• Collection of loans without written agreement prescribes after 6 years

    Persida Acosta

    Persida Acosta

    Dear PAO,
    An acquaintance borrowed thirty thousand pesos from me with an understanding that he will pay it in 2007. Can I still file a case for collection of his indebtedness even if eight years had already passed?

    Dear Mae,
    In all contracts of loan, the debtor has the obligation to return to the creditor the amount that he borrowed at the time and place that they have agreed upon. An unpaid creditor shall have the right to institute an action against his debtor before the court for the collection of the money owed. However, the law gives the creditor a certain period of time within which to institute an action. His failure to do so during such time shall result in the prescription of his right of action (Article 1139, Civil Code of the Philippines).

    The period of prescription for instituting action for collection of sum of money varies depending upon the existence of a written agreement of loan. If the parties executed a written contract of loan, the complaint for collection of sum of money may be brought within 10 years from the time the right of action accrues (Article 1144, Ibid.).

    However, if the parties only orally agreed upon the loan, the action shall be considered to have prescribed after the lapse of six (6) years (Article 1145, id.).

    Based on the foregoing, your right to file a case against your debtor for the collection of his indebtedness has already prescribed if you do not have a written agreement of loan since more than six years had already passed from the time that the loan matured. On the other hand, if you and the debtor executed a written contract of loan, you may still file a case before the court for the collection of his debt.

    However, since your claim for payment of money is less than one hundred thousand pesos (Php100,000.00), your petition should be filed in accordance with the Rules of Procedure for Small Claims Cases before the Metropolitan Trial Courts, Municipal Trial Courts in Cities, Municipal Trial Courts, and Municipal Circuit Trial Courts designated as small claims court of the place where you or your debtor lives (En Banc Resolution No. A.M. No. 08-8-7-SC dated October 27, 2009). A small claims action may be commenced by filing with the court an accomplished and verified Statement of Claim (Form 1-SCC) in duplicate, accompanied by a Certification of Non-forum Shopping (Form 1-A, SCC), and two duly certified photocopies of the actionable document/s subject of the claim, as well as the affidavits of witnesses and other evidence to support the claim (Section 5, Rules of Procedure for Small Claims Cases).

    We hope that we were able to answer your queries. Please be reminded that this advice is based solely on the facts that you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.

    Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to dearpao@manilatimes.net


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    1. Still about the query on the unpaid loan, the mortgagor is a US Citizen and is currently in the USA. Thank you in anticipation for the opportunity to post this query.

    2. I have a similar query, a relative of my husband contracted a loan of more than Php100, 000. We signed a real estate mortgage,bearing a residential lot as a collateral. The loan contract already expired in October 2013. I notified him through text messages and social media about the loan, once before the expiration of the contract and twice after, but up to this date he has not communicated with me in any form. Since it is stipulated in our contract that the mortgage will be forclosed upon his failure to pay the loan, can I now pressume that the lot is indeed forclosed?