Steps to Recover Money Loaned Without a Written Contract in the Philippines

This article is for educational purposes only and does not create a lawyer-client relationship. Always consult a qualified Philippine lawyer for advice on your specific facts.

1. Why an Oral Loan Is Still Binding

Form is generally immaterial. Article 1356, Civil Code states that contracts are perfected by mere consent, except in the specific cases where the law requires a particular form (e.g., donation of real property). A simple loan (mutuum) is not one of those exceptions.
Statute of Frauds is a shield, not a sword. Article 1403(2)(b) requires certain agreements “that cannot be performed within a year” to be in writing only while they are still executory. Once the lender has actually delivered the money, the loan becomes an executed contract, and the borrower can no longer invoke the Statute of Frauds to escape payment (see Heirs of Malate v. Gamboa, G.R. 231630, 16 Nov 2021).

2. Prescription Period

Basis of Action	Code Article	Period	When It Starts
Oral or implied loan	Art. 1145(2)	6 years	From the date the loan fell due (or, if no maturity date was agreed, from the date a valid demand is made)
Unjust enrichment	Art. 1145(1)	6 years	From date of unjust retention
Written acknowledgment later signed by debtor	Art. 1144	10 years	From the new written promise

Tip: Send a demand letter by registered mail; the registry receipt and returned card will prove the exact date the period began to run.

3. Gathering Evidence

Because there is no promissory note, the lender must rely on admissible secondary evidence:

Category	Examples of Proof	Notes
Documentary	Deposit slips, online transfer screenshots, text/email exchanges admitting the loan, social-media messages, ledger entries, receipts issued by debtor	Authenticate through the testimony of the sender/recipient or the keeper of business records (Rule 5, Rules on Electronic Evidence).
Oral	Testimony of the lender and witnesses present at the turnover of money	Credibility and consistency are key; avoid hearsay.
Circumstantial	Debtor’s partial payments, written admission in a different document, bounced checks issued as payment	May corroborate the lender’s version even if not conclusive alone.

4. Pre-Litigation Measures

Polite Reminder – A friendly follow-up often avoids litigation costs.
Formal Demand Letter – State the amount, due date, legal basis, and a clear deadline (usually 10 days). Attach evidence and warn of legal action plus 6 % legal interest (see Nacar v. Gallery Frames, G.R. 189871, 13 Aug 2013).
Barangay Conciliation (Katarungang Pambarangay Law, R.A. 7160) – Mandatory if both parties reside in the same city or municipality, unless:
- the loan exceeds ₱400,000 (the latest small-claims limit)
- one party is a corporation, or
- an urgent legal action is needed (Rule 6, KP Law). Failure to undergo mediation when required is ground for dismissal of a later case.
Write-Off vs. Compromise – Weigh the cost–benefit of suing versus negotiating a structured payment plan secured by post-dated checks or collateral.

5. Choosing the Proper Forum

Forum	Monetary Jurisdiction (principal + interest + penalties)	Key Advantages
Small Claims Court (A.M. 08-8-7-SC as amended)	Up to ₱400,000	No lawyers’ appearance fees, one-day hearing, decision within 24 hours after hearing.
Metropolitan/Municipal Trial Court (MTC)	> ₱400,000 up to ₱2 million	Summary procedure up to ₱2 M speeds up the case; appeal lies with the RTC.
Regional Trial Court (RTC)	Over ₱2 million	Full-blown trial; capable of granting provisional remedies (e.g., attachment).

Venue: File where the defendant resides or where the cause of action arose (Rule 4, Sec. 1, Rules of Civil Procedure).

6. Drafting and Filing the Complaint

Caption & Parties – State addresses to establish venue and barangay conciliation compliance.
Allegations –
- Existence of the loan, date, amount delivered, agreed maturity (or that none was set).
- Voluntary non-payment despite demand.
- Damages sought: principal, legal interest (6 % p.a. from extrajudicial demand), litigation expenses, and attorney’s fees (Art. 2208).
Certification Against Forum Shopping – Mandatory.
Verification – Signed and notarized.
Attachments – Demand letter, proofs of delivery, documentary exhibits.
Filing & Docket Fees – Computed on the total sum claimed.

7. Possible Provisional Remedies

Rule 57 – Preliminary Attachment may be sought if:

The debtor is about to abscond,
Has hidden or disposed of property to defraud creditors, or
Is a non-resident.

A bond equal to the claim amount is required.

8. Defenses You Should Anticipate

Defense	How to Counter
Statute of Frauds	Point out that the contract is executed (money already delivered).
Prescription	Show timely demand or partial payment that interrupted prescription (Art. 1155).
Lack of Consideration / Simulation	Produce bank transfer records or witness testimony.
Payment	Demand strict proof (e.g., official receipts, bank confirmation) and rebut with your own evidence.

9. Criminal Angle: Caution Required

The mere failure to pay a loan is not a crime. However:

B.P. 22 (Bouncing Checks Law) – Attaches only if the borrower issued a check that was dishonored and all statutory notices were served.
Estafa (Art. 315, Revised Penal Code) – Requires deceit or abuse of confidence at the inception of the loan; mere non-payment is insufficient.
Ethical Rules – Threatening criminal action solely to collect a civil debt may be deemed harassment and can backfire.

10. Alternative Civil Theories

Cause of Action	When to Plead
Unjust Enrichment (Art. 22)	If the debtor disputes the existence of a loan but undeniably received the money.
Solutio Indebiti (Art. 2154)	If money was delivered by mistake yet retained.
Resulting Trust (Art. 1456)	If the funds were used to purchase property now registered in the debtor’s name.

11. Judgment & Execution

Decision – Money judgments bear 6 % legal interest from finality until satisfaction.
Writ of Execution – Sheriff may levy debtor’s non-exempt property (Rule 39).
Garnishment – Bank accounts or receivables of the debtor may be garnished after due notice.
Examination of Judgment Debtor – Post-judgment discovery to locate assets (Rule 39, Secs. 37-43).

12. Practical Tips for Lenders

Tip	Why It Matters
Document everything early (screenshots, voice notes, receipts).	Memory fades; courts rely on concrete proof.
Send demand letters by both courier and email.	Creates paper trail and interrupts prescription.
Consider a compromise secured by a notarized acknowledgment of debt.	Converts an oral obligation into a written one, extending prescription to 10 years.
Compute interest at 6 % per annum unless you prove a higher stipulation.	Courts will strike down unconscionable rates and default to the legal rate.
Preserve original devices or obtain certified prints for electronic evidence.	Required under the Rules on Electronic Evidence.

13. Frequently Asked Questions

Question	Short Answer
Can I record our phone call as proof?	Yes, but you must testify on its authenticity; secret recording may raise privacy issues.
What if the borrower lives abroad?	You may sue in the Philippines if the cause arose here, and serve summons by leave of court via email or courier (Rule 14).
Is a text message “IOU” enough?	It qualifies as an “electronic document” and is admissible if properly authenticated.
Can I ask for moral damages?	Only if you can prove fraud or bad faith beyond mere non-payment.

14. Conclusion

Recovering money loaned without a written contract is entirely feasible under Philippine law, provided you act within six years, preserve competent evidence, and follow the mandatory barangay and court procedures. Begin with a clear demand, explore settlement, and, when needed, file the appropriate civil action—small claims for modest sums, regular courts for larger amounts. Patience and procedural rigor often make the difference between a collectible judgment and a paper victory.

Need tailored guidance? A brief consultation with counsel can refine your evidence strategy, draft airtight pleadings, and improve your odds of a swift, enforceable recovery.