Article 1295

The insolvency of the new debtor, who has been proposed by the original debtor and accepted by the creditor, shall not revive the action of the latter against the original obligor, except when said insolvency was already existing and of public knowledge, or known to the debtor, when the delegated his debt. (1206a)

Ang kawalan ng pambayad ng bagong may utang na iminungkahi ng orihinal na may utang at tinanggap ng nagpautang , ay hindi buhayin ang ginawa ng nagpautang  laban sa orihinal na may utang, maliban kung ang nasabing kawalan ng pambayad ay umiiral na at alam na ng publiko, o kaya ay alam na ng may utang nuong itinalaga nya ang kanyang utang.

This article applies only to delegacion – where the substitution of the old debtor is upon the proposal of the old debtor himself (delegante) and the proposal was accepted by the new debtor (delegado) and the creditor (delegatario)

If the new debtor who has been accepted by the creditor, happens to be insolvent and cannot fulfill the obligation delegated to him, the original debtor is no longer liable anymore for the payment of the obligation.

Exceptions:

1. If the insolvency was already existing and is of public knowledge when the debt was delegated to the new debtor ; or

2. If the insolvency of the new debtor was already existing and known to the original original debtor at the time of the delegation of the debt to the new debtor (Art 1295)

Instances where the old debtor is still liable:

1. When the third person is only secondarily liable
2. If the third person is a mere agent of the debtor
3. When the old debtor is still answerable jointly with the new debtor or solidarily by express stipulation.

Consent of the creditor in delegacion is indispensable.

Example:

Pedro is indebted to Petra with 1000.00. Pedro proposed Pete to be the new debtor and obtained the consent of Petra. If at the time of the delegacion Pete was already insolvent but his insolvency was neither of public knowledge nor known to Pedro, then Pedro is not liable. Neither is Pedro liable if the insolvency of Pete took place after he delegated his debt.