Here’s a practical, everything-you-need explainer on “Case Against a Debtor in Default on a Promissory Agreement (Philippines)”—written for lenders/creditors, counsel, and finance officers. This covers unsecured notes, notes with surety/guaranty, and loans secured by chattel or real estate mortgages. No web lookups used.

Case Against Debtor in Default on a Promissory Agreement (Philippines): The Complete Guide

1) First principles—what you must prove

At bottom, a collection case is simple: (a) a valid obligation, (b) default (breach), and (c) amount due.

Core elements & usual evidence

The promissory agreement/note (original if available): parties, date, unconditional promise to pay, amount, due date/term, interest/penalty/attorney’s fees, acceleration, venue.
Consideration/funding: proof you actually released the money (bank transfer/receipt/voucher/check).
Default: maturity date passed or demand was made (for “on demand” notes); proof of demand/notice (registered mail/courier/email with receipt).
Computation: principal balance, contractual interest, penalty/late charges, and (if any) attorney’s fees per clause—with a clear schedule (dates, rates, running totals).
Security/credit support (if any): real estate or chattel mortgage, suretyship, guaranty, co-makers.

Tip: A clean, date-by-date ledger + copies of bank credits/debits wins cases. Courts dislike round-number guesses.

2) Default, demand, and acceleration—how they work

Term notes: Debtor is in mora the day after the due date.
“On demand”/“upon request” notes: Default begins after a clear demand is served.
Acceleration: If the note says one missed installment accelerates all remaining installments, you may sue for the entire unpaid balance once conditions for acceleration are met. Send a written acceleration notice and include it in your evidence.

Demand matters for: starting default interest, triggering acceleration, and interrupting prescription (see §10).

3) Interest, penalties, and attorney’s fees—what’s enforceable

Contractual interest is generally enforceable if expressly stipulated in writing. Courts may reduce rates/penalties that are iniquitous or unconscionable, and they won’t allow hidden “interest-on-interest” (compound) unless clearly agreed and properly triggered.
Penalty charges (late fees, penalty interest) are treated as penal clauses and can be reduced by the court if excessive relative to the breach.
Attorney’s fees: Stipulations (e.g., “25% of amount due”) are subject to reasonableness; courts often trim to a fair figure if excessive.
Legal interest on judgments: Once the court fixes the amount due, legal interest runs from the date indicated in the decision until full payment.

Good practice: Provide separate lines for (a) contractual interest, (b) penalty/late charges, and (c) attorney’s fees—don’t mingle them.

4) Who you can sue (and in what capacity)

Maker/borrower: primary liable.
Co-maker: usually solidary (check wording).
Surety: solidarily liable with the principal debtor; no benefit of excussion.
Guarantor: subsidiarily liable—may insist you first exhaust the debtor’s assets unless excussion is waived.
Spouse: liable only if the obligation redounded to the family benefit or was contracted on behalf of the conjugal/ACP property; otherwise, liability is separate.

5) Choosing your remedy (flowchart)

A) Unsecured promissory note

Civil action for sum of money (collection) to recover principal + interest + penalties + fees.

B) Secured by real estate mortgage (REM)

Extrajudicial foreclosure (Act No. 3135) or judicial foreclosure.
After auction, you may claim deficiency if sale proceeds < debt (see §9).
Debtor usually has a redemption period in extrajudicial foreclosure.

C) Secured by chattel mortgage

Replevin + foreclosure (to seize the collateral and sell), or extrajudicial foreclosure under the Chattel Mortgage Law.
Deficiency is generally recoverable (but watch the Recto Law if the loan disguised a sale on installments—then no deficiency action after foreclosure).

Strategy: If collection looks difficult, go after security first (fast, asset-focused). If debtor has attachable assets/income, file sum-of-money and ask for preliminary attachment (see §8).

