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Proven ways in debt collection

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Published — October 7, 2017

The following post does not create a lawyer-client relationship between Alburo Alburo and Associates Law Offices (or any of its lawyers) and the reader. It is still best for you to engage the services of your own lawyer to address your legal concerns, if any.

Also, the matters contained in the following were written in accordance with the law, rules, and jurisprudence prevailing at the time of writing and posting, and do not include any future developments on the subject matter under discussion.

Related Topic: Repossession of Mortgaged Automobiles

No business can survive without sufficient funds, as every action done in its operations generally have corresponding costs attached to it. When it comes to finances, however, one of the most common challenges faced by many businesses is the difficulty of collecting from their debtors the amounts owed to them. So, how is debt collection being carried out?

Pressuring debtors to obtain payment

Pressure may be employed, but only through legitimate means, such as filing of legal action, or availment of other legal remedies to collect the amount due. Resort to harassment in collecting from the debtor should be avoided, as this may enable the debtor to turn the table against the creditor who, because of his bullying, would just expose himself to civil liability for damages, and even criminal liability for coercion.

Some examples of such bullying would be by calling debtors during very inconvenient hours (e.g. between 10:00 PM and 6:00 AM); employment of threats; misrepresenting oneself as lawyers, police officers, or other government authorities to intimidate the debtor; making false statements about an impending punishment in connection with a pending case where no case is actually pending; contacting the debtor’s friends, family, neighbors, and workmates, and discussing with them the details of the debtor’s indebtedness; and threatening to deposit post-dated checks prematurely.

Legal remedies in collecting unpaid debt

Creditors who are having problems collecting from their debtors may very well resort to the following legal remedies:

  1. To file an action for collection of sum of money before the court.
  2. In case the debt is secured by a mortgage, the creditor may choose either to file an ordinary action for collection, or he may have the mortgage foreclosed.
  3. In case there is a check issued, which bounced, the offended party may file a complaint for violation of the Anti-Bouncing Checks Law. This is a criminal action, and therefore imprisonment is among the possible consequences upon conviction.

Civil action for collection of sum of money

If the creditor opts to file an action for collection of sum of money, all that the creditor needs to establish are the existence of a transaction for which the debtor became indebted (which may be a loan, or any dealings that create obligations such as sale concerning unpaid purchase price, or lease concerning rentals), the amount of money owed by the debtor, the fact that the obligation is already due and demandable, and that a demand had been made by the creditor upon the debtor.

Please take note, though, that if the debt does not exceed P200,000.00 (excluding damages and interests), the creditor may file his claim before the Small Claims Court. Since the amount of the claim is relatively small and the relief prayed for is solely for payment or reimbursement of sum of money, it is the court’s policy in small claims proceedings not to keep these cases from dragging for long periods before finally being decided. Since the proceedings must be speedy, inexpensive, and informal, the Small Claims Procedure was made much more simple.

Foreclosure of mortgage

Foreclosure is a necessary consequence of non-payment of mortgage indebtedness. In a real estate mortgage, when the principal obligation is not paid when due, the mortgagee-creditor has the right to foreclose the mortgage and to have the property seized and sold for purposes of applying the proceeds to the payment of the obligation [See: G.R. No. 178367].

Foreclosure of mortgage may be done through a complaint filed in court (judicial foreclosure). But the creditor, if authorized by the debtor in writing, may foreclose the mortgage constituted on the property without going to court (extrajudicial foreclosure). By virtue of his granted authority, the creditor may take possession of the mortgaged property, and sell it in a public auction, subject to the requirement that notice of the sale has to be given by posting the same for not less than 20 days in at least three public places in the city or municipality where the property is situated [See: Sec. 2, Act No. 3135]. If no such authority to sell was granted to the creditor, then he has no other alternative but to resort to judicial foreclosure.

If the proceeds of the sale are insufficient to cover the entire amount of the debt in an extrajudicial foreclosure of mortgage, the creditor is entitled to claim the deficiency from the debtor [See: G.R. No. 175816].

