Rehabilitation Processes Overview
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Questions and Answers

What is a lien?

  • A statutory claim against property for debt repayment (correct)
  • A type of business reorganization
  • A form of debt forgiveness
  • A financial strategy for debt settlement

    • 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.

    <p>rehabilitation plan</p> Signup and view all the answers

    Match the following terms with their definitions:

    <p>Lien = Statutory claim on property for debt Debtor = Entity unable to meet financial obligations Rehabilitation Plan = Strategy for financial recovery Rehabilitation Receiver = Appointed individual overseeing rehabilitation</p> Signup and view all the answers

    Which of the following is NOT a responsibility of the rehabilitation receiver?

    <p>To grant debt forgiveness</p> Signup and view all the answers

    The rehabilitation receiver can make payments on behalf of the debtor without court approval.

    <p>False</p> Signup and view all the answers

    A debtor is considered __________ when they can no longer meet their financial obligations.

    <p>insolvent</p> Signup and view all the answers

    What is required for a debtor to file a verified petition for a pre-negotiated Rehabilitation Plan?

    <p>Endorsement by creditors holding at least two-thirds of total liabilities</p> Signup and view all the answers

    An insolvent debtor can seek court assistance for executing a Rehabilitation Plan.

    <p>True</p> Signup and view all the answers

    What percentage of unsecured obligations must be approved by creditors for an informal rehabilitation agreement?

    <p>75%</p> Signup and view all the answers

    A debtor must provide a schedule of the debtor's ______ and liabilities when applying for voluntary liquidation.

    <p>debts</p> Signup and view all the answers

    Match the following terms with their definitions:

    <p>Debtor = An individual or entity that owes money Creditors = Individuals or entities to whom money is owed Insolvency = The inability to pay debts when they are due Liquidation = The process of closing a business and distributing its assets</p> Signup and view all the answers

    What is the maximum duration of the standstill period for out-of-court rehabilitation agreements?

    <p>120 days</p> Signup and view all the answers

    Secured creditors need approval from 67% of the total secured obligations to agree to an out-of-court restructuring.

    <p>True</p> Signup and view all the answers

    Name one requirement for a debtor to apply for liquidation.

    <p>Establish insolvency</p> Signup and view all the answers

    Who can initiate voluntary proceedings for rehabilitation under the current act?

    <p>The owner of a sole proprietorship or a majority of partners in a partnership</p> Signup and view all the answers

    A creditor must have a claim of at least Php 1,000,000.00 to initiate involuntary proceedings.

    <p>True</p> Signup and view all the answers

    What is the minimum requirement for the moral character of a rehabilitation receiver?

    <p>Good moral character</p> Signup and view all the answers

    To initiate voluntary proceedings as a corporation, a ___ vote of the board of directors is required.

    <p>majority</p> Signup and view all the answers

    Match the following terms with their definitions:

    <p>Debtor = An individual or entity that owes a debt Creditors = Individuals or entities to whom money is owed Insolvency = The inability to pay debts as they come due Rehabilitation = A process aimed at restoring a debtor's solvency</p> Signup and view all the answers

    What is required for a non-stock corporation to initiate voluntary proceedings?

    <p>At least two-thirds (2/3) of the members' vote</p> Signup and view all the answers

    A rehabilitation receiver can have a conflict of interest.

    <p>False</p> Signup and view all the answers

    What must the creditors' claims be in terms of percentage for them to initiate involuntary proceedings?

    <p>At least 25% of the subscribed capital stock or partners' contributions</p> Signup and view all the answers

    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

    • 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.
    • 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
    • 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.

    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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    Related Documents

    Financial Rehabilitation and Insolvency Act FRIA of 2010 PDF

    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.

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