1) What a demand letter actually does (and doesn’t do)

A demand letter is usually the last “pre-case” step in collecting an unpaid debt. Properly done, it serves three practical purposes:

Puts the debtor on clear notice of the amount due, the basis of the debt, and a deadline to pay.
Creates a paper trail showing you attempted to settle before suing (often useful in court and in settlement talks).
Can affect interest, penalties, and attorney’s fees (depending on your contract and the facts), because it helps establish default or delay (mora).

But a demand letter, by itself, does not create a court judgment and does not force payment. If the debtor ignores it (or refuses to pay), your next steps depend on: (a) the amount, (b) where the parties live, (c) the evidence you have, and (d) whether you want the speed of small claims.

2) Before you file: confirm you’re choosing the right remedy

A. Is the claim “small claims” eligible?

Small claims is designed for straightforward money claims where the court can decide quickly based on documents and simple testimony.

Common eligible claims include:

Unpaid loans (personal loans, promissory notes)
Unpaid sale of goods (deliveries, invoices)
Unpaid services (professional fees, project fees—if well-documented)
Rentals/leases (unpaid rent; some related charges)
Reimbursement or other contract-based money obligations
Damages that are clearly quantifiable and supported by documents (in many situations)

Small claims is generally a good fit when:

The facts are not complicated
You have written proof (messages, receipts, contracts, invoices)
The main issue is simply nonpayment

B. Check the amount and the court that can hear it

Small claims is filed in the first-level courts (Metropolitan Trial Courts / Municipal Trial Courts in Cities / Municipal Trial Courts). The Supreme Court sets a small claims cap, and that cap has been increased over time. Because caps and procedures can be amended, you should verify the latest Supreme Court rules and forms before filing so you don’t get rejected for being over the limit.

If your claim exceeds the small claims limit, you may still sue, but it will likely be a regular civil case for collection of sum of money, which is slower and more formal.

C. Is barangay conciliation required first? (Katarungang Pambarangay)

Many disputes between individuals who live in the same city/municipality must go through the barangay justice system (Lupon) before court filing.

For collection cases, barangay conciliation is commonly required unless an exception applies (examples often include: parties residing in different cities/municipalities; the respondent is a corporation in certain contexts; urgent legal action; other statutory exceptions). If conciliation is required, you typically need a Certificate to File Action (or related certification) to attach to your court case.

Skipping this when required can lead to dismissal or delay.

3) Make sure your demand letter and evidence are “court-ready”

A. What your demand letter should contain

A solid demand letter usually includes:

Full names and addresses of parties
A clear statement of the transaction (loan, sale, service, etc.)
The principal amount owed
The due date(s) and how the debtor defaulted
Any agreed interest, penalties, charges (with contract basis)
A final deadline to pay (e.g., 5–15 days is common, but context matters)
Payment instructions (bank details, contact number)
A statement that you will file a case if unpaid
Attach or reference supporting documents

Notarization is not always required, but proof of sending/receipt is extremely important.

B. Proving the demand was received

Courts value reliable proof such as:

Personal service with signed acknowledgment
Courier/LBC with delivery confirmation
Registered mail with registry receipt and return card (when available)
For email/messages: screenshots plus context, and ideally confirmation replies (these can help, but have variable persuasive strength—paper/courier proofs are usually cleaner)

C. Evidence checklist (typical)

Gather and organize:

Contract / loan agreement / promissory note
Invoices, delivery receipts, job orders, SOA
Proof you performed your side (delivery, completion, acceptance)
Proof of partial payments (if any)
Messages acknowledging the debt (text, chat, email)
IDs, addresses, and correct legal names of debtor
Barangay certificate (if required)
Computation of claim (principal + interest + penalties, itemized)

4) Small Claims in the Philippines: the core idea and what to expect

Small claims is meant to be:

Fast (compared to ordinary cases)
Low cost
Simple (standard forms, limited pleadings)
Focused on settlement first, then quick judgment if no settlement

Key features (practical takeaways)

Lawyers are generally not allowed to appear for parties in small claims hearings (there are limited exceptions under the rules, but the system is built for self-representation).
You file using standard forms (Statement of Claim and attachments).
The court sets a hearing where it pushes for amicable settlement; if settlement fails, the judge can decide swiftly.
A small claims decision is generally final and executory (appeal is typically not available). Challenges are usually limited to special remedies (commonly, a petition for certiorari under exceptional circumstances like grave abuse of discretion).

This finality is why small claims can be powerful: the case ends faster, and execution can begin sooner—if you do it correctly.

5) Step-by-step: from demand letter to filing a small claims case

Step 1: Confirm venue (where to file)

Venue rules can vary depending on the nature of the claim and the applicable small claims rules, but as a practical baseline:

Often filed where the defendant resides (or where the defendant has a principal office if a business entity), or where the transaction occurred, depending on rule specifics and what is allowed.
If you file in the wrong place, you may lose time (dismissal/refiling).

Step 2: Prepare the Statement of Claim (and attachments)

Small claims uses forms. Expect to attach:

Copies of contracts/receipts/invoices/messages
Demand letter + proof of service/receipt
Barangay certification (if required)
Your computation of the amount claimed
Special authorizations if you’re filing for a company or on behalf of another

Tip: Prepare a clean “court packet”:

Index page
Chronology (date of loan/sale/service; due date; demand; nonpayment)
Numbered annexes (Annex “A”, “B”, etc.)

Step 3: Pay filing fees (or apply as indigent if qualified)

Filing fees depend on the claim amount and court. If you qualify as an indigent litigant, you may apply for exemption under the rules (requirements apply).

Step 4: Court issues summons / notice and sets hearing

The court will issue notice/summons and set a date. The defendant is directed to respond/appear.