6) Where to file, who hears the case, and venue

Court: The trial court with pecuniary jurisdiction over your claim (sum of money) hears it. Small cases may qualify as Small Claims (streamlined; no lawyers in hearing; decision is final), mid-sized cases go to first-level courts, larger to the RTC.
Venue: Where the defendant resides, or where the plaintiff resides if the claim is a personal action—unless the note has a valid exclusive venue clause.

Barangay conciliation: If both parties are natural persons living in the same city/municipality, many collection suits require prior barangay conciliation (unless an exception applies). Attach the certificate to file action.

7) Small Claims option (if eligible)

What it is: A paper-driven, no-lawyer summary process for money claims within the cap set by the Supreme Court.
Why use it: Fast; affidavit + documents often suffice; judgment is final (no appeal).
Pack: Promissory note, proof of loan release, demand letters + proof of service, computation sheet (principal + interest + penalties), ID & verification.

8) Provisional remedies (to secure assets early)

Preliminary attachment (Rule 57): Ask the court to freeze/seize assets at the start if the debtor is absconding, fraudulently disposing of property, or is a non-resident, etc. You must post a bond and show grounds by affidavit.
Replevin (Rule 60): For chattel mortgage or pledged items, get immediate possession pending foreclosure.
Preliminary injunction: Rare in plain collections; sometimes used to stop disposal of specific secured assets.

9) Foreclosure basics (if there’s security)

A) Real estate mortgage (Act 3135)

Extrajudicial foreclosure through a sheriff/notary after notice & publication, then auction sale.
Certificate of Sale is issued; there’s a statutory redemption period (debtor can redeem by paying the debt + costs within the period).
If the sale price doesn’t cover the debt, you may sue for deficiency.

B) Chattel mortgage (Act 1508)

Public auction after proper notice to debtor and public.
Deficiency recoverable except when the transaction is really a sale on installments covered by the Recto Law (seller-creditor who forecloses cannot sue for deficiency).

Paperwork: Make sure mortgages were properly registered; defective registration weakens priority against third parties.

10) Prescription, interruption, and acknowledgments

Actions on written contracts (like a promissory note) generally prescribe in 10 years from default.
Interruption:
- A written extrajudicial demand from you, or
- A written acknowledgment/partial payment from the debtor interrupts prescription and restarts the clock.
Keep proof: registry receipts, tracking, email headers, or signed receiving copies.

11) Common debtor defenses—and how to counter

Defense	Your Counter
No consideration / “I never got the money”	Bank proof of fund release, deposit slips, or cash voucher + witness.
Rescission/novation	Produce the latest written agreement; if none, argue no novation—mere proposals don’t novate.
Forged/unauthorized signature	Compare signatures; present notary, ID checks, emails; ask for handwriting exam if needed.
Paid already / partial payments uncredited	Show ledger and receipt trail; concede and credit genuine partials.
Unconscionable interest/penalty	Be ready to defend reasonableness; offer to recompute at lower rates as the court may reduce them.
No demand (for on-demand notes)	Show demand letters and proof of receipt; argue maturity for term notes.
Venue wrong	Point to exclusive venue clause or facts supporting chosen venue.
Prescription	Show interrupting demands or acknowledgments.

12) Computations that courts accept

Template (illustrative):

Principal: ₱___ (net of credited partial payments)
Contractual interest: % per annum from [start date] to [cutoff] = ₱_
Penalty/late charges: % per month from [default date] to [cutoff] = ₱_
Subtotal: ₱___
Attorney’s fees (per clause, subject to reasonableness): % = ₱_
Costs (filing, sheriff, publication for foreclosure): ₱___

After judgment, legal interest runs on the total adjudged amount until full payment.

13) Step-by-step: filing a sum-of-money case

Assemble dossier: note, funding proof, demands (+ proof), ledger, ID docs, any security/credit support.
Barangay (if required): file RFA/complaint; get certificate to file action if no settlement.
Draft and file complaint: include cause of action, prayer (principal, interest, penalty, fees, costs), and any provisional remedy (attachment).
Serve defendant; attend pre-trial/mediation; mark documents.
Submit judicial affidavits; present one credible witness (the account officer) + exhibits.
Decision; then motion for execution after finality; pursue garnishment/levy (see §15).

