Debt collection in the Philippines becomes a necessity when companies are unable to recover their due payments. The practice involves both amicable and legal solutions and, in some cases, focuses on maintaining a good business or client relation following the collection enforcement.
Our experts in company formation in the Philippines highlight the main approaches to debt collection, as well as the key legal issues and laws one has to take into account when pursuing unpaid debts.
Foreign investors who have more questions about their rights as creditors can rely on our ongoing assistance from our experts in company formation in the Philippines.
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Main debt collection options in the Philippines
Business owners in the Philippines have two main options when it comes to recovering unpaid invoices or owed money. These are amicable debt collection and legal debt collection (also called judicial collection).
The two approaches are used one after the other in most cases, as the first attempt will be to negotiate with the debtor and find a suitable payment solution for both parties.
When looking for the most suitable solution for debt collection in the Philippines, business owners can discuss their options with our agents specializing in company registration in the Philippines.
The stages of debt collection in the Philippines
When pursuing unpaid invoices or other types of debts, the payment terms stipulated in the agreement signed by the parties offer the first course of action. Once the stipulated payment period has passed, the creditor can start making attempts to recover the money.
In general, the process of debt collection in the Philippines includes the following steps:
- The creditor attempts to recover the due amounts: this can include an initial notification of the past-due payment issued by the creditor himself;
- The amicable debt collection begins: if the creditor is unresponsive or does not make the payment after the initial reminder, the assistance of a debt collection expert can be enlisted. The process will begin with an amicable stage;
- Judicial debt collection: should the amicable phase fail to produce results, the next step is to initiate legal proceedings to recover the debt;
- Collection order: after the termination of the judicial proceedings, a court order is used to enforce the collection. The order will stipulate the payment terms and how the debt is to be repaid.
Court debt collection in the Philippines
Civil cases involving debt collection are solved based on the owed amount. The Metropolitan Court, and the Municipal Courts have jurisdiction over debt collection cases. The law allows for expedited procedures to take place within first-level courts and, depending on the owed amount, these can also apply to debt collection cases.
The following aspects are relevant for court debt collection in the Philippines:
- The claim does not exceed ₱2,000,000: the case is covered by the rule on summary procedure;
- The money claim exceeds ₱1,000,000, but amicable settlement is possible: the case will also be covered by the rule on summary procedure;
- The threshold amount for small claims cases has been increased to ₱1,000,000 and there is no distinction whether the claim is filed with the first-level court within or outside the Metropolitan Manila region.
Our team offers complete solutions for businesses in partnership with our accountant in the Philippines and our experts who answer questions about how to immigrate to the Philippines.
If you want to know more about the practices used for debt collection in the Philippines, or if you have other questions, do not hesitate to contact our Philippines company formation agents.