Demand Letter and Small Claims Options (Philippines)

When a borrower (or customer) stops responding, the practical goal is to convert an “unpaid promise” into enforceable proof and, if needed, an enforceable judgment. In the Philippines, the usual path is:

Document the debt and your demands
Send a proper demand letter (and keep proof of receipt/refusal)
Comply with Barangay conciliation (when required)
File a Small Claims case (if within the small claims amount and claim type)
Execute the judgment (garnish, levy, collect)

This article explains each step and the key rules and pitfalls in Philippine practice.

1) Know what kind of “debt” you have

Most unpaid obligations fall into one of these:

A. Loan / Cash advance / “Utang” (civil obligation)

Proof often includes promissory notes, acknowledgments, chat messages, bank transfers, receipts, IOUs.

B. Unpaid goods or services (business collection)

Proof often includes invoices, delivery receipts, job orders, purchase orders, statements of account, acceptance/turnover documents.

C. Checks issued for payment

This can be civil (collection) and may also raise criminal exposure under the Bouncing Checks Law (B.P. Blg. 22) if the check bounces and the legal notice requirements are met. (Separate from Small Claims; the civil collection can still proceed.)

D. Security or collateral

If there is a pledge, chattel mortgage, real estate mortgage, or guaranty, there may be additional remedies, but these typically require careful handling and may not fit Small Claims.

2) Build a “collection-ready” evidence file before you demand

Debtors ignore demands most successfully when the creditor’s documentation is messy. Assemble:

Core proof of the obligation

Written contract / promissory note / acknowledgment (best)
If none: messages (Messenger/Viber/SMS/email), bank transfer slips, GCash/PayMaya records, receipts, delivery/acceptance documents, ledger/statement of account acknowledged by the debtor, or admissions like “I’ll pay next week.”

Proof of amount due

Principal
Interest (contractual or legal, if allowed)
Penalties (if agreed in writing; courts may reduce unconscionable penalties)
Payments made (show deductions)
Total as of a specific date

Proof of debtor identity and address

Full name, aliases used, and correct current address
For businesses: registered name, office address, and authorized signatory if possible

Clean timeline

A simple chronology helps: date of loan/sale → due date → partial payments → default → follow-ups → final demand.

3) Demand letter: what it does, why it matters

A demand letter is not just “pang-pressure.” It has legal and strategic value:

Puts the debtor in delay (mora) in many situations, affecting liability for damages and interest when the obligation requires demand.
Shows good faith and reasonableness.
Starts a paper trail helpful for Small Claims and execution.
Helps defeat defenses like “I was never asked to pay” or “amount unclear.”

Even when the debt is already due, a formal demand still strengthens the case.

4) What a proper demand letter should contain

A strong Philippine-style demand letter typically includes:

A. Parties and background

Creditor name and address
Debtor name and last known address
Brief statement of the transaction: loan/sale/service, date, and supporting documents

B. Amount breakdown

Principal
Interest rate and basis (contract clause or legal interest, if applicable)
Penalties (if any)
Less: payments
Total due as of a specific date, plus per-day/per-month accrual if applicable

C. Clear demand and deadline

A definite period to pay (commonly 5–15 days, depending on circumstances)
Payment methods and where to pay
Request for written response if debtor disputes the amount

D. Notice of next steps (without threats)

State that non-payment will lead to filing the appropriate case (Small Claims or regular civil action) and recovery of allowable costs.

E. Attachments

List the documents being relied upon (promissory note, invoices, proof of transfer, etc.).

F. Signature and authority

Signed by the creditor or authorized representative. If represented, include proof of authority (e.g., SPA or board authorization for entities), especially if litigation will follow.

5) How to serve the demand letter so it “counts”

The best demand letter is useless without proof it reached (or was refused by) the debtor.

Strong service methods

Personal service with the recipient signing an acknowledgment copy
Courier with tracking and proof of delivery
Registered mail with registry receipt + return card (or post office certification of delivery attempts/refusal)
Email (helpful if routinely used between parties; keep headers and delivery confirmations)
Messaging apps (screenshots + device metadata where possible; preserve the conversation thread)

If the debtor refuses to receive

Refusal is often as useful as receipt—keep courier notes, screenshots of attempted delivery, or sworn statements by the person who attempted service. Courts commonly treat documented refusal/avoidance as bad faith.

6) Common mistakes in demand letters that weaken a case

No computation or changing numbers every message
Claiming interest/penalty with no written basis (can be disallowed or reduced)
Using harassing/defamatory language (can backfire)
Threatening criminal cases as leverage in a way that looks like intimidation rather than lawful notice
Sending to the wrong address and having no proof of attempt

Keep it factual and document-driven.

