INTRODUCTION: Back in the 1800s, American philosopher Ralph Wal o !

merson remarke , "It is sai that the #orl is in a state o$ %ankr&ptc', that the #orl o#es the #orl more than the #orl can pa'() This simpl' sa's that the ina%ilit' o$ in i*i &als to repa' e%ts is as ol as h&manit' itsel$( De%tors ha*e %een le+all' ealt #ith at least in the past ,00 'ears, so m&ch so that the amo&nt o$ e%ts inc&rre in histor' ma', in $act, s&rpass the reso&rces o$ the #orl ( Nonetheless, cre itors #ill al#a's #ant to reco&p some, i$ not all, their losses( In the -hilippines, the cent&r'.ol Insol*enc' /a# has %een &p ate in the 0inancial Reha%ilitation an Insol*enc' Act 10RIA2 o$ 3010( Back in the 1800s, American philosopher Ralph Wal o !merson remarke , "It is sai that the #orl is in a state o$ %ankr&ptc', that the #orl o#es the #orl more than the #orl can pa'() This simpl' sa's that the ina%ilit' o$ in i*i &als to repa' e%ts is as ol as h&manit' itsel$( De%tors ha*e %een le+all' ealt #ith at least in the past ,00 'ears, so m&ch so that the amo&nt o$ e%ts inc&rre in histor' ma', in $act, s&rpass the reso&rces o$ the #orl ( Nonetheless, cre itors #ill al#a's #ant to reco&p some, i$ not all, their losses( In the -hilippines, the cent&r'.ol Insol*enc' /a# has %een &p ate in the 0inancial Reha%ilitation an Insol*enc' Act 10RIA2 o$ 3010( The latest *ersion o$ 0RIA #as en orse on 4&l' 5 to -resi ent Beni+no A6&ino III $or si+nat&re( Unless appro*e sooner, the %ill #ill lapse into la# on A&+( 7( In a pre*io&s article in this col&mn, I commente on the 0RIA8s pro*isions on the reha%ilitation an li6&i ation o$ corporations( In this article, I #ill comment on the sections that pertain to insol*enc' o$ in i*i &als( The iss&es in*ol*in+ in i*i &als in a %ankr&ptc' process are not complicate an , instea o$ o*er%&r enin+ the co&rts #ith in i*i &als +oin+ %ankr&pt, I %elie*e that consi eration sho&l %e +i*en to allo# $or the processes to %e ele+ate to persons s&ch as a %ankr&ptc' a ministrator( Suspension of payments The 0RIA pro*i es that in i*i &als #ho ha*e s&$$icient assets to co*er lia%ilities ma' $ile $or s&spension o$ pa'ments( This sho&l help those in i*i &als #ho cannot meet their lia%ilities as the' $all &e an allo# them to p&t their $inancial li*es %ack in or er( When the in i*i &al $iles $or s&spension o$ pa'ments, he m&st present listin+s o$ assets an lia%ilities an a propose a+reement #ith his cre itors( The sta' pro*i e %' the co&rt is a&tomaticall' li$te #hen the propose a+reement is re9ecte or #hen no a+reement is reache #ith the cre itors #ithin three months( Un er the 0RIA, properties hel %' a sec&re cre itor #ill not %e s&%9ect to the s&spension or er( This pro*ision #ill make it i$$ic&lt $or a e%tor #ho o#ns a small %&siness $rom carr'in+ on( I recommen that consi eration %e ma e $or a sta' o$ a sec&re cre itor #here the asset sec&re is nee e to contin&e the operation o$ the %&siness( A meetin+ o$ cre itors m&st %e hel not less than 1, a's %&t not more than :0 a's $rom the ate o$ the s&spension or er an %e atten e %' cre itors hol in+ more than ;<, o$ the lia%ilities o$ the in i*i &al( At the meetin+, 3<; o$ the cre itors representin+ at least ;<, o$ total lia%ilities m&st appro*e the propose a+reement( I$ the re6&ire n&m%er o$ cre itors oes not atten or i$ the re6&ire ma9orit' o$ cre itors oes not *ote in $a*or o$ the propose a+reement, it is eeme re9ecte ( No cre itor #ho inc&rre his cre it #ithin =0 a's prior to $ilin+ is entitle to *ote( I cannot rationali>e this pro*ision( Cre itors #ho contin&all' s&ppl' cre it to in i*i &als #o&l likel' %e most a$$ecte ( These same cre itors #o&l likel' kno# the in i*i &al %est $or p&rposes o$ assessin+ the capa%ilit' o$ the e%tor to pa' &n er the propose a+reement( The 0RIA pro*i es that $ail&re %' the e%tor to per$orm on the a+reement ca&ses all ri+hts that the cre itors ha at the pre.