Short answer. Not necessarily. Unless you and your creditors agreed otherwise, a cession releases you only from your debts to the extent of the net proceeds from the assigned property. If the proceeds are less than what you owe, the balance remains, and your creditors may still pursue you for it.
What the law says
This cession, unless there is stipulation to the contrary, shall only release the debtor from responsibility for the net proceeds of the thing assigned.
Civil Code, Article 1255 — Payment by Cession. Read the full provision →
Cession does not automatically discharge all debts
Article 1255 of the Civil Code allows a debtor to assign property to creditors in payment of debts. But it draws a clear limit: This cession, unless there is stipulation to the contrary, shall only release the debtor from responsibility for the net proceeds of the thing assigned. The release is proportional to what the property actually produces when sold or liquidated, net of the costs of that process. If your total debt was one million pesos and your assigned property yielded only 600,000 pesos net, you are still on the hook for the remaining 400,000 pesos.
What net proceeds means
The release is measured against net proceeds — not the gross amount the creditors receive from selling your property, but what remains after deducting the costs of administration, sale, and liquidation. If the property sells for a gross amount but costs are significant, the net figure is lower. Your discharge is limited to whatever number comes out after those deductions. The creditors retain the right to pursue you for any remaining balance as though no cession had taken place.
When a full discharge is possible
A full discharge is possible, but it requires a stipulation to the contrary — an explicit agreement with your creditors that the cession constitutes a final and complete settlement regardless of the proceeds. Such an agreement makes the cession function like a dation in payment: you give, they accept, and the debt is extinguished. Without that agreement, the default rule applies and the risk of a shortfall stays with you. If you want to ensure you are fully discharged, the agreement with each creditor must say so expressly.
Special laws and formal proceedings
Article 1255 mentions that agreements between debtors and creditors on the effects of a cession are governed by special laws. In the Philippines, formal insolvency and rehabilitation proceedings have their own statutory frameworks that determine how debts are settled when a debtor cannot pay in full. These frameworks may provide for a greater or more systematic discharge than a private cession agreement. If your financial situation involves multiple creditors and substantial debts, understanding whether a formal proceeding under those special laws might be more appropriate is worth considering.
Cases citing this provision
These Supreme Court decisions cite the provision above. We list them so you can read them yourself; the summaries of what each decided are not ours to give.
- Development Bank of the Philippines vs. Court of Appeals, et al, G.R. No. 118342, January 5, 1998 — read the decision on LawPhil →
- Yulim International Company Ltd., et al vs. International Exchange Bank (now Union Bank of the Philippines), G.R. No. 203133, February 18, 2015 — read the decision on LawPhil →