7) Barangay conciliation: the often-mandatory step before court

Before filing many civil cases between individuals, Philippine law may require Katarungang Pambarangay (Lupon) conciliation.

When it is typically required

Parties are individuals residing in the same city/municipality (subject to the usual rules), and
The dispute is not among those expressly exempted.

What you need for court

If conciliation is required, courts usually look for a barangay certification such as:

Certificate to File Action, or
Certification that settlement was not reached / respondent failed to appear, as applicable.

Why it matters

Filing in court without complying (when required) can lead to dismissal or delay.

Practical notes

Bring your documents, computation, and a draft settlement proposal.
If the debtor repeatedly fails to appear, that fact can support issuance of the certification needed to proceed.

(There are exceptions and technicalities—especially involving corporations, non-residents, urgent relief, or other exempt disputes—so the applicability depends on the parties and location.)

8) Small Claims in the Philippines: what it is and when it fits

The Rule of Procedure for Small Claims Cases provides a faster, simpler court process for money claims without the full complexity of ordinary civil cases.

What Small Claims generally covers

Collection of money based on contracts of loan, sale, services, lease, damages involving money claims, and similar obligations where the relief sought is essentially payment of a sum of money.

Amount limit

Small Claims has a maximum claim amount set by Supreme Court rules and may be adjusted over time. The “claim” usually refers to the amount prayed for in the complaint (often the principal plus allowable interest/penalties as claimed), but courts may scrutinize unconscionable add-ons. Because thresholds can change through amendments, the safest approach is to verify the current ceiling in the latest Small Claims rules/issuances.

Key advantage

Speed: designed for quicker hearings and resolution
Simplicity: standardized forms
Lower cost compared to full-blown civil litigation

Key limitation

It’s for money only. If you need complex relief (e.g., rescission with complicated accounting, replevin, foreclosure, specific performance beyond payment), Small Claims may not be appropriate.

9) Lawyers and representation in Small Claims

A defining feature: parties generally appear without lawyers during hearings.

The purpose is to keep proceedings simple and accessible.
Parties present their own facts and documents.
Certain entities may appear through authorized representatives (requirements vary by rules and practice; written authority is typically necessary).

Even without counsel in court, preparation and document organization are critical.

10) Where to file (venue and court)

Small Claims are typically filed in the first-level courts (Metropolitan/Municipal Trial Courts, etc.), following venue rules. Commonly:

Where the defendant resides, or
Where the plaintiff resides, depending on the governing rules for small claims and the nature of the obligation.

Filing in the wrong venue can cause dismissal or transfer.

11) The Small Claims process, step by step

While details vary by court branch and rule updates, the usual flow is:

Step 1: Prepare the forms and attachments

You submit:

Statement of Claim / Complaint form
Verification/certification requirements (as required by the forms)
Copies of evidence (promissory note, invoices, chat admissions, proof of payment/transfer, statement of account)
Proof of demand (demand letter and proof of service)
Barangay certification, if required
Proof of authority if you’re filing for someone else (SPA, board resolution, etc.)

Step 2: Pay filing fees

Fees depend on the claim and court schedules. Keep official receipts.

Step 3: Court issues summons and sets hearing

The defendant is served with summons and instructed to respond and appear.

Step 4: Hearing and possible settlement

Small Claims emphasizes settlement. If no settlement:

The judge may ask clarificatory questions.
You present your documents and narration.
The defendant raises defenses (payment, wrong amount, no contract, defective goods, etc.).

Step 5: Decision

Small Claims decisions are designed to be prompt. Outcomes include:

Full grant
Partial grant (reduced interest/penalties, partial offsets)
Dismissal (lack of proof, wrong venue, lack of required certification, etc.)

12) What defenses debtors commonly use—and how to counter

“I already paid.”

Counter with:

Your ledger + receipts + proof that alleged payment wasn’t received
Bank records showing no corresponding credit

“The amount is wrong / interest is too high.”

Counter with:

Clear computation
Written contract clause for interest/penalty
Reasonableness; be ready for courts to reduce excessive penalties

“There was no loan; it was a gift / capital / investment.”

Counter with:

Debtor admissions (“utang,” “I’ll pay”)
Payment schedules
References to “principal,” “interest,” “due date” in messages

“You didn’t demand; I wasn’t notified.”

Counter with:

Demand letter + proof of delivery/refusal
Consistent prior follow-ups

“Defective goods / incomplete service.”

Counter with:

Delivery receipts signed
Acceptance/turnover proof
Absence of timely complaint
Photos, inspection reports, punch-list sign-offs

13) Interest, penalties, attorney’s fees: what courts may allow

Contractual interest and penalties

Courts generally require a written basis for interest and penalties.
Courts can reduce unconscionable penalties and scrutinize excessive interest.

