Step 1 Categorize the credits

Real estate tax due to Quezon 1,000,000.00

City
Attachment credit on house 2,000,000.00
& lot owed to JC
Unpaid purchase price of 3,000,000.00
Lexus owed to SEL
Duties and interest on Lexus 2,000,000.00
owed to R.P.
Unpaid wages of laborers 2,000,000.00
Funeral Expenses of minor 500,000.00
child owed to FP
Medical expenses for the late 3,000,000.00
child owed to HD
Unpaid income tax owed to 1,500,000.00
R.P.
Unsecured credits of AA and 4,000,000.00
BB @P2M each
Unsecured credit of CC 1,000,000.00
20,000,000.00

Step 2 - Inventory of the Assets

IMMOVABLE PROPERTIES
House and Lot 5,000,000.00
MOVABLE PROPERTIES
Motor vehicle (Lexus) 4,000,000.00
Meralco shares of stocks 2,000,000.00
Pieces of jewelry 2,000,000.00
Furniture and Appliances 1,000,000.00
Cash 2,000,000.00
Receivables 1,000,000.00
17,000,000.00

Step 3 - segregate specific immovables and/or movables mentioned under Art. 2241 and 2242

Step 4 - Sell movables and determine if the proceeds are sufficient to cover the credits in said Article 2241; Pay number (
concur, apply proceeds of sale pro rata, (pari passu) to the credits under Arts. 2246 and 2247 for movable; exclude all ot
the movable to which preference refers.

For immovables and real rights – Sell the immovable or real right. Pay number (1) in Art 2242, if two or more credits con
(pari passu) to the credits under Arts. 2248 and 2249 for immovable; exclude all other credits to the extent of the value o
which the preference refers
Step 5 - (a) If proceeds of sale from specific movables or immovables are insufficient, the balance of said special preferre
under Art. 2245;
(b) If proceeds of sale from specific movables or immovables exceed the total special preferred the credits (there is exces
part of the free property of the debtor to be added to other assets in order to satisfy the ordinary preferred credits under

A. SPC
1. Specific Immovable Property House and 5,000,000.00
a. Real estate tax due to Quezon City (1,000,000.00) Fully Paid
b. Attachment credit on house & lot owe (2,000,000.00) Fully Paid
Balance to Free Property 2,000,000.00 Excess Balance - added to Free Propert

2. Movable Property - Motor vehicle (Lexus) 4,000,000.00

a. Duties and interest on Lexus owed to (2,000,000.00) Fully paid
Balance 2,000,000.00
b. Unpaid purchase price of Lexus owe (3,000,000.00) Partially paid
Balance of Unpaid
Purchase price added (1,000,000.00) Insufficient Balance - Added to Common
to Common Credit
 Free Properties
Excess of Proceeds of House and Lot 2,000,000.00
Meralco shares of stocks 2,000,000.00
Pieces of jewelry 2,000,000.00
Furniture and Appliances 1,000,000.00
Cash 2,000,000.00
Receivables 1,000,000.00
Total 10,000,000.00

Step 6 - satisfy ordinary preferred credits by selling all other assets or property of debtor and apply proceeds of sale to
order of preference of credits established in Article 2244. Rule on preference applies.

B. OPC
Free property 10,000,000.00
1. Unpaid wages of laborers (2,000,000.00) Fully Paid (10-2)
2. Funeral Expenses of minor child owed to (500,000.00) Fully Paid (8-.5)
3. Medical expenses
for the late child (3,000,000.00)
owed to HD Fully Paid ( 7.5-3)
4/ Unpaid income tax owed to R.P. (1,500,000.00) Fully Paid (4.5-1.5)
Balance of Free Property 3,000,000.00

What if the Free Property is only 5 million? Apply the Rule on Preference of Credit ONLY

B. OPC
Free property 5,000,000.00
Less: Unpaid wages of laborers (2,000,000.00) Fully Paid (5-2)
Balance of Free Property 3,000,000.00
Less: Funeral Expenses
of minor child owed to (500,000.00)
FP Fully Paid (3-.5)
Balance of Free Property 2,500,000.00
Medical expenses for
the late child owed to (3,000,000.00)
HD Partially Paid (2.5-3)
Unpaid balance of (500,000.00)
Medical Expense Unpaid
Unpaid income tax owed to R.P. (1,500,000.00) Unpaid

Step 7 - after applying proceeds of sale of all properties under step number 6, apply balance of the proceeds of the sale to
Art. 2251. Common credits are those which are not covered or enumerated in Articles 2241, 2242, 2243 and 2244. Rule
paid pro rata regardless of dates.

C. Common Credit - Rule on Concurrence of Credit

Common Credits Balances Ratio (2:2:1:1)
Unsecured credits of AA (2,000,000.00) 1/3
Unsecured credits of BB (2,000,000.00) 1/3
Unsecured credit of CC (1,000,000.00) 1/6
Balance of SPC (1,000,000.00) 1/6
(6,000,000.00)
 SPC (2242 par. 1) - Preferred

SPC (2242 par. 7)

SPC (2241 Par. 3)

SPC (2241 Par. 1) - Preferred

OPC (Art. 110)

OPC (2244 par. 1) - but 2nd in preference

OPC (2244 par. 3)

OPC (2244 par. 9)

CC
CC

and 2242

s in said Article 2241; Pay number (1) in Arts 2241, if two or more credits
nd 2247 for movable; exclude all other credits to the extent of the value of

Art 2242, if two or more credits concur, apply proceeds of sale pro rata,
er credits to the extent of the value of the immovable and real rights to
, the balance of said special preferred the credits become common credits

preferred the credits (there is excess in proceeds), such excess becomes

he ordinary preferred credits under Article 2250;

(5-1)
(4-2)
ess Balance - added to Free Property

(4-2)

(2-3)

ufficient Balance - Added to Common Credit

ebtor and apply proceeds of sale to the payment of credits following the
es.

y Paid (10-2)
y Paid (8-.5)

y Paid ( 7.5-3)
y Paid (4.5-1.5)

eference of Credit ONLY

y Paid (5-2)

y Paid (3-.5)

ially Paid (2.5-3)

balance of the proceeds of the sale to common credits in accordance with

es 2241, 2242, 2243 and 2244. Rule on concurrence applies, they are

Balance of Free Property Balance Applied to CC

3,000,000.00 1,000,000.00
3,000,000.00 1,000,000.00
3,000,000.00 500,000.00
3,000,000.00 500,000.00
3,000,000.00