In the Philippines, the right of a creditor to collect a debt is not eternal. Under the principle of statute of limitations—referred to in Philippine law as Prescription—the law sets a specific timeframe within which a legal action must be brought. Once this period expires, the obligation is not necessarily extinguished, but it becomes a "natural obligation," meaning it can no longer be enforced through the court system.
The primary governing law on this matter is Republic Act No. 386, otherwise known as the Civil Code of the Philippines.
1. General Prescription Periods for Debts
The length of time a creditor has to file a collection suit depends entirely on the source of the obligation (i.e., how the debt was documented or created).
| Source of Obligation | Prescription Period | Legal Basis (Civil Code) |
|---|---|---|
| Written Contract | 10 Years | Article 1144 |
| Court Judgment | 10 Years | Article 1144 |
| Obligation Created by Law | 10 Years | Article 1144 |
| Oral Contract / Verbal Agreement | 6 Years | Article 1145 |
| Quasi-Contract | 6 Years | Article 1145 |
The 10-Year Rule (Written Documents)
Most bank loans, credit card agreements, and formal "IOUs" (Promissory Notes) fall under the 10-year period. Because these are evidenced by written instruments, the creditor has a decade to initiate a formal complaint for "Sum of Money."
The 6-Year Rule (Verbal Agreements)
If you lent money to a friend based on a "handshake deal" or a verbal promise to pay without any supporting document, you only have 6 years to sue. Proving the existence of the debt is already difficult; waiting too long makes legal recovery impossible.
2. When Does the Clock Start Ticking?
A common misconception is that the prescription period begins the moment the money is lent. Under Article 1150 of the Civil Code, the time for prescription shall be counted from the day the action may be brought.
In the context of a loan, this usually means the date of default.
- If the loan is due on December 31, 2023, and the debtor fails to pay, the 10-year (or 6-year) period begins on January 1, 2024.
- For loans payable in installments, the prescription period generally applies to each individual installment from the date it falls due.
3. Interruption: Resetting the Clock
The prescriptive period is not always a continuous countdown. Under Article 1155 of the Civil Code, the "running" of the prescription period is interrupted (reset to zero) by:
- Filing a Case in Court: The moment a formal complaint is filed, the clock stops.
- Written Extrajudicial Demand: If the creditor sends a formal Demand Letter and the debtor receives it, the 10-year or 6-year period starts all over again from the date of receipt.
- Written Acknowledgment of Debt: If the debtor writes to the creditor asking for more time or promising to pay, they have effectively acknowledged the debt, and the prescription period resets.
Note: A verbal demand is insufficient to interrupt prescription for a written contract. It must be in writing.
4. Special Case: Checks (B.P. 22)
If a debtor issued a check as payment for a loan and that check bounced, the creditor may file a criminal case for violation of Batas Pambansa Bilang 22 (B.P. 22).
- The prescriptive period for filing a criminal case under B.P. 22 is only 4 years from the date of the check's dishonor and the subsequent receipt of a notice of dishonor.
5. What Happens After Prescription?
If a creditor files a case after the 10-year period has lapsed, the debtor can move to dismiss the case based on Prescription.
However, prescription is a defense that must be raised by the debtor in the "Answer" or a "Motion to Dismiss." If the debtor is sued and fails to raise the defense of prescription, the court may still render a judgment against them. The law assumes that by not raising it, the debtor has waived the benefit of the time limit.
6. Summary of Key Principles
- Written loans give creditors more time (10 years) than verbal loans (6 years).
- The period starts from the demandability of the debt (default), not the date of the loan.
- A written demand letter is the most common way creditors keep a debt "alive" indefinitely.
- Natural Obligation: Even if the period expires, if the debtor voluntarily pays the debt, they cannot later sue to get the money back by claiming the debt had prescribed.