Legal Demand Letter for Overdue Debt Payment in the Philippines

(A comprehensive practitioner-style guide)

1. What Is a “Demand Letter”?

A demand letter is a formal, written notice sent by a creditor (or counsel) to a debtor:

Purpose – to place the debtor in legal default (“mora solvendi”), request payment within a specified period, and warn of further legal action.
Character – extrajudicial (outside court); it may later be annexed to a complaint or small-claims form as proof that the cause of action has accrued.
Effect on rights – once received, the debtor becomes liable not only for the principal but—depending on the agreement or law—for interest, penalties, and damages.

2. Governing Law & Jurisprudence

Source	Key Points
Civil Code	Art. 1169 – debtor is in delay after demand; Art. 1155 – demand interrupts prescription; Art. 1170–1171 – liability for damages in delay or fraud; Art. 1306 – freedom to stipulate grace periods, interest, penalties.
Rules of Court	To sue for collection you must allege a cause of action that has “accrued”; if the obligation had no fixed maturity date, demand (extrajudicial or judicial) is indispensable.
Small Claims Rules (A.M. No. 08-8-7-SC, as amended)	Amount ceiling now ₱ 1 million. Annex “B” to the Statement of Claim is the Written Demand showing that the plaintiff tried to settle first.
Barangay Justice System (RA 7160, ch. VII)	For parties residing in the same city/municipality (outside Metro Manila’s Lupon exemptions), conciliation before the Punong Barangay is mandatory before suit; a demand letter often triggers this process.
B.P. 22 / Estafa (Art. 315, RPC)	A written notice of dishonor or demand is an element of the offense; sending it is a precondition to prosecution when the debt involves a bounced check.
Banking & Credit Laws	For credit-card or loan write-offs (e.g., BSP Manual of Regulations for Banks, §X310), documented demand letters are part of the collection file.
Tax Regulations (NIRC, RR 5-99)	Corporations deducting bad debts must prove actual efforts to collect, usually via demand letters and proof of service.
Leading Cases	Nacar v. Gallery Frames (G.R. No. 189871, 13 Aug 2013) – legal interest runs from extrajudicial demand if no date of payment agreed; Spouses Abalos v. CA – demand unnecessary when obligation fixes maturity.

3. When Is a Demand Letter Needed?

No maturity date or “on demand” loans – demand is essential to establish default.
B.P. 22 / check cases – statutory requirement.
Small claims or ordinary civil action – attaches to the complaint except where maturity date passed.
Interrupting prescription – creditor fears the action may soon prescribe; a demand letter “resets the clock.”
Supporting a tax deduction – to show reasonable collection effort.

Not required when the contract expressly sets a due date (“payable on 30 June 2025”); default arises automatically the day after.

4. Substantive Contents of a Philippine Demand Letter

Heading & counsel details (law firm name, address, PRC/IBP No.).
Identification of parties – full legal names, addresses, TIN or ID numbers.
Recital of facts
- Date and nature of the loan/obligation (e.g., Promissory Note dated 1 Jan 2024).
- Amount due: principal, accrued interest, penalties.
- Defaults already committed (missed amortizations, bounced check, etc.).
Legal basis – cite contract, Civil Code (Arts. 1159, 1169), special laws if relevant.
Demand proper
- Specific sum (in figures and words).
- Clear deadline (“within five [5] calendar days from receipt”).
- Mode of payment (cash, manager’s check, online transfer to ABC Bank acct. No. 123-456-789).
Consequences of non-compliance
- Filing of civil action (collection or foreclosure).
- Criminal action under B.P. 22 or Estafa, if applicable.
- Accrual of legal interest (typically 6 % p.a. per Nacar).
- Attorney’s fees and costs.
Reservation of rights – “All other remedies in law or equity are hereby reserved.”
Closing & signature – counsel or authorized officer.
Proof of service – see § 5 below.

5. Service & Proof of Receipt

Method	Practical Tips	Proof
Personal delivery	Secure debtor’s signature over “Received” plus date, or video/photo if refusal.	Signed copy or affidavit of server.
Registered Mail (PhilPost)	Cheapest for provinces; keeps registry receipt and return card (pink card).	Registry receipt + signed return card (or “Unclaimed” notation).
Private courier (LBC, JRS, GrabExpress)	Faster in Metro; retains airway bill; use “Return Service” option.	Waybill + tracking page.
Email	Acceptable for tech-savvy debtors; ensure address was used previously by debtor.	E-mail with delivery/read receipt.
Messaging apps	Viber/WhatsApp screenshot plus hash-timestamp if unavoidable; courts may admit under the Rules on Electronic Evidence.	Sworn print-out + phone’s system log.

Best practice: use at least two modes (e.g., registered mail + email) to pre-empt claims of non-receipt.

6. Time Frames & Grace Periods

Scenario	Common Practice	Legal Requirement
Ordinary commercial loan	5-15 calendar days	None; reasonableness test.
Post-dated check bounced	Give 5 banking days to replace/settle (per B.P. 22).	At least 5 banking days from receipt.
Consumer loan (RA 7394)	Often 10-15 days before repossession.	Must be “reasonable notice.”
Small claims pre-filing	Any period stated in demand letter; attach to claim.	Not fixed, but absence may be ground to dismiss.

