiver can make payments on behalf of the debtor without court approval.
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A debtor is considered __________ when they can no longer meet their financial obligations.
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What is required for a debtor to file a verified petition for a pre-negotiated Rehabilitation Plan?
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An insolvent debtor can seek court assistance for executing a Rehabilitation Plan.
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What percentage of unsecured obligations must be approved by creditors for an informal rehabilitation agreement?
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A debtor must provide a schedule of the debtor's ______ and liabilities when applying for voluntary liquidation.
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Match the following terms with their definitions:
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What is the maximum duration of the standstill period for out-of-court rehabilitation agreements?
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Secured creditors need approval from 67% of the total secured obligations to agree to an out-of-court restructuring.
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Name one requirement for a debtor to apply for liquidation.
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Who can initiate voluntary proceedings for rehabilitation under the current act?
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A creditor must have a claim of at least Php 1,000,000.00 to initiate involuntary proceedings.
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What is the minimum requirement for the moral character of a rehabilitation receiver?
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To initiate voluntary proceedings as a corporation, a ___ vote of the board of directors is required.
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Match the following terms with their definitions:
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What is required for a non-stock corporation to initiate voluntary proceedings?
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A rehabilitation receiver can have a conflict of interest.
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What must the creditors' claims be in terms of percentage for them to initiate involuntary proceedings?
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Study Notes
Rehabilitation
- A process aimed at restoring the financial well-being and viability of an insolvent debtor
- Various methods are utilized, including debt forgiveness, debt rescheduling, reorganization, dacion en pago, debt-equity conversion, sale of assets, setting up a new business entity, and other approved arrangements.
Types of Rehabilitation
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Court-Supervised Rehabilitation
- Voluntary Proceedings (Initiated by the Debtor):
- Initiated by the owner for sole proprietorships
- Initiated by a majority of partners for partnerships
- Initiated by a majority vote of the board of directors or trustees and authorized by stockholders representing at least two-thirds of the outstanding capital stock for corporations
- Initiated by a vote of at least two-thirds of members for nonstock corporations
- Filing a petition for rehabilitation with the court is required.
- Involuntary Proceedings (Initiated by Creditors):
- Any creditor or group of creditors with a claim exceeding Php1,000,000 or at least 25% of the subscribed capital stock or partners' contributions (whichever is higher) can initiate involuntary proceedings.
- Filing a petition for rehabilitation with the court is required.
- Voluntary Proceedings (Initiated by the Debtor):
-
Pre-Negotiated Rehabilitation
- An insolvent debtor, independently or jointly with a creditor, can file a petition for approval of a pre-negotiated plan endorsed or approved by creditors representing:
- At least two-thirds of the debtor's total liabilities
- Secured creditors holding more than 50% of total secured claims
- Unsecured creditors holding more than 50% of total unsecured claims
- An insolvent debtor, independently or jointly with a creditor, can file a petition for approval of a pre-negotiated plan endorsed or approved by creditors representing:
-
Out-of-Court or Informal Restructuring Agreements or Rehabilitation Plans
- Requires approval from:
- The debtor
- Creditors representing at least 67% of secured obligations
- Creditors representing at least 75% of unsecured obligations
- Creditors representing at least 85% of total liabilities (secured and unsecured)
- A Standstill period of no more than 120 days is permitted.
- Court assistance may be sought for execution or implementation of the plan.
- Requires approval from:
Rehabilitation Receiver
- Appointed by the court
- Responsibilities:
- Verify the accuracy of the petition and its annexes
- Verify and correct the inventory of the debtor's assets and their valuation
- Verify and correct the schedule of the debtor's debts and liabilities
- Evaluate the validity and genuineness of claims against the debtor
- Take possession, custody, and control of the debtor's property
- Sue and recover amounts owed to and properties pertaining to the debtor, with court approval
- Have access to information relevant to the debtor's operations and business
- Sue and recover property or money paid, transferred, or disbursed in fraud of the debtor or its creditors, with court approval
- Monitor the debtor's operations to ensure no unauthorized payments or transfers
- Engage the services of individuals or entities to assist with their functions, with court approval
Key Definitions
- Claim: refers to a request for payment or satisfaction of a debt.
- Lien: refers to a legal claim on real or personal property that entitles a creditor to use the property for debt repayment.
- Rehabilitation Plan: a plan aimed at restoring the financial well-being of an insolvent debtor, using methods like debt forgiveness, debt rescheduling, reorganization, dacion en pago, debt-equity conversion, sale of assets, setting up a new business entity, and other approved arrangements.
- Rehabilitation Receiver: refers to the individual or entity appointed by the court to oversee the rehabilitation process.
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Description
Explore the various methods and types of rehabilitation aimed at restoring the financial health of insolvent debtors. This quiz covers court-supervised procedures, both voluntary and involuntary, as well as the key concepts involved in debt management and restructuring.