14) Special notes on negotiable instruments & transfers

If your instrument meets the Negotiable Instruments Law requirements (in writing, signed, unconditional promise, sum certain, payable on demand or at a fixed time, to order/bearer), holders in due course may take free of many defenses.
Many “promissory agreements” are non-negotiable (e.g., contain conditions, not to order/bearer). That’s fine—you still sue on breach of contract.

15) Winning is half the battle—how to collect the judgment

Garnish wages/bank accounts: Serve the writ on employer/bank.
Levy on personal/real property: Sheriff levies then auctions; follow notice rules.
Examination of judgment debtor: Force disclosure of assets/income (court hearing).
Third-party examination: Subpoena persons who may hold debtor’s assets.
Liens on registered property: Annotate the judgment on titles (helps settlement).
Keep at it: Writs of execution have lifespans, but you can move for alias writs until satisfied.

16) Parallel/criminal angles (use judiciously)

B.P. 22 (bouncing checks) may apply if the debtor issued a check knowing of insufficient funds; penalties are criminal, separate from civil collection.
Estafa (Art. 315(2)(d)) may apply in specific deceit scenarios.
These are not debt-collection shortcuts; file only if elements fit and with counsel’s advice. Civil and criminal cases can proceed independently.

17) Settlement tools you should try first

Demand letter + draft payment plan (dates, amounts, mode; include acceleration & waiver clauses).
Dación en pago (transfer of an asset to settle the debt).
Restructuring/Novation (new schedule/rate; keep new written note).
Notarized Acknowledgment of Debt with confession of judgment-style stipulations (only to the extent allowed by rules)—these speed up proof.

18) Compliance & paperwork hygiene (for creditors)

Keep originals or certified copies; scan everything.
Use registered mail/courier with tracking for demands.
Keep a running amortization schedule; update after each payment.
Register mortgages properly; for chattel, include Affidavit of Good Faith.
Use clear, fair interest/penalty terms; courts reward transparency.

19) Quick FAQs

Q: Do I have to send a demand letter? A: For term loans, not to create default (maturity does that), but demand is still smart to interrupt prescription and start default interest. For on-demand notes, yes.

Q: Can I recover attorney’s fees? A: If stipulated, usually yes—subject to reasonableness. Without a clause, courts may still award equitable fees if you were forced to litigate.

Q: The debtor made a small payment last year—does it help me? A: Yes. Partial payments/acknowledgments generally interrupt prescription and restart the 10-year clock.

Q: Can I sue the surety immediately? A: Yes. A surety is solidarily liable—you may proceed directly.

Q: We foreclosed the chattel and came up short. Can we still collect the deficiency? A: Generally yes, unless the deal is a sale on installments under the Recto Law (then no deficiency after foreclosure).

20) Print-friendly action checklist

Assemble evidence: note, funding proof, demands (with proof), ledger, security papers.
Choose path: small claims / regular collection / foreclosure (REM/chattel) / combo.
Consider provisional remedy: attachment or replevin; prepare bond & affidavit.
File suit (observe barangay conciliation if required; honor venue clause).
Prove damages with math: principal, interest, penalties, fees—dated schedule attached.
After judgment: move for execution—garnish, levy, examine debtor and third parties.
Keep interrupting prescription if negotiating—use written demands; log any acknowledgment/partial.

Bottom line

A successful Philippine collection case is paperwork + patience: a clear note, proof of funding, proof of default/demand, and a transparent computation—plus smart use of security, provisional remedies, and execution. Build your file like an auditor, choose the right forum (small claims vs. regular vs. foreclosure), and be ready for either a judgment or a structured settlement that you can enforce.

If you share your note language (interest/penalty, acceleration, venue), dates, payments, and whether there’s security/surety, I can draft a tailored demand letter, a computation sheet, and a suggested complaint outline fit for your jurisdiction and case size.