General legal information for the Philippine setting; not a substitute for tailored legal advice.

1) Snapshot: pathways if a borrower stops paying

Civil is primary. Non-payment is ordinarily a civil matter (breach of loan/credit contract). Depending on how the loan was structured, a creditor may:

Collect (small claims or ordinary civil action for sum of money)
Enforce security (foreclose a real estate mortgage; replevin/sell under a chattel mortgage; enforce a PPSA security interest over movables)
Use provisional remedies (e.g., preliminary attachment, replevin)
Report to credit information systems (if a regulated “submitting entity”)
Consider penal routes only when elements of a crime are present (e.g., B.P. 22 bouncing checks; estafa by deceit or misappropriation)

2) Pillars of law & procedure (what typically governs)

Civil Code (loan, obligations & contracts, damages, compensation/set-off, novation, dación en pago, statute of frauds, prescription)
Rules of Court (civil actions; provisional remedies Rule 57 attachment, Rule 60 replevin; execution Rule 39)
Real Estate Mortgage: Rule 68 (judicial foreclosure) and Act No. 3135 (extrajudicial foreclosure)
Chattel Mortgage Law (Act No. 1508) and PPSA (R.A. 11057) for personal property security interests
Truth in Lending Act (R.A. 3765) and Financial Consumer Protection Act (R.A. 11765) for disclosure/fairness in credit by regulated entities
R.A. 9510 (Credit Information System Act) for reporting by covered lenders
B.P. 22 (bouncing checks) and Revised Penal Code estafa (only if criminal elements exist)
Katarungang Pambarangay (LGC, R.A. 7160) for mandatory barangay conciliation in many civil money disputes between natural persons in the same city/municipality
E-Commerce Act (R.A. 8792) for validity of e-signatures/e-contracts

3) Building a collectible claim (before you sue)

A. Paper & proof

Promissory note/loan agreement; proof of disbursement (bank transfer, receipts)
Interest must be in writing (Civil Code Art. 1956). Otherwise, only legal interest may be claimed as damages from default.
Default (mora) begins upon judicial or extrajudicial demand unless the obligation has a date certain or demand is otherwise unnecessary (Art. 1169). A demand letter starts interest/penalties running and supports attorney’s fees.

B. Interest & penalties

Usury ceilings are not presently fixed by statute (old caps were lifted), but courts strike down or reduce unconscionable interest/penalty rates and may apply 6% p.a. legal interest on forbearance from default until full satisfaction.
Attorney’s fees/liquidated damages are enforceable if reasonable; courts cut oppressive stipulations.

C. Acceleration

If the contract has an acceleration clause, strictly follow any notice requirement before suing for the entire balance.

D. Pre-litigation options

Restructure (re-amortize, extend, reduce rates), novation, dación en pago (asset in lieu of cash), compromise, or assignment of the receivable to a collection agency (ensure compliance with privacy/consumer rules).

4) Where to file (forums & thresholds)

Small Claims (first-level courts): purely money claims up to the current Supreme Court threshold (periodically updated). Lawyer appearance is restricted; documentary proof is key; no appeal from judgments (only extraordinary remedies).
Ordinary civil action for sum of money: file in the MTC/MeTC or RTC depending on amount (jurisdictional limits are set by law and have been increased in recent years).
Venue: where the plaintiff or defendant resides (for personal actions) unless contract stipulates exclusive venue.

Barangay conciliation first? If both parties are natural persons who reside in the same city/municipality, most civil money claims must undergo lupon conciliation before court filing, subject to recognized exceptions (e.g., party is a juridical person, urgent relief, no personal confrontation possible, etc.).

5) Provisional remedies (to protect collection while the case is pending)

Preliminary attachment (Rule 57): secures assets to satisfy judgment later. Requires grounds (e.g., defendant is a non-resident, about to abscond, fraudulently disposing of property) and a bond.
Replevin (Rule 60): to seize specific personal property wrongfully detained—common for vehicle loans under chattel mortgages or PPSA security interests.
Preliminary injunction is generally not to secure payment of a money claim, but may restrain acts that defeat a security interest.

