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Debt Clearance Letter

Debt Clearance Letter Template for Philippines

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Key Requirements PROMPT example:

Debt Clearance Letter

"I need a Debt Clearance Letter for a personal loan of PHP 500,000 that will be fully paid by March 15, 2025, including all interest and penalties, to be issued by ABC Bank Manila Branch."

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Document background
A Debt Clearance Letter is a crucial document in Philippine financial and legal practice, issued when a debtor has fully satisfied their financial obligations to a creditor. This document is essential in various contexts, from personal loans to business transactions, providing legal protection for both parties under Philippine law. The letter must comply with local regulations, including the Civil Code of the Philippines and the Rules on Notarial Practice of 2004. It serves multiple purposes: confirming debt settlement, preventing future claims, and providing documentation for financial records. The document typically includes specific details about the original debt, payment confirmation, and a clear release statement, often requiring notarization for enhanced legal validity.
Suggested Sections

1. Letterhead and Date: Creditor's official letterhead, complete contact information, and current date

2. Debtor Information: Full name and address of the debtor, any relevant account or reference numbers

3. Debt Details: Clear identification of the original debt, including amount, date incurred, and any reference numbers

4. Confirmation of Payment: Express confirmation that the debt has been paid in full and received by the creditor

5. Release Statement: Clear statement releasing the debtor from all further obligations related to the debt

6. Authorization: Signature block with name, title, and signature of authorized representative of the creditor

Optional Sections

1. Payment History Summary: Used when there were multiple payments or a payment plan involved, summarizing how the debt was settled

2. Conditional Statements: Include when the clearance is subject to certain conditions (e.g., check clearance)

3. Related Account Information: Used when multiple accounts or debts are involved to clarify which specific debts are cleared

4. Return of Collateral: Include when the debt was secured by collateral that needs to be returned

5. Future Reference Contact: Additional contact information for future verification of the debt clearance

Suggested Schedules

1. Original Loan Agreement: Copy of the original loan document or debt agreement for reference

2. Payment Proof: Copies of final payment receipts or bank transfers proving settlement

3. Account Statement: Final statement showing zero balance or full settlement of the account

4. Collateral Release Form: If applicable, documentation releasing any security or collateral held against the debt

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant Industries

Banking and Financial Services

Real Estate

Consumer Lending

Microfinance

Commercial Lending

Retail

Education (Student Loans)

Healthcare (Medical Loans)

Legal Services

Small and Medium Enterprises

Construction and Development

Relevant Teams

Legal

Finance

Credit Control

Collections

Accounts Receivable

Risk Management

Compliance

Treasury

Documentation

Corporate Secretariat

Relevant Roles

Credit Manager

Financial Controller

Accounts Receivable Manager

Legal Counsel

Compliance Officer

Collections Manager

Finance Director

Loan Officer

Credit Risk Officer

Treasury Manager

Debt Recovery Specialist

Corporate Secretary

Financial Operations Manager

Legal Documentation Specialist

Industries
Civil Code of the Philippines (Republic Act No. 386): Provides the fundamental legal framework for obligations and contracts, including provisions on the extinguishment of obligations through payment, release, or other modes of settlement
Rules on Notarial Practice of 2004 (A.M. No. 02-8-13-SC): Governs the authentication and notarization requirements for legal documents, which may be necessary for the debt clearance letter to have full legal effect
Consumer Act of the Philippines (Republic Act No. 7394): Protects consumer rights and interests, including provisions related to credit transactions and debt settlement practices
Truth in Lending Act (Republic Act No. 3765): Ensures transparency in lending practices and requires full disclosure of credit terms, which may need to be referenced in the debt clearance letter
Data Privacy Act of 2012 (Republic Act No. 10173): Regulates the handling of personal information in documents, ensuring protection of both creditor and debtor's personal data
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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