$ilin+ o$ the petition to re*est in them( Voluntary liquidation An in i*i &al #ith e%ts e?cee in+ -,00,000 ma' appl' $or ischar+e o$ his o%li+ations, pro*i e that his assets are not s&$$icient to co*er his lia%ilities( On $ilin+, the in i*i &al m&st pro*i e a sche &le o$ assets an lia%ilities an an in*entor' o$ assets( These assets #ill %e li6&i ate %' a li6&i ator as in corporate li6&i ation an the procee s &se to pa' cre itors( There appear to %e no pro*isions at this time to pre*ent a%&ses %' e%tors +oin+ %ankr&pt more than once( Cre it car companies ma' nee to a ress their a++ressi*e iss&ance o$ cre it car s &e to the ease %' #hich a person can %&il &p cre it an 6&ickl' +o %ankr&pt to #ipe o&t e%ts( @ome consi eration sho&l %e +i*en in speci$ic circ&mstances to pro*i e $or a ischar+e #hich is con itional on pa'ment o$ a speci$ic amo&nt to cre itors epen in+ on the income le*el o$ the in i*i &al +oin+ %ankr&pt( Involuntary liquidation An' cre itor or +ro&p o$ cre itors #ith a claim or a++re+ate claim o$ at least -,00,000 on an in i*i &al ma' $ile a petition $or li6&i ation in the pro*ince or cit' #here the e%tor resi es( The petitionin+ cre itor m&st post a %on the co&rt #ill set( I$ the petition is ismisse or #ith ra#n %' the petitioner, the cre itor #ill pa' the costs an ama+es inc&rre %' the e%tor incl& in+ his le+al costs( Upon $ilin+ the petition, the co&rt #ill iss&e an or er re6&irin+ the e%tor to sho# ca&se #h' he sho&l not %e 9& +e insol*ent( Upon sho#in+ +oo ca&se, the co&rt #ill iss&e a $&rther or er $or%i in+ the e%tor to pa' lia%ilities an trans$errin+ assets( I$, a$ter trial, the co&rt $in s in $a*or o$ the cre itors, it #ill iss&e the li6&i ation or er(

The 0RIA pro*i es that #hen the li6&i ation or er is iss&e , the sheri$$ m&st take control o$ the assets o$ the %ankr&pt in i*i &al( It #o&l more e$$icient i$ in the petition there are nominate parties to act as li6&i ator to take possession o$ the assets $or a ministration( In practice, these co&l %e pro$essionals #ho co&l %e i enti$ie to carr' o&t this t'pe o$ ser*ice an potentiall' %e license to per$orm s&ch ser*ices The p&rpose o$ the 0RIA is to allo# an honest person A %&t &n$ort&nate e%tor A to o%tain a ischar+e $rom his e%ts in or er to reinte+rate himsel$ into the %&siness li$e o$ the co&ntr' as a &se$&l citi>en( The 0RIA pro*i es $or the or erl' an $air istri%&tion o$ the propert' o$ the e%tor on a pari pass& 1e6&all' an #ith no pre$erence2 %asis( Bope$&ll', there #ill %e a contin&e re*ie# o$ 0RIA in the 1,th Con+ress to allo# $or these processes to r&n e$$icientl' an to pre*ent a%&ses(