Step 5: Appear at hearing—settlement first

On the hearing date, the judge typically:

Confirms appearances and identities
Explores settlement (compromise)
If settlement fails, proceeds to clarificatory questions and evaluation of evidence

Bring:

Originals of key documents (if you have them)
Extra copies
A simple, accurate computation sheet

Step 6: Judgment or compromise agreement

If you settle, the compromise can be approved by the court and becomes enforceable like a judgment.
If no settlement, the court issues a decision based on the streamlined process.

6) Computing what you can claim (and common pitfalls)

A. Principal

The unpaid amount you can clearly prove.

B. Interest

Two main types:

Stipulated interest — if there’s a written agreement (promissory note/contract). Courts will enforce reasonable agreed interest, but may reduce unconscionable rates.
Legal interest — may apply in certain circumstances when there is no valid stipulated rate, or for judgments. Legal interest rules in the Philippines have evolved through jurisprudence; courts apply interest depending on whether the obligation is a loan/forbearance of money and whether the amount is demandable.

Practical tip: Don’t overreach. Inflated or unclear interest computations can weaken credibility and complicate what should be a simple case.

C. Penalties and liquidated damages

If written and reasonable, you may claim them. If extreme, courts may reduce.

D. Attorney’s fees

Small claims is built for self-representation, so attorney’s fees are not automatically awarded. Attorney’s fees may be recoverable when:

The contract provides for it (subject to reasonableness), and/or
The court finds a legal basis (e.g., bad faith), depending on the facts

E. Costs

You can usually recover allowable court costs as provided by rules.

7) How to handle common defenses from debtors

“Wala akong pera” / inability to pay

Financial difficulty is not a legal defense to a valid debt. It may matter for settlement terms, not liability.

“Wala naman kaming contract”

Contracts can be proved by documents, conduct, and admissions. Messages acknowledging the debt, proof of transfer/payment, and delivery receipts can establish the obligation.

“Bayad na”

This becomes an evidence issue. Ask for proof of payment; present your records and bank histories.

“Hindi ako ang umutang / I didn’t authorize that”

Identity and authority become key. You’ll need proof linking the debtor to the transaction (signed documents, transfer to their account, acknowledgments, delivery acceptance).

“Prescription” (time-bar)

Debts can prescribe depending on the nature of the obligation and applicable Civil Code provisions. If the debt is old, analyze prescription carefully—this can defeat an otherwise valid claim.

8) After you win: how collection really happens (execution)

Winning a judgment does not automatically produce money. If the debtor still refuses, you move to execution.

A. If the debtor doesn’t pay voluntarily

You file a motion/application for issuance of a Writ of Execution (following court procedure). The sheriff can then enforce the judgment.

B. What can be enforced

Typically:

Garnishment of bank accounts (subject to rules and exemptions)
Levy on non-exempt property
Other lawful means of satisfying the judgment

Debtors sometimes “promise to pay” after judgment. If you accept installment arrangements, try to put it in a written agreement filed in court when appropriate, so you can enforce quickly if they default again.

C. Reality check: asset location matters

Execution works best when the debtor has:

A job/income that can be reached through lawful processes
Bank accounts
Vehicles/real property
Ongoing receivables/business cashflow

If the debtor is “judgment-proof” (no reachable assets), you may still win on paper but collect slowly.

9) Strategic alternatives to (or alongside) small claims

A. Barangay settlement with enforceable terms

If you expect the debtor will pay with structured terms, barangay mediation can yield a practical agreement faster—sometimes with community pressure that works better than court.

B. Regular collection case (if over the small claims cap or complex issues)

If the amount exceeds the cap or the dispute is fact-heavy (e.g., counterclaims, complicated damages), an ordinary civil action may be necessary.

C. Criminal complaints: be careful

Nonpayment of debt is generally not a crime by itself. Criminal exposure can arise if there was fraud or deceit meeting elements of specific offenses (e.g., certain forms of estafa), but using criminal process as a debt collection tool without basis can backfire. Treat criminal options as exceptional and fact-specific.

10) Practical filing tips that prevent dismissal and delay

Use the debtor’s correct legal name and address (verify IDs, business registration, or consistent transaction records).
Attach proof of demand and proof of receipt.
If barangay conciliation applies, attach the proper certificate.
Keep your claim clean and simple—principal + clearly supported interest/penalties.
Bring originals of key documents to hearing.
Prepare a one-page timeline and a one-page computation.
Don’t miss hearings. Non-appearance can lead to dismissal (for claimant) or judgment (against defendant), depending on the rule and circumstances.

11) A straightforward “playbook” after a demand letter goes ignored

Wait for the deadline in the demand letter to lapse.
Finalize your evidence packet and computations.
Check barangay conciliation requirement; secure certification if needed.
Confirm small claims eligibility (amount cap + nature of claim).
File small claims in the proper first-level court with complete attachments.
Appear and push for settlement if workable—but be ready to prove your claim.
If you win, move promptly for execution if the debtor still won’t pay.

12) When it’s worth consulting a lawyer (even if small claims is self-represented)

Even if lawyers usually don’t appear in small claims hearings, it can still be valuable to consult one beforehand when:

The debtor disputes the debt and raises legal issues (authority, prescription, forgery)
The amount is large and you can’t afford errors
You want to maximize enforceability (e.g., where to sue, how to craft computations, how to prepare for execution)
You anticipate needing to locate assets for collection

Important note

This article is for general informational purposes and is not legal advice. Procedures, caps, forms, and court practices can change through Supreme Court issuances and local implementation. For a specific strategy tailored to your facts and documents, consult a Philippine lawyer or your local court’s small claims desk for the latest forms and requirements.