Voluntary Court-Supervised Rehabilitation Proceedings for Insolvent Juridical Debtors

Rehabilitation proceedings may be voluntary (initiated by the debtor) or involuntary (initiated by the creditor or group of creditors), as provided under Republic Act No. 10142, also known as the “Financial Rehabilitation and Insolvency Act (FRIA) of 2010”. Here are the requirements for initiating voluntary court-supervised rehabilitation proceedings under R.A. 10142. [See also Court-Supervised Rehabilitation Proceedings]. 

Voluntary Court-Supervised Rehabilitation Proceedings under the FRIA


The petition for voluntary court-supervised rehabilitation proceedings must be approved by:

  • 1. the owner, in case of a sole proprietorship; 
  • 2. a majority of the partners, in case of a partnership; or

A group of debtors may file a petition for rehabilitation  when: 

  • (1) one or more of its members foresee the impossibility of meeting debts when they respectively fall due, and 
  • (2) the financial distress would likely adversely affect the financial condition and/or operations of the other members of the group or the participation of the other members of the group is essential under the terms and conditions of the proposed Rehabilitation Plan.


The petition filed by the debtor must be verified and must set forth with sufficient particularity all of the following material facts:

  • 1. the name, business, and principal address and other addresses of the debtor;
  • 2. the nature of the business and principal activities of the debtor, and the addresses where these activities are conducted;
  • 4. the fact and the cause of the debtor’s insolvency;
  • 5. the specific relief sought;
  • 6. the grounds upon which the petition is based;
  • 7. all pending actions or proceedings by or against the debtor/s and the courts or tribunals where they are pending;
  • 8. the threats or demands to enforce claims or liens against the debtor/s;
  • 9. the manner by which the debtor may be rehabilitated and how such rehabilitation may benefit the general body of creditors, employees and stockholders; and
  • 10. the exact address/es at which documents regarding the debtor and the proceedings may be reviewed and copied.

The petition shall be accompanied by the following documents:

  • (a) the income tax returns stamped as received by the BIR for the past 2 years prior to the year of filing;
  • (b) an audited financial statement of the debtor at the end of its last fiscal year; 
  • (c) interim financial statements not earlier than 30 days prior to the filing of the petition and certified under oath by the appropriate officer, except when the petition is filed within 30 days after the end of the fiscal year;
  • (d) a Schedule of Debts and Liabilities which lists all the creditors of the debtor, indicating the name and last address of record of each creditor; the amount of each claim as to principal, interest, or penalties due 30 days prior to the date of filing; the nature of the claim; and any pledge, lien, mortgage, judgment or other security given for the payment thereof;
  • (e) an Inventory of Assets which must list with reasonable particularity all the assets of the debtor, whether in the possession of the debtor or third parties, stating the nature of each asset; the location and condition thereof; the book value and market value of the asset, and attaching the corresponding certified copy of the certificate of title thereof in case of real property, or the evidence of title or ownership in case of movable property; the encumbrances, liens or claims thereon, if any, and the identities and addresses of the lien holders and claimants. 

    The Inventory shall include (i) a Schedule of Accounts Receivable which must indicate the amount of each, the persons from whom due and their correct addresses, the dates of maturity, and the degrees of collectability categorizing them as highly collectible to remotely collectible, and (ii) a Schedule of Existing Claims against third parties which must indicate the name and last address of record of each third party against whom the debtor has a claim, the nature and amount of the claim, including the principal, interest, or penalties due from each third party and any pledge, lien, mortgage, judgment or other security or collateral given for the payment of each claim, and a brief statement of the facts which gave rise to the claim;
  • (f) a Rehabilitation Plan which conforms with the minimal requirements set out in Section 61, Rule 2 of these Rules;
  • (g) a Schedule of Payments and Disposition of Assets which the debtor effected within 1 year immediately preceding the filing of the petition;
  • (h) a Schedule of Cash Flow of the debtor for 3 months immediately preceding the filing of the petition, and a detailed schedule of the projected cash flow for the succeeding 3 months;
  • (i) a Statement of Possible Claims by or against the debtor which must contain a brief statement of the facts which might give rise to the claim and an estimate of the probable amount thereof;
  • (k) a list containing at least 3 nominees for the position of rehabilitation receiver as well as their qualifications and addresses, including but not limited to their telephone numbers, fax numbers and e-mail addresses.

All attachments to the petition shall be deemed part and parcel of the verified petition.


The petition filed by the debtor must be verified by an affidavit of a responsible officer of the debtor, whose authority must be attached to the petition, and shall be in a form substantially as follows:

“I, ____________________, (position) of (name of petitioner), do solemnly swear that:

  1. the petitioner has been duly authorized to file the petition and that the stockholders (or members or partners) and board of directors (or governing body) have approved and/or consented to, in accordance with law, all actions or matters necessary or desirable to rehabilitate the debtor, including the conversion of the rehabilitation proceedings to liquidation proceedings if so ordered by the court;
  2. the petition is being filed to protect the interests of the debtor, the stockholders, the investors and the creditors of the debtor, which warrants the appointment of a rehabilitation receiver;
  3. there is no petition for insolvency filed with any other body, court or tribunal affecting the petitioner;
  4. the Inventory of Assets and the Schedule of Debts and Liabilities contain the full, correct and true description of all debts and liabilities and of all goods, effects, estate and property of whatever kind or class belonging to the petitioner;
  5. the Inventory of Assets also contains a full, correct and true statement of all debts owing or due to the petitioner, or to any person or persons in trust for the petitioner and of all securities and contracts whereby any money may hereafter become due or payable to the petitioner or by or through which any benefit or advantage may accrue to the petitioner;
  6. the petition contains a concise statement of the facts giving rise, or which might give rise, to any cause of action in favor of the petitioner;
  7. the petitioner has no land, money, stock, expectancy, or property of any kind, except those set forth in the Inventory of Assets;
  8. the petitioner has, in no instance, created or acknowledged a debt for a greater sum than the true and correct amount;
  9. the petitioner, its officers, directors and stockholders have not, directly or indirectly, concealed, fraudulently sold or otherwise fraudulently disposed of any part of the petitioner’s real or personal property, estate, effects or rights of action, and the petitioner, its officers, directors and stockholders have not in any way compounded with any of its creditors in order to give preference to such creditors, or to receive or to accept any profit or advantage therefrom, or to defraud or deceive in any manner any creditor to whom the petitioner is indebted; and 
  10. the petitioner, its officers, directors, and stockholders have been acting in good faith and with due diligence.”
 Action of Court and ProceedingsThe Rehabilitation Plan
 The Commencement OrderThe Rehabilitation Receiver
 Stay or Suspension OrderThe Management Committee
 Determination of claimsThe Creditor’s Committee
 Treatment of secured creditorsAvoidance proceedings
 Termination of proceedings 
P&L Law

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