Debt collection via a small claim case
It is best to protect your interest at all times. While your generosity may be abused by others, you are not left without any recourse.
Published in Daily Tribune on September 25, 2020
by: Miko Jim Paulo V. Panganiban
It is good to look back to much simpler days when our problems were merely how to ask money from our parents to buy our favorite snack or toy without being scolded. Then we got older, got a job or started our business and adulting became real.
When we start making our own money, we realize why our parents reacted the way they did when we had tantrums whenever they refused to give in to our childish whims. Now, we have bills, mortgages and a lifestyle. If we’re lucky, we learn how to tighten our belts and be smart with our hard-earned money.
Sometimes though, a relative needs money for medical expenses, or a friend wants to do business with you or borrow money from you for their immediate needs. And because you thought you were being a nice person, you cannot bring yourself to turn them down. They come with a promise to pay on a specific day but here comes that day and they are nowhere to be found. Now, the question all over your head is, how can I get my money back?
A loan or a debt is considered as an obligation to do under the Civil Code of the Philippines. When a person is obliged to do something, (in this case to pay you what they owe) and failed to do so, you may demand that they fulfill their obligation. Demand may be made extrajudicially by settling the obligation out-of-court or it can be made judicially by filing a collection case in court.
Either way, your chances of successfully recovering your money greatly increases if the agreement is in writing. If asking your relative or friend to sign a loan agreement is too awkward for you, then you should only loan an amount that you can afford to lose because without any evidence, you may never recover anything.
Having said that, considering that court processes take time and money, it is advisable to take this matter, as much as possible, extrajudicially. You yourself, or with assistance of your lawyer, may send a demand letter to your debtor. The demand letter may contain a demand to pay the loan within a certain period upon receipt thereof, and failure to do so will result to incurring of interest and filing of necessary civil or criminal case (if applicable) against the debtor.
After a reasonable time given to the debtor to pay his loan and he failed to do so, you may now consider filing a collection case in court.
Depending on the venue of the claim, if the amount of loan does not exceed P400,000 for Metropolitan Trial Courts, or P300,000 for Municipal Trial Courts, Municipal Trial Courts in Cities, and Municipal Circuit Trial Courts, you may file a small claim action. Should the debtor have several loans but the amount still did not exceed the aforementioned amount, small claim action is still proper.
A small claim action is commenced by filing with the court a verified Statement of Claim (Form 1-SCC) and Certification Against Forum Shopping, Splitting a Single Cause of Action and Multiplicity of Suits (Form 1-A SCC), and attaching therein your sets of evidence of the loan. This action may be filed in court having jurisdiction over the place where either you or your debtor resides. The forms may be downloaded from the internet or you may ask the assistance of any court. This is do-it-yourself claim considering that a representation of a lawyer is not allowed in small claim action. After notice and hearing, the court shall render its decision within 24 hours from the termination of the hearing and such decision is final and executory.
If the loan amount exceeds the amount proper for small claims, the collection case may be filed with the Regional Trial Court having jurisdiction over the place where either you or your debtor resides. In this instance, the case will undergo the regular proceedings. Unlike in small claim action, a lawyer’s representation may be necessary to protect your rights. While this may take time, the legal interest continues to run, and you may also claim for other damages, such as attorney’s fees and cost of litigation.
It is best to protect your interest at all times. While your generosity may be abused by others, you are not left without any recourse.