7. Legal Consequences of Ignoring the Letter

Default (mora solvendi) – debtor liable for interest, liquidated damages, attorney’s fees.
Interruption of prescription – new counting starts; debtor cannot invoke lapse of time.
Groundwork for civil or criminal suit – creditor now has a matured cause of action.
Possible negative credit reporting – banks submit to Credit Information Corporation (CIC).
Lien enforcement – chattel mortgagee may repossess pledged chattel (Art. 1484) after demand.

8. Demand Letter vs. Other Pre-litigation Notices

Instrument	Purpose	Must Precede Lawsuit?
Demand Letter	Place debtor in delay & show good faith effort	Yes, if no fixed maturity or for small claims
Notice of Dishonor (B.P. 22)	Element of criminal case vs. bounced check	Yes
Final Notice Before Foreclosure	Compliance with R.A. 9850 (Real Estate Mortgage)	Yes, 30 days before sale
Notice to Arbitrate	Triggers arbitration clause (ADR Act)	Yes, if contract-bound

9. Ethical & Practical Considerations

No harassment – Fair Debt Collection Practices Act (pending bills) are persuasive; avoid obscene language or defamatory threats.
Avoid “offering to drop criminal charges for payment” – may constitute extortion or violate lawyer’s Code of Professional Responsibility (Canon 19).
Data Privacy – disclose only information necessary for collection; redact excess personal data before sharing with third parties.
Negotiation Window – include an invitation to restructure or compromise to demonstrate good faith; courts look favorably on attempted conciliation.

10. Sample Template (Excerpt)

RE: FORMAL DEMAND FOR PAYMENT – ₱ 350,000.00

Dear Mr. Juan Dela Cruz,

Pursuant to the Promissory Note dated 10 March 2024, the principal amount of THREE HUNDRED FIFTY THOUSAND PESOS (₱ 350,000.00) plus 6 % annual interest became due on 10 March 2025.

Despite repeated reminders, the obligation remains unpaid. Accordingly, you are hereby given a final, non-extendible period of five (5) calendar days from receipt of this letter, or until ________ 2025, to remit full payment via cash or manager’s check payable to “ABC Lending Inc.” at our office, 123 Ayala Ave., Makati City.

Should you fail to comply, we shall be constrained to institute the appropriate civil and/or criminal actions under the Civil Code and Batas Pambansa Blg. 22, without further notice. All costs of collection, including attorney’s fees equivalent to ten percent (10 %) of the amount due, shall be for your account.

This letter constitutes extrajudicial demand and interrupts the running of the prescriptive period in accordance with Article 1155 of the Civil Code.

We trust you will accord this matter your prompt attention.

Very truly yours, Atty. Maria Santos Counsel for ABC Lending Inc.

(Attach: Statement of Account, copy of Promissory Note, bank details for payment.)

11. Next Steps After Sending the Letter

Monitor deadline – diary the last day.
If paid – issue an Official Receipt and a Quitclaim/Release.
If unanswered –
- a. Small Claims (≤ ₱ 1 M) – file SCC Form 1-SC at the first-level court with demand letter attached.
- b. Barangay conciliation – if applicable, file Complaint before the Lupon; secure Certificate to File Action if settlement fails.
- c. Regular civil action (> ₱ 1 M or with mortgage) – prepare Verified Complaint and attachments.
- d. Criminal case (B.P. 22) – execute Jurat-sworn Complaint-Affidavit citing demand letter and registry receipt.
Preserve evidence – keep originals of all proof of service; convert to searchable PDF for e-filing.

12. Frequently Asked Questions

Q. Can I demand both civil payment and threaten B.P. 22 simultaneously? A. Yes, but the threat must be factual, not harassing; never condition withdrawal of criminal complaint on payment.

Q. Does texting the debtor count as a demand? A. It may, if you can later authenticate the messages. However, a signed written notice remains the safest.

Q. Is VAT applicable to attorney’s fees stated in the letter? A. Only if fees are eventually paid to a VAT-registered professional; the demand itself need not reflect VAT.

Q. Will a demand letter sent by email interrupt prescription? A. Jurisprudence recognizes extrajudicial demands “in writing”; e-mail print-outs with metadata have been accepted, but registered mail remains more robust.

13. Practical Checklist for Creditors

Draft letter with correct figures and deadline.
Review contract for notice clauses or ADR requirements.
Double-check debtor’s latest address (from KYC or billing).
Send via registered mail and email/courier; keep receipts.
Calendar deadline + 5 days buffer.
Prepare pleadings or settlement offer in advance.
Secure Certificate to File Action (barangay) if needed.

14. Conclusion

A well-crafted demand letter is cheap, quick, and often decisive. It:

Triggers default, preserves claims, and paves the way for litigation or settlement.
Demonstrates the creditor’s good faith and compliance with procedural statutes.
May save both parties legal costs by compelling voluntary payment or compromise.

Always tailor the contents to the specific contract, amount, and applicable laws. When in doubt, consult counsel to ensure the letter meets all Philippine legal requirements and ethical standards.

Disclaimer: This article is for informational purposes only and does not constitute legal advice. For legal issues about your specific circumstances, consult a licensed Philippine attorney.