A Philippine Legal Guide to Collecting (and Paying) Debts After Death

When a person dies, their relationships don’t vanish—but many legal rights and obligations shift into a new “bucket”: the estate. If the deceased (the decedent) lent money to others, the estate generally becomes the creditor. If the deceased owed money, the estate becomes the debtor. The heirs are involved, but the law draws an important line: collection and payment normally happen through the estate, and heirs are generally not personally liable beyond what they inherit.

This article explains, in Philippine context, how outstanding loans, promissory notes, acknowledgments (IOUs), and other receivables are handled after death—covering estate settlement, who can sue, deadlines, proof, and practical steps.

1) Core principle: Rights and obligations generally survive death

Under Philippine civil law, inheritance includes not only property and rights, but also obligations that are not extinguished by death. In practical terms:

If A lent money to B, and A dies: the right to collect is part of A’s estate.
If A borrowed money from C, and A dies: the debt is chargeable against A’s estate.

Obligations that don’t typically survive

Certain obligations are purely personal (e.g., personal services) and may be extinguished by death. But ordinary money debts and credits (loans, IOUs, promissory notes) are usually transmissible.

2) Important distinction: “Estate liability” vs “heirs’ personal liability”

A common fear is: “If my parent had debts, will I inherit the debt?” The general rule is:

✅ Debts are paid from the estate, not from heirs’ personal pockets

Heirs do not automatically become personally liable for the decedent’s unpaid loans beyond the value of what they receive from the estate.

But heirs can become exposed in certain scenarios

Heirs may face claims up to the value of the property they received if:

they received estate assets (by distribution/partition), and
estate debts were not properly settled.

In other words, creditors typically chase the estate first, and may proceed against distributees to the extent of the inheritance in appropriate cases.

3) What counts as a “loan” or “IOU” that heirs can collect?

Heirs (through the estate) can collect any receivable owed to the decedent, including:

Promissory notes
IOUs / acknowledgments of debt (even informal ones, if provable)
Loan agreements (written or oral, though proof is easier if written)
Unpaid portions of sale on installment (if the decedent was the seller)
Checks issued to the decedent (subject to rules on presentment and prescription)
Judgment awards in favor of the decedent (if already decided)

Common misconception: “An IOU must be notarized.”

Not necessarily. Notarization helps (stronger evidentiary weight), but a non-notarized writing can still be enforceable if authenticity and terms are proven.

4) Who has the authority to collect after death?

This is the single biggest practical issue.

A) If there is a court estate proceeding (judicial settlement)

If the estate is under probate/settlement, the proper party to collect is usually the:

Executor (if there is a will and an executor is appointed), or
Administrator (if intestate or no executor), acting for the estate.

Why this matters: Debtors want to pay the “right person.” Paying someone without authority can risk a second demand later.

B) If there is no court proceeding (extrajudicial settlement or small estate handling)

Heirs may be able to collect, but ideally after establishing clear authority, such as:

Extrajudicial Settlement of Estate (EJS) (if allowed), and/or
a Special Power of Attorney (SPA) from all heirs appointing one heir/agent to collect, and/or
proof of heirship (and agreement among heirs) to avoid disputes and debtor risk.

Best practice for debtors: Pay only to (1) the estate representative, or (2) all heirs jointly, or (3) a properly authorized representative with written authority.

5) Must the estate be settled first before heirs can sue to collect?

Not always, but often the cleanest route is through estate settlement.

There are two realities:

Substantive right: The right to collect transfers to heirs/estate at death.
Procedural ability: Courts and debtors often require a proper party with authority.

If collection is uncontested, debtors may voluntarily pay upon presentation of documents. If contested, filing a case is easier if the plaintiff has clear legal standing (executor/administrator or properly authorized heirs).

Practical rule of thumb

Big/contested claims: Open a proper estate proceeding or appoint an administrator.
Small/uncontested claims: Heirs can try demand and settlement first, using written authority to minimize risk.

6) How to collect: Step-by-step roadmap (Philippines)

Step 1: Gather documents and proof

Collect anything showing:

identity of the decedent
existence of the debt
amount, interest (if any), due dates, and payment history

Useful evidence includes:

promissory note/IOU
chats/emails acknowledging the debt
bank transfer records
receipts, ledgers, witness statements
demand letters and responses

Step 2: Identify the proper “collector”

If there is an executor/administrator: collection should be in the estate’s name.
If none: heirs should unify authority (EJS and/or SPA) to avoid intra-heir disputes and debtor uncertainty.

Step 3: Send a formal demand

A written demand:

identifies the debt and basis
states the amount and how computed
gives a deadline to pay
specifies who is authorized to receive payment
requests a meeting or payment plan if needed

Step 4: Choose the remedy if unpaid

Possible actions include:

Civil action for collection of sum of money
Small claims (if within the current threshold and appropriate)
Action on a written instrument (if promissory note exists)
Foreclosure (if loan is secured by real estate mortgage/chattel mortgage, subject to estate rules)

Step 5: Proper receipt and release

To prevent future disputes:

issue an official receipt
execute a release/quitclaim (carefully, and only to the extent paid)
keep documentation for estate accounting and tax purposes

7) What if the deceased was the borrower (creditors collecting from the estate)?

This is the “mirror image” of the topic, and it matters because heirs often ask: “Can creditors come after us?”

