Writing a Demand Letter to Collect Debts in the Philippines

John and Juan are friends. Juan borrowed money from John in order to finance his business. John agreed and lent him P50,000.00. As for the terms of payment, it was agreed that Juan will pay in five equal installments every month starting July 6, 2011.

Juan was able to pay on July 6, 2011. However, come August, Juan failed to pay. On September, Juan still was unable to pay John. He even failed to explain to John his reasons why he was not able to pay the installments for the months of August and September as agreed upon.

On October, John got sick and he needed money. So, he decided to act on the collection of Juan’s debt. In as much as he wanted to start right away, he was unsure of what steps to take in order to collect from Juan.

What could be the best action on John’s part? The first thing to do in collecting from the borrower is to send a Demand Letter. This should be done by John. Such letter should state:

  1. the amount of money that John is demanding from Juan
  2. the terms of payment
  3. the date when such payment should be made
  4. the place where such payment should be made
  5. and a provision that should Juan be unable to comply with such demand, John would be constrained to file the necessary legal actions against him.

Lastly, John should make sure that the Demand letter was received by Juan. This is to make sure that Juan was sufficiently informed of the demand and that he was really given the opportunity to do what is asked of him.

For more information on debt collection, contact us at info@domingo-law.com:8888/dlaw or visit our website www.localhost:8888/dlaw.

See also:  Estafa vs. Bouncing Checks Law

Do You Need Lawyers in Debt Collection

The obvious answer is NO, you don’t need lawyers BUT they are certainly HELPFUL. Squeezing out money from your borrowers can be taxing and what can one really do when the borrower tells you “I do not have funds right now”?

Hiring a lawyer to collect your debt can certainly take that burden off. While it is not advisable to file cases in court, there are times when that is the only option left. Then you’ll need lawyers.

So what can a lawyer do for you? Initially, they will send a demand letter to your borrower, stating the amount owed and indicating the penalties and interests if there are any. The letter should clearly state the “demand to pay” and the period within which payment should be made. If unheeded, the lawyer is given the right to file a court case.

Once a court case is filed, the judge will ask the parties to come up with a reasonable settlement of the debt. If the debt is denied, a full blown trial may be expected as matters of evidence will now be considered. If, on the other hand, the debt is admitted, all you need to discuss is the mode of payment.

Modes of payment can vary from installment basis, dacion en pago, and novation. These modes will be discussed in detail in my next article. When the parties agree to a mode of payment, a settlement agreement is signed. If borrower still fails to pay despite the agreement, the lender will simply have to go to court and ask the judge to enforce the signed agreement.

Finally, a lawyer is also not needed when filing “small claims”. Debts which are less than 100,000 Pesos are considered small claims. The lender may go directly to court without the need of legal representation. He or she just have to fill out a ready form and then pay the filing fees.

Should you need more information on debt collection in the Philippines, feel free to contact us at +639175488045 or send an email at info@domingo-law.com:8888/dlaw.

See also:  Writing a Demand Letter to Collect Debts in the Philippines