A demand letter (also called a letter of demand or “huling habilin”) is a formal written notice requiring a debtor to pay an outstanding obligation within a specified period, failing which the creditor will file a legal action. In Philippine law and practice, it is an indispensable tool in debt collection. It serves multiple critical purposes:

It formally puts the debtor in mora solvendi (delay), which triggers the running of legal interest at 6% per annum (Bangko Sentral ng Pilipinas Circular No. 799, s. 2013, as applied in Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013).
It interrupts the running of the prescriptive period (Article 1155, Civil Code).
It is a mandatory requirement for Small Claims actions (Section 4, A.M. No. 08-8-7-SC, as amended) and highly advisable in all other collection cases.
It is strong evidence of good faith effort to settle amicably, which courts consider favorably when awarding attorney’s fees or exemplary damages.

When Is a Demand Letter Mandatory?

Small Claims Cases (up to ₱1,000,000 as of 2024 amendments)
The plaintiff must attach the demand letter and proof of its receipt (or attempted delivery) to the Statement of Claim. Without it, the case will be dismissed outright.
Regular Collection of Sum of Money (Rule 141 jurisdictional amounts above Small Claims)
While not strictly mandatory, the absence of prior demand can result in denial of legal interest from the date of debt maturity until judicial demand, and may weaken claims for attorney’s fees.
Barangay Conciliation Requirement (P.D. 1508 / R.A. 7160 as amended)
If both parties reside or work in the same city/municipality, the dispute must first undergo barangay conciliation. The demand letter can be presented during conciliation, or the filing of the barangay complaint itself may serve as the demand.
Contracts with “Demand Clause” or Promissory Notes
Many loan agreements or promissory notes expressly require written demand before acceleration of the obligation or filing of a case.

Essential Elements of a Legally Effective Demand Letter

To be considered valid and admissible in court, the letter must contain the following:

Complete identification of the creditor (full name, address, contact numbers, TIN if applicable).
Complete identification of the debtor (full name, all known addresses, contact numbers).
Clear description of the obligation:
- Date the debt was incurred
- Nature (loan, unpaid invoices, bounced checks, services rendered, etc.)
- Principal amount
- Copies of supporting documents (promissory note, contract, statement of account, acknowledgment receipt, bounced checks) attached or referenced
Computation of the total amount due as of the date of the letter:
- Principal
- Accrued interest (stipulated rate or legal rate of 6% p.a.)
- Penalties, if stipulated and not iniquitous
- Attorney’s fees (usually 10–25% of total amount due, if stipulated or reasonable)
Unequivocal demand for full payment within a reasonable period (7–15 days from receipt is standard and considered reasonable by most courts).
Express warning of legal action (specify Small Claims, Collection, Estafa, B.P. 22, etc., depending on the facts).
Date and place of the letter.
Signature of the creditor or his/her authorized representative/attorney.

Recommended Structure and Wording

[Your Complete Name or Company Name]
[Your Complete Address]
[Contact Numbers and Email]
[Date]

[Debtor’s Full Name]
[All Known Addresses of Debtor]

Via Personal Delivery and Registered Mail with Return Card
(or via LBC/PHLPOST Courier)

Subject: FINAL DEMAND TO PAY UNPAID OBLIGATION IN THE TOTAL AMOUNT OF ₱______________ (As of [Date])

Dear Mr./Ms./Mmes. [Debtor’s Name],

This is to formally demand that you settle your long-overdue obligation to me/us in the total amount of PESOS: ____________________________ (₱__________) as of [date], broken down as follows:

Principal amount loaned/received on [date] per [Promissory Note/Contract/Acknowledgment Receipt dated ] – ₱_______
Accrued interest at the rate of % per annum (or legal rate of 6% p.a.) from [date] to [date] – ₱________
Penalties, if any – ₱__________
Attorney’s fees equivalent to % of the total amount due – ₱________

TOTAL AMOUNT DUE AND DEMANDED: ₱__________

Copies of the pertinent documents are hereto attached as Annexes “A” to “___”.

Despite previous verbal and/or written demands, you have failed and refused, and continue to fail and refuse, to settle the above obligation, to my/our damage and prejudice.

Within SEVEN (7) DAYS from receipt of this letter, you are hereby required to pay the full amount of ₱__________ either in cash, manager’s check, or via bank deposit to [account details].

Should you fail to pay within the given period, I/we shall be constrained to file the appropriate criminal and/or civil actions against you, including but not limited to Violation of B.P. 22, Estafa under Article 315 of the Revised Penal Code, Collection of Sum of Money with Damages, and such other cases as the facts and the law may warrant. In such event, you shall be held liable for additional damages, attorney’s fees equivalent to 25% of the total amount due, litigation expenses, and costs of suit.

This demand is made without prejudice to any other rights and remedies available under the law.

Very truly yours,

[Signature over Printed Name]
Creditor / Attorney-in-Fact / Counsel
[Notary Public block if notarized – recommended for amounts above ₱500,000]

Best Practices for Service and Proof of Receipt

To ensure the letter is admissible and proves receipt:

Send via Registered Mail with Return Card (PhilPost) – keep the registry receipt and return card.
Send simultaneously via private courier (LBC, JRS, GrabExpress, etc.) that provides tracking and proof of delivery.
Have it personally served by a notary public or process server – the notary can execute a Certificate of Service.
For large amounts, have the entire letter notarized (adds evidentiary weight and allows the notary to personally serve it).
Keep screenshots of email or Messenger delivery/read receipts (supplementary only; not sufficient alone).

Courts accept any of the above as sufficient proof of demand under the Small Claims Rules.

What Happens After Sending the Demand Letter

Debtor pays within the period → issue a receipt marked “PAID” or “FULLY SETTLED” and execute a Release/Waiver/Quitclaim.
Debtor partially pays or asks for extension → obtain a new promissory note or written acknowledgment with new terms.
Debtor ignores the letter → file the appropriate case immediately after the deadline. Interest continues to run at 6% p.a. from date of extrajudicial demand until fully paid.
Debtor disputes the claim → proceed to barangay conciliation (if required) or directly to court.

Common Mistakes That Render a Demand Letter Legally Weak or Inadmissible

Vague or no computation of interest/penalties
No attached supporting documents
No clear deadline
No proof of receipt
Demanding unconscionable interest or penalties (court may reduce under Article 2227, Civil Code)
Sending only via ordinary mail or text message
Failing to update the amount due to include interest up to the date of the letter

A properly drafted and served demand letter is often the single most cost-effective step in debt recovery in the Philippines. In practice, a well-written lawyer’s demand letter results in payment in 40–60% of cases without need for court action. When court becomes necessary, the same letter becomes the cornerstone of a successful collection suit.