The 0RIA e?pressl' repeale the Insol*enc' /a# 1Act No( 1=,72 as amen e , an implie l' repeale , to the e?tent that the' are inconsistent #ith the pro*isions o$ the Act, all other la#s, or ers, r&les an re+&lations( The 0RIA is si+ni$icant %eca&se it co*ers the reha%ilitation o$ sole proprietorships, partnerships an corporations, pro*i es the le+al %asis $or o&r proce &ral r&les on corporate reha%ilitation 1the latest o$ #hich is A(C( No( 00.8.10.@C, prom&l+ate %' the @&preme Co&rt en %anc on Decem%er 3, 300=, an took e$$ect on 4an&ar' 17, 300=2, an consoli ates the la#s on insol*enc' an reha%ilitation( The 0RIA shall take e$$ect 1, a's a$ter its complete p&%lication in the O$$icial Da>ette or in at least t#o national ne#spapers o$ +eneral circ&lation( I #ill not *ent&re to s&mmari>e the 1,0.section 0RIA, %&t #ill 9&st en ea*o&r to isc&ss pro*isions #hich, to m' min , are si+ni$icant, partic&larl' in connection #ith reha%ilitation procee in+s( The 0RIA pro*i es $or i$$erent t'pes o$ reha%ilitation procee in+s $or sole proprietorships, partnerships an corporations( The Co&rt.@&per*ise Reha%ilitation 1see Chapter II o$ the 0RIA2 incl& es: 1a2 Eol&ntar' -rocee in+s #hich is a reha%ilitation petition initiate %' the sole proprietor, %' a ma9orit' o$ the partners, or %' a ma9orit' o$ the %oar o$ irectors<tr&stees an a&thori>e %' the corporation8s stockhol ers representin+ at least 3<; o$ the o&tstan in+ capital stock or 3<; o$ the mem%ers, an 1%2 In*ol&ntar' -rocee in+s #hich is a reha%ilitation petition initiate %' cre itors #ith an a++re+ate claim o$ at least -1 Cillion or at least 3,F o$ the s&%scri%e capital stock or partners8 contri%&tion, #hiche*er is hi+her( The -re.Ne+otiate Reha%ilitation 1see Chapter III o$ the 0RIA2 is initiate %' the insol*ent e%tor, %' itsel$ or 9ointl' #ith an' o$ its cre itors, an seeks the appro*al o$ a pre.ne+otiate Reha%ilitation -lan en orse or appro*e %' cre itors hol in+ at least 3<; o$ the e%tor8s total lia%ilities, incl& in+ sec&re cre itors hol in+ more than ,0F o$ the sec&re claims, an &nsec&re cre itors hol in+ more than ,0F o$ the &nsec&re claims( The O&t.o$.Co&rt or In$ormal Restr&ct&rin+ A+reements or Reha%ilitation -lans 1see Chapter IE o$ the 0RIA2 m&st %e a+ree &pon %' the e%tor, an appro*e %' cre itors hol in+ at least 8,F o$ the e%tor8s total lia%ilities, incl& in+ sec&re cre itors hol in+ at least 75F o$ the sec&re o%li+ations an &nsec&re cre itors hol in+ at least 5,F o$ the &nsec&re o%li+ations( A li6&i ator or reha%ilitation recei*er ma' %e a 9&ri ical entit', pro*i e that it esi+nates as a representati*e a nat&ral person #ho possesses all the 6&ali$ications an none o$ the is6&ali$ications( The 9&ri ical entit' an the representati*e are soli aril' lia%le $or all o%li+ations an responsi%ilities o$ a li6&i ator or reha%ilitation recei*er( The Reha%ilitation -lan ma' incl& e *ario&s means to restore the $inancial #ell.%ein+ an *ia%ilit' o$ an insol*ent e%tor, incl& in+ %&t not limite to e%t $or+i*eness, e%t resche &lin+, reor+ani>ation or 6&asi.reor+ani>ation, acion en pa+o, e%t.to.e6&it' con*ersion, sale o$ %&siness 1or parts o$ it2 as a +oin+ concern, or settin+ &p o$ a ne# %&siness entit', or other similar arran+ements as ma' %e appro*e %' the reha%ilitation co&rt or cre itors( The 0RIA ho#e*er oes not speci$' limitations on the scope o$ these means, s&ch as the amo&nt or percenta+e o$ e%t that ma' %e $or+i*en, or the ma?im&m perio o$ time #hen e%ts ma' %e resche &le ( The 0RIA e?pressl' allo#s $or reha%ilitation procee in+s $or a +ro&p o$ e%tors, #hich sho&l %e 1a2 corporations that are $inanciall' relate to one another as parent corporation, s&%si iaries or a$$iliates, 1%2 partnerships that are o#ne more than ,0F %' the same person, an 1c2 