How to Respond to a Debt-Collection Demand Letter in the Philippines

A practical, step-by-step legal guide

Important disclaimer This article is for general information only and does not create a lawyer-client relationship. Philippine statutes and regulations change; for advice on a specific case, consult a qualified Filipino lawyer.

1. What exactly is a “demand letter”?

A demand letter (sometimes called notice of demand, collection letter or final notice) is a formal, written request for payment sent by a creditor, its lawyer, or an accredited collection agency. It is not a court document, but it is usually the last step before the creditor files:

a civil action for sum of money (including Small Claims); or
in limited situations, a criminal complaint (e.g., Batas Pambansa Blg. 22 for bouncing checks, or estafa under Art. 315, Revised Penal Code).

2. Key Philippine laws & rules you should know

Area	Primary sources	Practical takeaway
Obligations & Contracts	Civil Code (Arts. 1156–1422)	The creditor must prove (1) a valid debt and (2) your default or delay.
Prescription (time-bar)	Civil Code Arts. 1144, 1145, 1149	Written contracts → 10 yrs; oral contracts → 6 yrs; BP 22 → 4 yrs (from dishonor).
Debt collection practices	▸ BSP Circular 454 (banks & credit-card issuers) ▸ BSP Circular 947 (fintech & e-money issuers) ▸ SEC Memorandum Circular 18-2019 (financing / lending companies)	Harassment, threats, public shaming and disclosure of your debt to uninvolved persons are prohibited.
Data Privacy	Republic Act 10173 & NPC circulars	Collectors may not call or text your relatives, co-workers or friends without lawful basis or your consent.
Consumer protection	RA 7394 (Consumer Act), RA 9835 (Truth in Lending)	Demand letters must reflect accurate, lawful charges and disclose the legal basis for interest, penalties, and fees.
Barangay conciliation	RA 7160, Katarungang Pambarangay Rules	For purely civil money claims ≤ ₚ100,000 involving parties in the same city/municipality, the creditor generally must go through barangay mediation first.

3. First things to do when you receive a letter

Stay calm and keep the envelope. The postmark or courier sticker helps calculate deadlines and prescription.
Check the sender’s authority. If a collection agency signs, it must indicate its SEC registration number and name the original creditor.
Verify the debt details. Compare the amount, account number, dates, and contract terms against your own records.
Compute possible prescription. Count from the date the cause of action arose (e.g., the missed due date).
Check for abusive or illegal language. Threats of imprisonment for mere non-payment (without a bouncing-check or estafa angle) may violate Art. 287 (coercion) and relevant circulars.
Gather all documents. Contracts, official receipts, statements of account (SOA), text/email exchanges, and proof of payments are vital.
Calendar your deadline. The letter will usually give 3–15 days to “settle or face legal action.” Diarize at least 2 days before that.

4. Your rights as a debtor

Right to written validation of the exact amount, legal basis of interest, and computation of penalties.
Freedom from harassment (no calls after 8 PM or before 6 AM; no profane language; no threats to publicize the debt).
Right to data privacy—collectors cannot disclose your debt to your office HR, relatives, or social-media contacts.
Right to dispute the debt in writing and to demand supporting documents.
Right to negotiate or restructure and to ask for itemized amortization schedules.
Right to be sued in the proper venue (your city/municipality if you are a natural person).
Right to prescription/limitation defenses once the statutory period lapses.

5. Strategic options for your reply

Option	When to choose	Key contents of your letter
Acknowledge & pay in full	You agree with the amount and have funds	▸ Admit liability ▸ State payment date or attach proof of deposit ▸ Request official receipt & clearance
Request a payment plan	You owe the debt but need relief	▸ Acknowledge principal ▸ Propose instalments or condonation of penalties ▸ Ask creditor to suspend further action while negotiating
Dispute amount or whole debt	Amount is wrong, prescribed, or not yours	▸ Deny liability (in whole or part) ▸ Itemize objections ▸ Demand documents ▸ Reserve legal rights
Invoke prescription	Debt older than 6 / 10 years	▸ Assert that cause of action is time-barred ▸ Demand cessation of collection ▸ Warn of counter-action for harassment
Cease-and-desist (harassment)	Collector uses threats / shaming	▸ Cite BSP/SEC circulars & Data Privacy Act ▸ Demand compliance ▸ Warn of complaints to BSP, SEC, NPC, NBI
No response (wait-and-see)	Rarely advisable; use only if letter is obviously bogus	▸ Keep records; monitor for court summons

Sample outline for a written reply

Date Name of collector / law office Address

Subject: Account No. 123456 – Response to Demand Letter dated 10 June 2025

Sir/Madam:

I acknowledge receipt of your letter delivered on 15 June 2025.

After review, I dispute the alleged balance of ₱75,000 for the reasons below: a. ₱25,000 was paid via G-Cash on 5 February 2024 (attached proof). b. Interest of 7 % per month exceeds the 3 % per Central Bank Circular 960 cap and is therefore void under Art. 1229, Civil Code.