6) Enforcing secured loans

A. Real estate mortgage (REM)

Judicial foreclosure (Rule 68): Court‐supervised sale; debtor has equity of redemption before confirmation of sale.
Extrajudicial foreclosure (Act 3135): Allowed if the REM contains a special power of sale; requires posting/publication by the sheriff/notary and public auction. Mortgagor typically has a statutory right of redemption (commonly one year from registration of sale).
Deficiency/surplus: Creditor may recover deficiency; debtor receives any surplus.

B. Chattel mortgage / PPSA security over movables

Chattel Mortgage Law: After default, mortgagee may cause extrajudicial sale; deficiency may be recovered except when the transaction is a sale of personal property on installments where the Recto Law limits deficiency claims (vendor who forecloses cannot recover deficiency).
PPSA (R.A. 11057): Creditors with a perfected security interest (via control or filing in the Secured Transactions Registry) may, upon default, (i) take possession without breach of peace, (ii) collect accounts, or (iii) dispose of collateral by commercially reasonable sale/lease/license after reasonable notice to the debtor and other notified secured parties. Debtor is entitled to surplus; creditor may sue for deficiency (subject to Recto-type limits if applicable).

Tip: For vehicles/equipment, combine replevin (to quickly secure the asset) with foreclosure/sale to mitigate loss.

7) Unsecured loans & negotiable notes

Ordinary collection suit based on promissory note/loan agreement; attach proof of disbursement and demand.
If the note is negotiable, a holder in due course enjoys defenses immunity except real defenses. Borrower’s personal defenses (e.g., side agreements) may not defeat such a holder.

8) Criminal angles (limited and element-based)

B.P. 22 (Bouncing Checks): Issuing a check to apply on an account/obligation that is dishonored for lack of funds or credit; notice of dishonor and failure to pay within the statutory grace create prima facie knowledge. This is penal, separate from civil liability.
Estafa (Art. 315, RPC): Requires deceit or abuse of confidence (e.g., misappropriation of money received in trust; inducing a loan through fraudulent misrepresentation). Mere inability to pay a loan is not estafa.

9) Collection conduct compliance

Privacy & disclosure: The Data Privacy Act and sector rules restrict sharing a debtor’s personal data; disclose only to those with lawful basis (counsel, courts, regulators, credit bureaus where allowed).
Anti-harassment: Regulators (BSP/SEC/IC) prohibit abusive collection (threats, doxxing, contacting a debtor’s contacts without basis, shaming posts, midnight calls). Keep calls/letters professional, identify the principal, and maintain records.

10) Judgment, execution, and finding assets

A. Judgment

Money judgments include principal, interest, penalties (as allowed), attorney’s fees (if reasonable), and costs. Courts may recompute interest and reduce unconscionable rates.

B. Execution (Rule 39)

Garnish bank accounts, receivables, salaries (subject to labor exemptions); levy on real/personal property; sell at auction.
Debtor’s exempt property (e.g., necessary tools, basic household items) cannot be levied.
Third-party claims (tercería) must be resolved before sale if a stranger asserts ownership.

C. Post-judgment discovery

Use subpoenas, examinations of debtor, and written interrogatories to locate assets; consider charging orders against partnership interests.

11) Defenses you should anticipate (and how to prepare)

Payment/partial payment (keep a running ledger; admit what’s paid to preserve credibility)
No written interest (Art. 1956) → prepare to reframe interest as damages from default at legal rate from demand
Unconscionable rates/penalties → provide commercial basis and accept possible judicial reduction
Lack of consideration or failure of cause → attach proof of disbursement
Forgery/lack of authority (for corporate borrowers) → keep board approvals/secretary’s certificates
Prescription → mind periods: 10 years for written contracts (Art. 1144); 6 years for oral (Art. 1145). Demand does not suspend prescription unless contractually stipulated; certain acts may interrupt (written acknowledgment, partial payment, filing suit).
Improper venue / lack of barangay conciliation → comply with venue clauses and KP where required.
Invalid foreclosure → strictly follow statutory notice and sale procedures.

