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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.

All rights reserved.

314 thoughts on “Proven ways in debt collection

  • Good Day po atty naging co maker po ako ng mga nangutang sa isang bpo company sadly nagka alisan ng empleyado at natakasan kami ng higit 450k na pera pinapirma po ako nung debtor hanggang dec ano po pwede kong gawin? makukulong po ba ako?

  • Good day po. Kung wala po inisyu na cheke pero my pinirmahan po na parang promissory note na walang nakasaad na due date pero nag iinterest ng 10% monthly, ano po ang pwede ikaso ng pinagkakautangan kung nadelat na sa pagbabayad ng interest

  • ATTENTION:
    Good Day Maam/Sir, you are invited to attend the Preliminary Hearing schedule on July 29, 2019 in SMALL CLAIMS #326-18 for a Violation of Article 354 of Revised Penal Code Filed docketed July 27, 2019. If you failed to attend a Warrant of Arrest will be issued within 48 hours prior nto compliance.
    You can verify your case at Clerk of Court under Atty. Paolo Benitez RTC Taguig

    -LEGAL DEPARTMENT OF PONDO PESO PHILLIPINES

    Sinendan po ako ng Pondo Peso ng ganyang message. 12 days palang po akong delay sa pagbabayad. Nawalan po kasi ako ng work kaya hindi ko agad masettle. Totoo po ba yan? First of all hindi naman dapat thru sms nanggagaling yang ganyang warning diba po?

  • Good pm. Atty. may utang po ako sa Kredit Pintar worth 5000. Due date ko po last December 27, 2018 but unfortunately di ko po cya nabayaran. May tumawag po sa akin Bry for collection Department kanina na kailangan kong bayaran ung 5000 plus interest plus penalty na 2.5% per day. Kapag hindi ko daw po nabayaran ung utang pupunta daw po cla sa bahay at office namin pati rin sa barangay. Please need your advice. Thank you…

  • Atty. may utang po ako sa isang lending company due last December 27, 2018. Di po ako nakabayad kasi magpasko at himihingi ako sa kanila ng extension. Pero ung utang ko na 5000 may patong daw na 2.5% per day. Tapos ang sabi ng collector pag hindi daw ako nakabayad ngayon pupunta daw cla next week sa bahay at office namin pati ri sa barangay. Tapos ung picture ko raw ay ikakalat kahit saan daw para wala akong kawala. Gusto ko naman magbayad kasi kung hindi dapat nagpalit na ako ng CP number kung gusto ko talagang tumakas. Nakikipagusap po ako ng maayos pero ung collector nagtataas na ng boses. Luckily narecord ko po ung conversation namin. Thank you po..

  • Hi Atty.

    I have reloan sa Moola Lending. I juat txt message na I can reloan. Aware naman ako terms nila na kung 2k loan mo may 10% deduction. So 1800 lang nakuha ko then 2600 balik in 1 mo. Then due to maternity leave ko nagipit ako at sinagot ko isnag tawag ng agent nila. I informed na ma lelate ako ng payment but I am willing to pay makuha ko lang maternity benefit ko. So sabi sakin no problem basta babayad ng 600 pesos to pro long the loan. Then after 4 days of due date. I received a txt message na from 2600 naging 3500 na. I answered one of the agents sobrang bastos at pinapa explain ko kung paano sila nag bbgay ng interest. Na explain ng maigi pero doon ko lang nalaman na may late payment fee sila na 700 at 40 pesos additional for each day interest. Nagulat ako. Sabi ko kung pwede i-send sakin ulit ung contract na sinasabi nila na sinend nila sakin sa email which was wla akong na receive. Only text messages lang saying na approved ung loan at 600 pesos na payment if ever I want to pro long it. Ngayon nananakot na mag legal action daw sila if di ako makakabayad. 4300 na sya ngayon. Kasi kung sinabi lang na may 700 fee at 40 pesos penalties in the 1st place di ako uutang. Ano po magandang gawin sa misleading of terms nila atty?

  • Good pm po Atty. Arjay.

    Ako din po nag apply po ako sa fastcash loan ng 5k tapos hindi buo yong natangap kong pera amounting 5k po. Nasa 4k something lang yata yon. Hindi ko po nabayaran yong amount overdue ko po kasi hindi kasya ng sahod ko po na ipambayad doon kasi may salary deductions po ako sa sahod dahil sa mga absences ko po. Lumalaki yong amount overdue ko po dahil sa laki ng interest nila naging 8k napo. Tapos po tinawagan yong cousin ko po nag file daw sila ng estafa case sa akin po. Ano gagawin ko po?

    • Sir ani po ngayare sa case nyo? Binayaran nyo po sila ng ganon kalaki? Sobrang laki kase talaga ng interest nila ganon din ang sakin sa pondo.peso from 4700 to 7k 90+ penalty per day.

  • Hi Atty,

    Good Day po! May nagpagawa po kasi samin ng mga chairs and table worth 350k then yung company po niya is sole proprietor. Ang pumirma po ng contract is yung employee niya since yun naman po tlga ung kausap namin sa deals and design and yung employee niya po yung kumuha sa amin para sa project. Pero naka address po ung contract sa business niya. Ang problema po hindi pa po kami bayad mag 6months na and hindi na din po nakikipag usap ung may ari ang question ko po pag dinemanda po ba namin sila pwde ko din po bang kasuhan yung may ari kahit hindi naman po siya yung naka pirma sa contract? Salamat po.

  • Hi,Atty.
    Meron po akong nahiram sa GetPeso online lending.Hindi ko pa po sila nabayaran ksi kinapos ako sa pera.Unang tumawag sa akin named Diane kelangan ko daw magbayad kasi kung hindi kokontakin nila lahat ng references ko.Sumunod na araw naman may tumawag sa akin named Atty Sevilla daw of Getpeso sabi nya magbayad daw ako kasi kung hindi ipablocklist daw ako sa BSP at CMAP kasama mga reference ko.Sinagot ko po sya na meron nman po yatang tamang proseso sa paniningil hindi po yung tatakutin ka.May karapatan po ba sila ipablocklist ako sa BSP at CMAP daw po?Maraming Salamat po.

  • Goodpm tumawag po ang pondo peao sakin.sabi po may utang daw po ako at over due na.ilang beses po nila ako nireject dati.ngaun po nagkautang daw ako at nakuha ko daw thru coinph.pupunta daw sila barangay pata dito.wala naman po ako nakuhang pera.legal po ba ang pondo peso? Pyramics lending inc daw po ang conpany nila.ayaw nila bigay ang address at contact no.nila sakin..puro cp po ng agents ang tumatawag sakin

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