sin+le proprietorships that are o#ne %' the same person( The +ro&p o$ e%tors ma' 9ointl' $ile a reha%ilitation petition #hen one or more o$ its mem%ers $oresees the impossi%ilit' o$ meetin+ e%ts #hen the' respecti*el' $all &e, an the $inancial istress #ill likel' a *ersel' a$$ect the $inancial con ition an <or operations o$ the other mem%ers o$ the +ro&p, an <or the participation o$ the other mem%ers is essential &n er the terms an con itions o$ the propose Reha%ilitation -lan( In this connection ho#e*er, the assets an lia%ilities o$ a e%tor ma' not %e commin+le or a++re+ate #ith those o$ another, &nless the latter is a relate enterprise that is o#ne or controlle , irectl' or in irectl', %' the same interest, an onl' #here 1i2 there #as commin+lin+ in $act o$ assets an lia%ilities prior to the commencement o$ the reha%ilitation procee in+s, 1ii2 the' ha*e common cre itors an it #ill %e more con*enient to treat them to+ether rather than separatel', 1iii2 the relate enterprise *ol&ntaril' acce es to 9oin the e%tor as part' petitioner an to commin+le its assets an lia%ilities #ith the e%tor8s, an 1i*2 the consoli ation o$ assets an lia%ilities is %ene$icial to all concerne an promotes the o%9ecti*es o$ reha%ilitation( The 0RIA p&nishes an in i*i &al e%tor, a sole proprietor, partners, or irectors an o$$icers o$ a e%tor, ha*in+ notice o$ the commencement o$ the procee in+s, or ha*in+ reason to %elie*e that reha%ilitation or li6&i ation procee in+s are a%o&t to %e commence , or in contemplation o$ these procee in+s, 1a2 ispose o$ or ca&se to %e ispose an' propert' o$ the e%tor other than in the or inar' co&rse o$ %&siness, or a&thori>e or appro*e an' transaction in $ra& o$ cre itors or in a manner +rossl' isa *anta+eo&s to the e%tor an <or cre itors, or 1%2 conceal, or a&thori>e or appro*e the concealment o$, $rom the cre itors, or em%e>>les or misappropriates, an' propert' o$ the e%tor( The' shall %e lia%le $or o&%le the *al&e o$ the propert' sol , em%e>>le , or ispose o$, or o&%le the amo&nt o$ the transaction in*ol*e , #hiche*er is hi+her(

The 0RIA a&thori>es an' %ank, #hether &ni*ersal or not, to ac6&ire an hol an e6&it' interest in the e%tor or its s&%si iaries, p&rs&ant to an appro*e Reha%ilitation or /i6&i ation -lan, s&%9ect to the o#nership limits applica%le to &ni*ersal %anks $or e6&it' in*estments, an pro*i e that s&ch e6&it' in*estment or interest shall %e ispose o$ %' the %ank #ithin a perio o$ , 'ears or as ma' %e prescri%e %' the Conetar' Boar ( In*ol&ntar' -rocee in+s ma' %e initiate %' cre itors i$ 1a2 there is no +en&ine iss&e o$ $act or la# on the claims o$ the petitioners, an the &e an eman a%le pa'ments ha*e not %een ma e $or at least 70 a's or that the e%tor has +enerall' $aile to meet its lia%ilities as the' $all &e, or 1%2 a cre itor, other than petitioners, has initiate $oreclos&re procee in+s a+ainst the e%tor that #ill pre*ent the e%tor $rom pa'in+ its e%ts as the' %ecome &e or #ill ren er it insol*ent( I$ the co&rt $in s the reha%ilitation petition s&$$icient in $orm an s&%stance, it shall, #ithin , #orkin+ a's $rom the $ilin+ o$ a petition, iss&e a Commencement Or er, #hich shall incl& e a @ta' or @&spension Or er( I$ the petition is e$icient, the reha%ilitation co&rt ma', in its iscretion, +rant petitioner a reasona%le perio to amen or s&pplement the petition, or to s&%mit s&ch oc&ments as ma' %e necessar' or proper to p&t the petition