12) Special notes on documentation

Clarity wins: state principal, interest, penalties, fees, due dates, acceleration, venue, service of notices, consents to data processing, arbitration/mediation if any, and security descriptions (for PPSA: collateral description broad enough to cover proceeds/accessions).
E-signatures are generally valid if you can show identity and intent to sign plus integrity of the electronic document (R.A. 8792).
Surety/guaranty must be in writing; surety is solidarily liable; guarantor benefits from excussion unless waived.

13) ADR, plea to speed & cost control

Arbitration/mediation clauses in commercial loan agreements can fast-track outcomes; arbitral awards are enforceable like judgments, subject to limited court review.
Court-annexed mediation/JDR is standard; come with a settlement grid (lump-sum discount, staged payments, secured substitution).

14) Playbooks & checklists

A. Unsecured loan – basic playbook

Audit file: note, proof of release, demand, computation.
Send demand (cure/accelerate; give banking details; set a clear deadline).
Barangay conciliation if required; document non-settlement.
Choose Small Claims (if within threshold) or Sum of Money case; consider attachment if grounds exist.
Prove with affidavits + exhibits; seek interest/fees.
Execute on judgment: garnish/levy; conduct post-judgment discovery.

B. Vehicle/equipment loan secured by chattel mortgage/PPSA

Confirm default and notice compliance; demand cure/return.
Replevin to secure the asset; then extrajudicial sale or PPSA commercially reasonable disposition with notice.
Apply proceeds; pursue deficiency (subject to Recto-law limits for installment sales).

C. Real estate mortgage

Verify SPA to sell (for extrajudicial), tax declarations, titles, lien status.
Extrajudicial foreclosure (Act 3135) or judicial (Rule 68); follow posting/publication; hold auction.
Issue Certificate of Sale, handle redemption window; then consolidate title; claim deficiency if any.

D. Evidence checklist

Contract/note; disbursement proof; updated SOA; demand letter with proof of receipt; computations (principal, contractual interest, penalty, legal interest timeline); board approvals/surety; security documents (REM/CML/PPSA filing); proofs of notice (foreclosure/sale).

15) Mini-templates (adapt to your facts)

A. Demand Letter (extrajudicial demand)

[Date] [Borrower Name & Address]

Re: Loan dated [date], ₱[amount]

Our records show unpaid principal of ₱[ ], plus contractual interest and penalties from [date of default].

Demand: Pay ₱[running total] within [x] days from receipt to [bank details]. Failing payment, we will (a) accelerate the entire obligation; (b) file civil action and seek attorney’s fees, interest, and costs; and, if applicable, (c) repossess/foreclose collateral pursuant to [REM/CML/PPSA] after required notices.

Please direct communications to [law firm/authorized officer].

Very truly yours, [Creditor/Authorized Counsel]

B. Prayer in a Sum-of-Money Complaint (core items)

Principal ₱[ ]
Contractual interest (or, alternatively, legal interest from demand)
Penalties (subject to court review)
Attorney’s fees (reasonable; as stipulated) and costs
Provisional remedies (attachment/replevin), as warranted

16) Time limits & tolling (prescription quick guide)

10 years: actions on written contracts, mortgages, judgments (Art. 1144)
6 years: oral contracts and quasi-contracts (Art. 1145)
Interruption: filing of action; written acknowledgment or partial payment; certain agreements to extend time. Keep dated acknowledgments.

17) Key practical takeaways

Start with a clear demand; it triggers default and interest and satisfies pre-suit requirements.
Choose the cheapest effective forum (Small Claims if available); bring documents, not rhetoric.
When secured, move quickly to possess and sell collateral under the correct statute; follow notice and commercial reasonableness to preserve deficiency claims.
Expect courts to moderate oppressive rates/fees; draft and compute accordingly.
Criminal filings are exceptional—use only when statutory elements are truly present (B.P. 22/estafa).
Winning the case is half the battle; plan execution and asset discovery from day one.