Criminal action for violation of Anti-Bouncing Checks Law

The Anti-Bouncing Checks Law (B.P. Blg. 22) was passed for the specific purpose of addressing the problem of continued issuance and circulation of unfunded checks. B.P. Blg. 22 considers the mere act of issuing an unfunded check as a criminal offense [See: G.R. No. 191404].

Violation of B.P. Blg. 22 shall be punished by imprisonment for 30 days to 1 year, or by a fine of double the amount of the check, but in no case it shall exceed P200,000.00. Both such fine and imprisonment may, however, be imposed at the discretion of the court.

With such remedies that every creditor may avail of against the defaulting debtor, all such creditor has to do is to choose what he believes is most effective and convenient based on the circumstances surrounding his credit. Always bear in mind that unless creditors take action, many debtors will simply ignore their obligations. Precious cash need not be unnecessarily sacrificed, especially by business entities, simply because of difficulty in collecting debts. This holds very true when the money to be collected could be used on other business activities that would bring more money in the pocket.


Alburo Alburo and Associates Law Offices specializes in business law and labor law consulting. For inquiries regarding credit and debt collection laws, you may reach us at info@alburolaw.com, or dial us at (02)7745-4391/0917-5772207.

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314 thoughts on “Proven ways in debt collection

  • hello po atty.. may utang po ako sa pondo peso.. pero hnd pa ako nka pag bayad.. pwd po ba ako makulong nun! online app po yun 3000 utang utang ko tpos 2234 nlng nkuha ko dahil bnawasan ndw sa interest.

  • Hello po Atty.
    Meron po akong nahiram na loan sa isang lending company. Ginawa ko pong guarantor ang sister ko, just today nakatanggap po siya ng ganito;

    City Prosecutor’s officer Advisory: Your Complainant party has a direct filling with affidavid of complain attachment of evidence in the Prosecutors office. Expect our Camp Crame Warrant Section official to Serve your Bench Warrant with Writ of Preliminary attachment please be informed for your voluntary surrender to avoid commotion at your place Fiscal.Cecilia Gonzales.Prosecutor office manila. Kindly call at 264-2354 / 09385766848

    Ano po dapat kong gawin? Willing to pay naman po the loan, nagkanda bale balentong lang po tlga finances ko dahil po sa condition ng new born ko.

    Thanks po

  • Good Day po.

    I just need some help. I have an outstanding loan with home credit. I was not able to pay for 3 months. They have inform me that I need to pay 34000. I ask them if they can give me more time since nahospital po ako nung may at almost 2months na hindi nka work kasi po na operahan ako sa galstones. last month september they texted me that they have terminated my account and nasa collector na po and was advs. to contact the number given until now. I have also sent emails and chats to home credit but no reply. Gusto ko po ma settle yung loan ko ayaw ko po umabot pa sa court.

  • Hi atty, i found out that MOOLA LENDING IS NOT EVEN REGISTERED SA DTI. No sort of regulated bodies monitoring their interest which is mas malaki pa sa nakuha sa kanila. I think mali ang calculations and interest rate and now they are sending messages na nagbabanta about barangay hearing. The truth is di ko na alam kung sino ang kumukontak sakin dahil mobile number lang. I am really concern about the legality kasi nung nagbayad ako nq 2100 for the prolongation ng loan ko. Mas lalong lumaki ang owing balance ko. Eh approved loan is 7k pero 6,100 lang ang nakuha ko. Sobra makapaginterest ang MOOLA.
    Sana matulungan nyo po ako

  • Good pm po! May unpaid checks po ako na apat na piraso na may total na halos 17k, nagbounced na po, gusto ko nman po magbayad kso nakikipag-arrange ako n baka pwedeng hulugan ko in 6mos. kaso ayaw nila pumyag tpos nagpadala n sila ng letter n need ko n daw byaran yun in 5days from receipt of demand kundi sasampahan nila ako ng criminal case,kso wala p po akong pambayad ng biglaan,ano po bang pwede kong gawin at makukulong po ba ako khit may intensyon naman ako magbayad?salamat po.