in or er, in #hich case, the , #orkin+ a's shall %e co&nte $rom the ate o$ s&ch $ilin+ or s&%mission( The reha%ilitation procee in+s are eclare commence &pon the iss&ance o$ the Commencement Or er( The 0RIA clari$ies, amon+ others, that the Commencement Or er 1a2 prohi%its an ren ers n&ll an *oi e?tra9& icial process or acti*it' to sei>e propert', sell enc&m%ere propert', or other#ise attempt to collect on or en$orce a claim a+ainst the e%tor, a$ter the commencement ate, &nless other#ise allo#e &n er the 0RIA, 1%2 ren ers n&ll an *oi an' set.o$$, a$ter the commencement ate, o$ an' e%t o#e to the e%tor %' an' o$ the e%tor8s cre itors, an 1c2 ren ers n&ll an *oi the per$ection, a$ter the commencement ate, o$ an' lien a+ainst the e%tor8s properties( The 0RIA also eclares that attempts to seek le+al or other reco&rse a+ainst the e%tor o&tsi e the reha%ilitation procee in+s shall %e s&$$icient to s&pport a $in in+ o$ in irect contempt o$ co&rt( The 0RIA en&merates the e?ceptions to the @ta' or @&spension Or er, i(e(, #here the or er shall not appl', incl& in+ %&t not limite to 1a2 cases alrea ' pen in+ appeal in the @&preme Co&rt as o$ commencement ate, 1%2 cases pen in+ or $ile in a speciali>e co&rt or 6&asi.9& icial a+enc' #hich the co&rt, in its iscretion, ma' etermine, is capa%le o$ resol*in+ the claim more 6&ickl', $airl', an e$$icientl' than the reha%ilitation co&rt, 1c2 en$orcement o$ claims a+ainst s&reties an other persons soli aril' lia%le #ith the e%tor, an thir part' or accommo ation mort+a+ors as #ell as iss&ers o$ letters o$ cre it, &nless the propert' s&%9ect o$ the mort+a+e is necessar' $or the reha%ilitation o$ the e%tor, an 1 2 an' criminal action a+ainst the in i*i &al e%tor, o#ner, partner, irector or o$$icer o$ the e%tor( The 0RIA eclares that, &pon the iss&ance o$ the Commencement Or er, &p to the appro*al o$ the Reha%ilitation -lan or the ismissal o$ the petition, #hiche*er is earlier, the imposition o$ all ta?es an $ees, incl& in+ penalties, interests, an char+es, &e to the national +o*ernment an the local +o*ernment &nit, shall %e consi ere #ai*e , in the $&rtherance o$ the o%9ecti*es o$ reha%ilitation( The 0RIA pro*i es shorter perio s $or the i$$erent sta+es o$ the reha%ilitation procee in+s( 0or e?ample, 1a2 the Commencement Or er shall %e p&%lishe in a ne#spaper o$ +eneral circ&lation once a #eek $or at least 3 consec&ti*e #eeks, #ith the $irst p&%lication %ein+ ma e #ithin 5 a's $rom its iss&anceG 1%2 copies o$ the petition shall %e personall' ser*e on cre itors hol in+ at least 10F o$ the total lia%ilities o$ the e%tor 1or on the e%tor, in cre itor.initiate reha%ilitation procee in+s2 #ithin , a's $rom the iss&ance o$ the Commencement Or erG 1c2 cre itors shall $ile their claims #ith the co&rt, an nominate an' other person as reha%ilitation recei*er, at least , a's %e$ore the initial hearin+G 1 2 the initial hearin+ shall %e set not more than :0 a's $rom the $ilin+ o$ the petitionG 1e2 cre itors shall $ile their comment on the petition an the Reha%ilitation -lan #ithin a perio o$ not more than 30 a's $rom the initial hearin+G 1$2 the reha%ilitation recei*er shall s&%mit to the co&rt a report on his preliminar' $in in+s an recommen ations #ithin :0 a's $rom the initial hearin+G 1+2 the co&rt shall +i*e &e co&rse to the petition, ismiss the petition, or con*ert the petition into a li6&i ation procee in+s, #ithin 10 a's $rom receipt