A) If there is a judicial settlement of estate

Creditors must generally file their claims in the estate proceeding within the time set by the court’s notice to creditors (under the Rules of Court on settlement of estates). Failure to file within the allowed period can bar the claim, subject to limited exceptions.

B) If heirs settled extrajudicially

Creditors may still pursue claims against:

the estate property, and/or
the heirs/distributees who received property, typically up to the value of what they received, especially within the period recognized under the rules governing extrajudicial settlement.

Key point: Proper settlement is not just paperwork—it is a creditor-management system.

8) Prescription (deadlines): Do IOUs and loans “expire”?

Yes. Debt claims are subject to prescription (statute of limitations). The exact period depends on the nature of the obligation and evidence (written vs oral, etc.).

General guidance (high-level)

Written contracts / promissory notes often have a longer prescriptive period than purely oral agreements.
The clock usually runs from the date the obligation becomes due (maturity/demandability), not from the date it was signed.
Acknowledgment of debt, partial payments, or written admissions can affect the prescriptive period (often resetting or interrupting it depending on circumstances).

Because prescription analysis is highly fact-specific (due dates, demands, partial payments, written acknowledgments), it’s best treated as a legal review item before filing.

9) Interest, penalties, and “verbal” interest agreements

A) If the contract states interest

Collectible interest depends on proof and enforceability of the stipulation.

B) If there is no written interest clause

As a general practical matter, claiming interest is easier when:

it is clearly agreed upon, and
ideally in writing.

Courts scrutinize interest and penalties, especially if they appear excessive or unsupported.

C) Compounding and penalty charges

These often require clear contractual basis and may be reduced if unconscionable.

10) Secured vs unsecured debts: Mortgages, pledges, guarantors

If the decedent was the lender and the loan was secured

The estate may enforce:

real estate mortgage (foreclosure)
chattel mortgage
pledge
surety/guaranty (subject to terms)

If the decedent was the borrower and the debt was secured

Creditors may have:

a claim in the estate proceeding, and/or
a right to enforce the security (foreclosure), often with procedural coordination with estate settlement.

Secured transactions can be powerful because they provide a specific asset to satisfy the debt—but procedure matters.

11) Family loans and “soft” IOUs: common proof problems

Many Philippine debts are:

informal
family-based
paid in cash
supported only by messages or a notebook entry

These can still be collectible if proven, but the risk is evidentiary. Helpful strategies:

preserve chats and metadata
obtain written acknowledgment from the debtor (even after death, heirs can request a confirmation letter)
document partial payments and dates
use witnesses who can testify to the loan and terms

12) Can one heir collect alone?

Debtors’ risk

If a debtor pays only one heir without authority, other heirs might claim non-payment. So debtors often demand:

proof of authority, or
payment to all heirs jointly.

Heirs’ internal rule

If the receivable is part of the estate, it should be collected and accounted for as an estate asset, then distributed according to:

will (if any), or
intestacy rules.

One heir collecting alone is possible only if properly authorized and properly accounted for.

13) What if the debtor dies too?

If both creditor (decedent) and debtor die, collection becomes estate-to-estate:

the creditor’s estate asserts a claim against the debtor’s estate
deadlines and procedure depend on whether the debtor’s estate is under settlement proceedings

This scenario strongly favors formal estate proceedings to avoid procedural dead ends.

14) Can heirs file criminal cases to collect?

Nonpayment of debt is generally not a crime by itself. Criminal liability may arise only when there is a separate criminal act (e.g., deceit constituting estafa, bouncing checks under the applicable law), but using criminal process purely as a collection tool is risky and often improper.

Heirs primarily rely on civil remedies for collection.

15) Practical checklists

For heirs trying to collect a decedent’s loans/IOUs

Death certificate
Proof of heirship/authority (court appointment, EJS, SPA, etc.)
Loan document/IOU, or compiled proof of the transaction
Payment history / ledger / bank records
Demand letter + proof of delivery
Computation of principal + interest (basis and dates)
Plan for proper receipt and estate accounting

For debtors who want to pay safely

Ask for proof of authority (executor/administrator or written authority of heirs)
Pay by traceable method (bank transfer/check)
Get a proper receipt and release signed by authorized party
If uncertain, consider interpleader/consignation concepts (legal mechanisms to pay without risk), with counsel

16) FAQs

“Do heirs automatically become the new ‘creditor’?”

Substantively, the right to collect passes into the estate/heirs. Procedurally, collection is safest through the estate representative or properly authorized heirs.

“Can creditors garnish the heirs’ salaries?”

Generally, creditors pursue the estate, not heirs personally—unless a specific legal basis exists (e.g., heirs received estate assets and are being pursued to the extent of what they received, or heirs personally guaranteed something).

“Do we need an extrajudicial settlement just to collect a small IOU?”

Not always, but having clear authority prevents disputes and increases the chance the debtor will pay voluntarily.

“What if the only proof is a chat message?”

It can still help, especially if it clearly acknowledges the debt and amount. Authenticity and context matter.

Closing note

Heirs can collect a deceased person’s outstanding loans and IOUs in the Philippines, but the smoothness of collection depends on authority (who can legally receive payment), proof (what evidence exists), and procedure (estate settlement rules and deadlines). If the amount is significant, the debtor is resisting, or multiple heirs disagree, getting advice from a Philippine lawyer handling estates/collections is usually the most cost-effective way to avoid delay and prevent the claim from being undermined by technicalities.