  • Hi Atty,
    Good Day Po Sir, aksidente po ako nkautang sa Moola, 4k po. Yung Pumasok po sa accnt ko 3600 lang po. Naospital po ako almost 2 months, so di po ako nakapag bayad, dahil d rin po ako nakapagtrabaho, tumatawag po sila halos ilang beses araw araw, at sinabi ko po ngyari sa akin, nagalit po sila at puro pagbabanta ang sinsabi sakin, di na raw po ako makakakuha ng NBI, POLICE Clearance, at ngfile n daw po sila ng kaso, tanung ko lng po, pwede po ba talaga mangyari to, lalot wala nman akong aktwal n pinirmahan sa kanila, slamt po sana po matulungan nyo po ako.

  • Hi atty is this true…
    kasi ng chek ako online wala nmn atty n gnyan, my utang ako na 8k. dk pa mbyaran kasi mwwln ako wrk na, tpos mkktnggp ako gnyn.. totoo po ba may gnyn…

    METROPOLITAN TRIAL COURT
    Mr/Mrs. MICHAEL AMAT MALATE ,
    Expect our official common to issue your COURT ORDER(Bench Warrant)
    exactly 3pm SEPTEMBER 27,2018) together with Sheriff team to issue Writ of Preliminary Attachment to garnish your real and personal property at 76 BLOCK 10 FARMERS 2 AVE BRGY TUMANA MARIKINA CITY
    Please be informed for your voluntary surrender to avoid commotion .
    ATTY.OSCAR VILLANUEVA / 09502020565 /09550349402
    PASIG MTC

  • may utang po ako kay moola lending currently. principal loan po is 2k 1800 lang po ang nakuha ko.. ang balik po is 2600 i filed for prolongation for another 30 days which meant i have to pay 600 then the next month 3300 na po ang babayaran nagpapro long po ulit ako for another 30 days this time 4k na po ang babayaran ko.. may question is pwede po bang pababaan yung interes nun kasi to think 1800 lang ang nakuha kong proceeds.. parang renewal lang po ang nangyayari dapat 2600 pa lang rin ang babayaran ko which is the original payable amount

  • Good morning po atty.
    Nagbigay po ng Loan of P200,650 sa isang student, within 3 years from year 2013 – 2016 to help fund his education. Walang signed agreement stipulating how much ang installment payments and wala specific date. The only letter na binigay ng debtor/student was a request letter to have a loan to support his education. Sinabi nya na gagawin nyang priority ang pagbabayad nun paunti unti kapag makagraduate at makapagtrabaho na cya. He coined it study now, pay later. Everytime creditor hands him money, pumipirma on paper si student to acknowledge receipt.

    Nag graduate yung student nung May 2017, nag simula magtrabaho ng June 2017 pero makalipas pa ng 1 taon bago nagsimula magbayad ng P2k. Total outstanding amount ngayon ay P 183,150. Walang interest ang ipinataw sa utang nya.

    Ang gusto sana ng Creditor ay magbayad cya ng P5,000 installment payment each payday, every 15th and 30th/31st of each month. Pero sabi ni debtor P2,500 lng every payday and insists na dahil wala naman nabanggit sa letter nya noon on payment terms, yun lng daw babayaran nya dahil un lng kaya nya.

    Wala po bang say ang creditor sa kung magkano ang installment payment na dapat gawin ni debtor dahil silent po ung letter on the payment terms? Sino po ba dapat nagsasabi ng payment terms?
    Maari po ba magpadala ng demand letter sa debtor para makakolekta ng P5k every payday instead na P2500? Paano po pag patuloy pa din cya sa pagbabayd ng P2500, option po ba magfile sa small claims court?

    Thank you.

  • hi atty.,

    i would like to ask if i can go against online lending company – fashcash / cash lending – they have hacked my phone and retrieved all my contacts. now they are contacting all my contacts and they have also done damaged on my phone. that is why i lost interest in repaying because of what they have done.

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