o$ the reha%ilitation recei*er8s reportG 1h2 i$ the petition is +i*en &e co&rse, the reha%ilitation recei*er shall re*ie#, re*ise an <or recommen action on the Reha%ilitation -lan, an s&%mit the same or a ne# one to the co&rt, #ithin =0 a's $rom the &e co&rse or erG 1i2 the reha%ilitation recei*er shall ha*e 30 a's $rom ass&mption o$ o$$ice #ithin #hich to esta%lish a preliminar' re+istr' o$ claims, #hich ma' %e challen+e %' the e%tor, cre itors, stakehol ers an other intereste parties #ithin ;0 a's $rom the e?piration o$ the 30. a' perio G 192 the reha%ilitation recei*er shall s&%mit the re+istr' o$ claims 1#hich shall incl& e &n isp&te claims not s&%9ect o$ an' challen+e2 &pon e?piration o$ the ;0. a' perio G 1k2 #ithin 30 a's $rom notice %' the reha%ilitation recei*er that the Reha%ilitation -lan is rea ' $or e?amination, the reha%ilitation recei*er shall con*ene the cre itors $or p&rposes o$ *otin+ on the Reha%ilitation -lanG 1l2 #ithin the same 30. a' perio , a cre itor ma' $ile an o%9ection to the Reha%ilitation -lan on limite +ro&n sG an 1m2 the co&rt shall ha*e a ma?im&m perio o$ 1 'ear $rom the $ilin+ o$ the petition to con$irm the Reha%ilitation -lan an , i$ no Reha%ilitation -lan is con$irme #ithin sai perio , the procee in+s ma', &pon motion or mot& proprio, %e con*erte into li6&i ation procee in+s( Un er the 0RIA, all *ali an s&%sistin+ contracts o$ the e%tor #ith cre itors an other thir parties as at the commencement ate shall contin&e in $orce, &nless cancelle %' *irt&e o$ a $inal 9& +ment o$ a competent co&rt prior to the iss&ance o$ the Commencement Or er or at an' time therea$ter %' the reha%ilitation co&rt( The e%tor, #ith the consent o$ the reha%ilitation recei*er, shall, #ithin =0 a's $ollo#in+ the commencement ate, in$orm its contract&al co&nter.part' #hether or not it is con$irmin+ the partic&lar contract( Contract&al o%li+ations o$ the e%tor arisin+ or per$orme &rin+ this perio , an a$ter#ar s $or con$irme contracts, shall %e consi ere a ministrati*e e?penses( Contracts not con$irme #ithin the ea line shall %e consi ere terminate ( An' contract o$ the e%tor ma' %e cancelle or terminate $or an' +ro&n pro*i e %' la#( 0or -re.Ne+otiate Reha%ilitation, 1a2 an' cre itor or other intereste part' ma' s&%mit to the co&rt a *eri$ie o%9ection to the petition or the Reha%ilitation -lan on speci$ie +ro&n s #ithin 8 a's $rom the ate o$ the secon p&%lication o$ the Commencement Or erG 1%2 i$ there is no s&ch o%9ection, the co&rt shall appro*e the Reha%ilitation -lan #ithin 10 a's $rom the ate o$ sai secon p&%licationG 1c2 hearin+s on an' o%9ection shall %e hel not earlier than 30 a's, an not later than ;0 a's, $rom the ate o$ sai secon p&%licationG an 1 2 the co&rt shall ha*e a ma?im&m perio o$ 1 'ear $rom the $ilin+ o$ the petition to appro*e the Reha%ilitation -lan altho&+h, i$ the co&rt $ails to act #ithin sai perio , the Reha%ilitation -lan shall %e eeme appro*e (

