Poor performance of debt recovery adversely affects the cash flow and finance of a company. However, it normally is a hard job. It requires effort on negotiation, and lawsuits in some cases. There is a process in debt recovery every company should prepare. Therefore we would like to give an overview of business’s basic steps for debt collection in this article.

1. Demand for settling debt by negotiation (lead time from 01 to 03 months).

Demand in correspondence:

It is actually more effective to communicate by phone, email, or in-person with the Debtor, but in several cases that we cannot arrange an appointment with the Debtor, we must prepare the written request to the Debtor to fulfill the payment obligations (“The payment request“) in the most effective way.

Purpose of The payment request: In fact, only 10% of the Debtor decides to pay the Businesses for the debt when the Businesses send The payment request. However, in order to recover the irrecoverable debts, this is such a significant amount for the Businesses to implement this method. In addition, The request payment is also the basis for the Businesses to initiate a lawsuit. Besides that, it helps the Businesses determine the time limit for initiating lawsuits in resolving disputes at competent states which is its advantage.


There are many steps, methods a creditor can use to approach the debtor. Case by case the creditor could conduct the steps as follows:

  • Convincing period: When payment is not made by the due date and the Debtor does not have any response about the debt, the creditor may call, mail to the debtor to ask for his payment in accordance with regulations law. These are gentle reminders and the creditor should show sympathy for difficulties the debtor may have. The creditor can consider giving extension to the payment (1 week could be a reasonable extension).
  • Reminding period: When the payment continues to miss the extension, the creditor could request for negotiation. Cooperation and faithfulness should be shown up.
  • Warning period: If the debtor continues to fail to perform his obligations, the creditor should seriously demand the payment as well as indicate very negative consequences if the debtor fails to fulfill his payment obligations. At this time, the creditor should request the Debtor to commit by a writing document. In the worst scenario, the creditor afterward files the case to a competent court, this writing commitment shall be very useful. It would be very clear evidence that the debtor did not cooperate to settle the debt.

In the case where debts are big, calling or email reminders do not work, The creditor should send its representative to the debtor to request payment in person. This is also the chance to discover why the debtor cannot pay for debts on due time. Feasible solutions can be navigated. In some cases after understanding the situation, creditors assisted debtors in overcoming the difficulties, reducing inventory, from which they can recover the debts.

If there was no positive feedback from the debtor, the creditor should immediately give notice on filing a case to court or Arbitration Center.

2. Lawsuit initiation in a court or arbitration center (lead time from 03 to 12 months).

If the negotiation fails and the lawsuit is evaluated as a feasible solution, a creditor may initiate a lawsuit against the debtor at a competent court or an arbitration center.

A lawsuit can be initiated if it satisfies 03 (three) conditions. First, there is an actual debt and the debtor fails to repay as committed and the creditor believes that its rights and interests are infringed. Second, disputes between the creditor and debtor are under the jurisdiction of a court or arbitration center, not any other agencies or organizations. And the last, if pre-proceedings, such as conciliation, negotiation, notification, … are required by laws and/or agreements, the creditor has to complete such procedures before it initiates the lawsuit against debtors.

Therefore, the Businesses can proceed to submit a petition at a Competent Court or initiate a lawsuit at Arbitration Cent in accordance with the law.

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TNTP & Associates International Law Firm

Lawyer Nguyen Thanh Ha

Email: ha.nguyen@tntplaw.com