Please provide within 10 days: (a) the original promissory note, (b) complete SOA, and (c) computation of charges.

Pending verification, kindly refrain from contacting third parties or threatening criminal action, which violate BSP Circular 947 and the Data Privacy Act.

Very truly yours, [Signature] [Printed name, address, phone, email]

6. Negotiating a settlement or restructuring

Aim for a written agreement. A “waiver of rights” clause is common; scrutinize it.
Get condonation of penalties or interest in exchange for lump-sum or longer tenor.
Check for hidden charges. Processing fees, notarial fees, and “lump-sum interest” are negotiable.
Insist on a Quitclaim and Full Settlement letter once you finish paying.
If the creditor demands too much, offer a compromise payment (e.g., 40–60 % of balance) citing litigation costs and prescription risks.
Record all calls (with consent) or keep emails; they are admissible as evidence under the Rules on Electronic Evidence.

7. What if negotiations fail?

Stage	What happens next	Your action items
Barangay mediation (if required)	Barangay Captain issues Notice to Appear	Attend; propose compromise; non-appearance may bar future suit.
Small Claims Case (≤ ₱400k)	Creditor files under A.M. 08-8-7-SC (as amended)	File Response within 10 days; no lawyers allowed; bring receipts & witnesses.
Regular civil case	Summons from RTC/MTCC	You have 15 days to file Answer (Rule 9); consult counsel.
Criminal complaint (BP 22 / estafa)	Subpoena for preliminary investigation	Appear; submit Counter-Affidavit; settle or raise defenses (lack of notice of dishonor, full payment).

8. Defenses you can raise in court

Prescription—action filed beyond limitation period.
Partial/Full Payment—attach receipts; burden shifts to creditor.
Illegal interest—usurious or unagreed rates void; courts may delete them (Art. 1229).
Lack of cause of action—no written contract, or creditor is not real party in interest.
Violation of conditions precedent—e.g., failure to undergo barangay conciliation.
Absence of notice of dishonor (for BP 22) or intent to defraud (for estafa).
Unenforceable assignment—collection agency unable to produce deed of assignment.

9. Administrative & regulatory remedies

Agency	When to complain	Procedure
Bangko Sentral ng Pilipinas (BSP)	Harassment by banks, credit-card issuers, EMI, etc.	Email consumeraffairs@bsp.gov.ph with letter, recordings, screenshots.
Securities & Exchange Commission (SEC)	Abusive practices by financing/lending companies or unregistered “online lenders”	File sworn complaint at SEC EC Room or email cgfd_md@sec.gov.ph.
National Privacy Commission (NPC)	Collector discloses your debt to contacts or posts on social media	File complaint-affidavit via complaints@privacy.gov.ph.
Department of Justice / NBI	Threats of violence, extortion, or identity theft	Affidavit, evidence, and request for investigation at NBI-CCD.

10. Preventive tips for the future

Keep digital copies of all loan contracts and receipts.
Use post-dated checks sparingly; prefer auto-debit or online pay to avoid BP 22 exposure.
Notify creditors of address changes to avoid “constructive” receipt of demand.
Read fine print—look for accelerated maturity clauses and default interest.
Cap interest in the contract and require itemized SOA in case of default.
Maintain an emergency fund to cover at least 3 months of debt obligations.

11. Quick FAQ

Question	Short answer
Can a collector imprison me for unpaid credit-card bills?	No. Non-payment of debt is not a crime unless it involves BP 22 or estafa circumstances.
Is shouting or calling me names illegal?	Yes, it can be unjust vexation (Art. 287 RPC) and violates BSP/SEC collection rules.
Do I need a lawyer to reply to a demand letter?	Not legally required, but highly recommended if the amount is large or there are criminal threats.
What if the debt is only ₱15,000?	Expect a Small Claims case; procedure is simple, but you still must file a timely Response.
How do I stop collectors from calling my office?	Send a written cease-and-desist citing the Data Privacy Act and attach HR’s memo if available.
Will ignoring the letter make it go away?	Rarely. It can push the creditor to file suit earlier and add costs. At least send a brief dispute or settlement offer.

12. Take-away checklist

✅ Read & date-stamp the letter ✅ Verify debt details and compute prescription ✅ Decide your strategy: pay, negotiate, dispute ✅ Draft a clear, polite reply within the stated deadline ✅ Keep copies and proof of dispatch (registered mail / courier / email) ✅ Document all collector communications ✅ Seek legal counsel early—especially if criminal threats arise ✅ Use regulatory complaints against abusive collectors ✅ Prepare for Barangay or court proceedings if settlement fails

Final word: A demand letter is a warning bell, not a final judgment. Responding promptly, asserting your rights, and negotiating in good faith often prevent expensive litigation and emotional stress. Knowledge of the Philippine legal landscape—and organized records—are your best defenses.