0or O&t.o$.Co&rt or In$ormal Restr&ct&rin+ A+reements or Reha%ilitation -lans, a stan still perio a+ree &pon the parties pen in+ ne+otiation an $inali>ation o$ the Restr&ct&rin+ A+reement or Reha%ilitation -lan shall %e e$$ecti*e an en$orcea%le also a+ainst other cre itors i$ 1a2 s&ch a+reement is appro*e %' cre itors representin+ more than ,0F o$ the total lia%ilities o$ the e%tor, 1%2 notice o$ the a+reement is p&%lishe in a ne#spaper o$ +eneral circ&lation once a #eek $or at least 3 consec&ti*e #eeks, an 1c2 the stan still perio oes not e?cee 130 a's $rom the ate o$ e$$ecti*it'( The appro*e Restr&ct&rin+ A+reement or Reha%ilitation -lan is +rante a cram. o#n e$$ect s&ch that it shall ha*e the same le+al e$$ect as a co&rt.con$irme Reha%ilitation -lan( The notice thereo$ shall %e p&%lishe in a ne#spaper o$ +eneral circ&lation once a #eek $or at least ; consec&ti*e #eeks, an the Restr&ct&rin+ A+reement or Reha%ilitation -lan shall %e e$$ecti*e 1, a's $rom the ate o$ the last p&%lication o$ the notice( To en , let me 9&st sa' that the 0RIA also pro*i es $or the li6&i ation o$ insol*ent 9&ri ical e%tors 1see Chapter E o$ the 0RIA2( The Eol&ntar' /i6&i ation is initiate %' the e%tor *ia a *eri$ie petition, or a *eri$ie motion in co&rt.s&per*ise or pre.ne+otiate reha%ilitation procee in+s( In this connection, reha%ilitation procee in+s ma' also %e con*erte into li6&i ation procee in+s, #hen the reha%ilitation co&rt $in s that the e%tor is insol*ent an there is no s&%stantial likelihoo $or the e%tor to %e s&ccess$&ll' reha%ilitate , or #hen the Reha%ilitation -lan is not con$irme %' the reha%ilitation co&rt #ithin 1 'ear $rom $ilin+ o$ the petition, or #hen the reha%ilitation procee in+s is terminate &e to $ail&re o$ reha%ilitation or ismissal o$ the reha%ilitation petition $or reasons other than technical +ro&n s, or at an' time &pon the recommen ation o$ the reha%ilitation recei*er that the reha%ilitation o$ the e%tor is not $easi%le( The In*ol&ntar' /i6&i ation is initiate %' ; or more cre itors #hose a++re+ate claims amo&nt to at least -1 Cillion or at least 3,F o$ the s&%scri%e capital stock or partners8 contri%&tion, #hiche*er is hi+her, also *ia a *eri$ie petition or a *eri$ie motion in a co&rt.s&per*ise or pre.ne+otiate reha%ilitation procee in+s( On the other han , $or insol*ent in i*i &al e%tors 1see Chapter EI o$ the 0RIA2, the 0RIA pro*i es $or 1a2 the s&spension o$ pa'ments, #hen the e%tor possesses s&$$icient properties to co*er all his e%ts %&t $oresees the impossi%ilit' o$ meetin+ them #hen the' respecti*el' $all &e, 1%2 *ol&ntar' li6&i ation, initiate %' the e%tor #ho oes not ha*e s&$$icient properties to co*er his lia%ilities an o#es e%ts e?cee in+ -,00 tho&san , an 1c2 in*ol&ntar' li6&i ation, initiate %' cre itors #ith claims a++re+atin+ at least -,00 tho&san ( Suspension of payments The 0RIA pro*i es that in i*i &als #ho ha*e s&$$icient assets to co*er lia%ilities ma' $ile $or s&spension o$ pa'ments( This sho&l help those in i*i &als #ho cannot meet their lia%ilities as the' $all &e an allo# them to p&t their $inancial li*es %ack in or er( When the in i*i &al $iles $or s&spension o$ pa'ments, he m&st present listin+s o$ assets an lia%ilities an a propose a+reement #ith his cre itors( The sta' pro*i e %' the co&rt is a&tomaticall' li$te #hen the propose a+reement is re9ecte or #hen no a+reement is reache #ith the cre itors #ithin three months( Un er the 0RIA, properties hel %' a sec&re cre itor #ill not %e s&%9ect to the s&spension or er( This pro*ision #ill make it i$$ic&lt $or a e%tor #ho o#ns a small %&siness $rom carr'in+ on( I recommen that consi eration %e ma e $or a sta' o$ a sec&re cre itor #here the asset sec&re is nee e to contin&e the operation o$ the %&siness( A meetin+ o$ cre itors m&st %e hel not less than 1, a's %&t not more than :0 a's $rom the ate o$ the s&spension or er an %e atten e %' cre itors hol