Legal interest

When appropriate, courts may impose legal interest on monetary obligations and judgments. Philippine jurisprudence has applied a 6% per annum legal interest standard for certain monetary awards for years (subject to rule refinements and proper classification of the obligation).

Attorney’s fees

Even in Small Claims, attorney’s fees are not automatic. Courts usually require:

A contractual stipulation, and/or
A recognized legal basis (e.g., bad faith), and even then may limit the amount.

14) If the debtor stays absent: default and proceeding without them

If the defendant ignores the case or fails to appear despite summons, the court may proceed and decide based on your evidence, subject to the rules on service and due process.

Your biggest vulnerability in an “uncontested” case is still proof: the judge must see that the obligation exists and the amount is correct.

15) Winning is not the end: enforcing the judgment

Many creditors “win” but don’t collect because they stop at the decision. Collection often happens at execution.

After judgment: Writ of Execution

If the debtor doesn’t voluntarily pay within the allowed period, you request a writ of execution.

Common enforcement tools

Garnishment of bank accounts (requires accurate bank information; banks respond to court processes)
Garnishment of salaries/receivables (subject to exemptions and practical limits)
Levy on personal property or real property (sheriff-led process)
Examination of the judgment obligor (in some situations, courts can require disclosure of assets)

Practical reality

Execution succeeds when you can identify:

Where the debtor banks
Employer/business income streams
Real property or vehicles
Customers who owe the debtor money

Without asset leads, a judgment can be hard to monetize.

16) When Small Claims is not available or not ideal

A. Claim exceeds the small claims ceiling

Options include:

Regular civil action for collection of sum of money (still often in first-level courts depending on amount and rules), or
Splitting claims is risky if it looks like evasion of jurisdictional thresholds; courts may treat it unfavorably.

B. You need remedies beyond payment

Examples: foreclosure, recovery of property, rescission with complex relief, replevin. These generally require ordinary civil procedures.

C. The debtor is a corporation / special party situation

Small Claims can still be possible for money claims, but representation and pre-litigation requirements (including barangay conciliation) can differ based on party status and location.

17) Criminal angles: when people mention estafa or B.P. 22

Estafa (Revised Penal Code)

Not every unpaid debt is estafa. Estafa generally requires deceit or abuse of confidence and specific elements. Courts are cautious about turning pure “utang” into criminal cases.

B.P. 22 (bouncing checks)

If payment was by check that bounced, B.P. 22 may apply if notice and timing requirements are met. This is separate from Small Claims and has its own procedural demands. Civil collection may proceed regardless, but criminal complaints should not be used as mere harassment.

18) Prescription: don’t wait too long

Civil actions prescribe (expire) depending on the nature of the obligation (written contract vs oral, etc.). Because prescription rules can be technical and fact-specific, the safe practice is to act early and keep documentary proof of acknowledgments or partial payments (which can affect prescription timelines).

19) A practical blueprint: from ignored messages to collectible judgment

Freeze the story: finalize your computation and document list.
Send a final demand letter with proof of delivery/refusal.
Check if barangay conciliation applies; if yes, initiate and obtain the proper certification.
File Small Claims if the claim fits the rules and ceiling; otherwise file the appropriate civil action.
Prepare for hearing: a binder/folder with labeled exhibits, timeline, and computation sheet.
After judgment, pursue execution quickly and focus on asset discovery.

20) Demand letter template (structure only)

[Date] [Debtor Name] [Debtor Address]

RE: FINAL DEMAND TO PAY [Loan/Obligation]

Dear [Name]:

On [date], you incurred an obligation to pay ₱[principal] to [creditor] arising from [loan/sale/services], evidenced by [promissory note/invoice/chat admissions/proof of transfer].
The obligation became due on [due date]. Despite repeated reminders, payment has not been made.
As of [date], your outstanding balance is:

Principal: ₱____
Interest: ₱____ (basis: ____ )
Penalty: ₱____ (basis: ____ )
Less payments: (₱) TOTAL DUE: ₱

Demand is hereby made for you to pay the total amount of ₱____ within [X] days from receipt of this letter, through [payment channels].
If you dispute any portion, you must submit a written explanation with supporting documents within the same period.
Failure to comply will constrain us to pursue the appropriate action to recover the amount due, including court proceedings, with recovery of allowable costs and other relief.

Sincerely, [Name / Creditor / Authorized Representative] [Contact details] Attachments: [list]

21) Key takeaways

A debtor’s silence is not a defense, but your proof and process determine whether you collect.
A demand letter is strongest when it has clear computation and provable service.
Barangay conciliation can be a gatekeeper step; skipping it when required can derail the case.
Small Claims is designed to be fast, but success depends heavily on organization and execution strategy after judgment.