in+ more than ;<, o$ the lia%ilities o$ the in i*i &al( At the meetin+, 3<; o$ the cre itors representin+ at least ;<, o$ total lia%ilities m&st appro*e the propose a+reement( I$ the re6&ire n&m%er o$ cre itors oes not atten or i$ the re6&ire ma9orit' o$ cre itors oes not *ote in $a*or o$ the propose a+reement, it is eeme re9ecte ( No cre itor #ho inc&rre his cre it #ithin =0 a's prior to $ilin+ is entitle to *ote( I cannot rationali>e this pro*ision( Cre itors #ho contin&all' s&ppl' cre it to in i*i &als #o&l likel' %e most a$$ecte ( These same cre itors #o&l likel' kno# the in i*i &al %est $or p&rposes o$ assessin+ the capa%ilit' o$ the e%tor to pa' &n er the propose a+reement( The 0RIA pro*i es that $ail&re %' the e%tor to per$orm on the a+reement ca&ses all ri+hts that the cre itors ha at the pre.$ilin+ o$ the petition to re*est in them( Voluntary liquidation An in i*i &al #ith e%ts e?cee in+ -,00,000 ma' appl' $or ischar+e o$ his o%li+ations, pro*i e that his assets are not s&$$icient to co*er his lia%ilities( On $ilin+, the in i*i &al m&st pro*i e a sche &le o$ assets an lia%ilities an an in*entor' o$ assets( These assets #ill %e li6&i ate %' a li6&i ator as in corporate li6&i ation an the procee s &se to pa' cre itors( There appear to %e no pro*isions at this time to pre*ent a%&ses %' e%tors +oin+ %ankr&pt more than once( Cre it car companies ma' nee to a ress their a++ressi*e iss&ance o$ cre it car s &e to the ease %' #hich a person can %&il &p cre it an 6&ickl' +o %ankr&pt to #ipe o&t e%ts( @ome consi eration sho&l %e +i*en in speci$ic circ&mstances to pro*i e $or a ischar+e #hich is con itional on pa'ment o$ a speci$ic amo&nt to cre itors epen in+ on the income le*el o$ the in i*i &al +oin+ %ankr&pt( Involuntary liquidation An' cre itor or +ro&p o$ cre itors #ith a claim or a++re+ate claim o$ at least -,00,000 on an in i*i &al ma' $ile a petition $or li6&i ation in the pro*ince or cit' #here the e%tor resi es( The petitionin+ cre itor m&st post a %on the co&rt #ill set( I$ the petition is ismisse or #ith ra#n %' the petitioner, the cre itor #ill pa' the costs an ama+es inc&rre %' the e%tor incl& in+ his le+al costs( Upon $ilin+ the petition, the co&rt #ill iss&e an or er re6&irin+ the e%tor to sho# ca&se #h' he sho&l not %e 9& +e insol*ent( Upon sho#in+ +oo ca&se, the co&rt #ill iss&e a $&rther or er $or%i in+ the e%tor to pa' lia%ilities an trans$errin+ assets( I$, a$ter trial, the co&rt $in s in $a*or o$ the cre itors, it #ill iss&e the li6&i ation or er(

The 0RIA pro*i es that #hen the li6&i ation or er is iss&e , the sheri$$ m&st take control o$ the assets o$ the %ankr&pt in i*i &al( It #o&l more e$$icient i$ in the petition there are nominate parties to act as li6&i ator to take possession o$ the assets $or a ministration( In practice, these co&l %e pro$essionals #ho co&l %e i enti$ie to carr' o&t this t'pe o$ ser*ice an potentiall' %e license to per$orm s&ch ser*ices The p&rpose o$ the 0RIA is to allo# an honest person A %&t &n$ort&nate e%tor A to o%tain a ischar+e $rom his e%ts in or er to reinte+rate himsel$ into the %&siness li$e o$ the co&ntr' as a &se$&l citi>en( The 0RIA pro*i es $or the or erl' an $air istri%&tion o$ the propert' o$ the e%tor on a pari pass& 1e6&all' an #ith no pre$erence2 %asis( Bope$&ll', there #ill %e a contin&e re*ie# o$ 0RIA in the 1,th Con+ress to allo# $or these processes to r&n e$$icientl' an to pre*ent a%&ses(