Common challenges in debt collection for foreign businesses in Vietnam

As economic integration accelerates, foreign businesses increasingly invest in and contract with Vietnamese partners. While this brings cooperation opportunities, it also carries risks of late payments or bad debts, particularly when debtors deliberately delay payment or dispose of assets to avoid repayment obligations. For foreign creditors, debt collection in Vietnam presents not just economic challenges but legal and cultural hurdles as well. Differences in the legal system and enforcement mechanisms, combined with limited access to information, make debt collection in Vietnam complicated, expensive and time consuming. In this article, TNTP outlines the key challenges in the debt collection process and explains the legal and practical barriers foreign businesses face in Vietnam.

1.Main difficulties when foreign businesses collect debt in Vietnam

• Debtors’ non-cooperation and difficulty in accessing information: Foreign businesses face significant challenges when collecting information about a debtor’s financial situation, revenue, debt obligations or violations in Vietnam. Data related to tax records, accounting books and asset transactions are confidential and difficult to access, particularly when debtors deliberately conceal information. Furthermore, Vietnam’s corporate information disclosure system lacks transparency and comprehensiveness, making it inadequate for foreign creditors who need to quickly verify information.
• Cultural and communication challenges: Differences in language, customs and business practices create significant barriers for foreign creditors. Many lack understanding of Vietnam’s relationship-based business culture. This complicates direct negotiations with debtors, often leading to misunderstandings that can damage business relationships.
• Differences in legal regulations between countries: Vietnam’s legal system has distinct characteristics that set it apart from many other countries. For example, each type of dispute has different time limits for the statute of limitations on initiating lawsuits. Failing to understand these limitations may result in creditors losing their right to sue. Regarding evidence, Vietnamese courts require documents made abroad to be consularly legalized and notarized translated into Vietnamese; otherwise, they will not be accepted under the Civil Procedure Code 2015 (“ the CPC”). Additionally, foreign judgments, decisions or awards must undergo a complex recognition and enforcement procedure under the CPC before they can be enforced in Vietnam. This process may face refusal, causing delays and additional costs for creditors.
• Debt collection time is often prolonged: When foreign creditors file lawsuits in Vietnamese courts or pursue enforcement procedures to collect debts, the process typically takes 1 to 2 years and even longer for complex cases or when debtors deliberately evade their obligations. This extended timeframe reduces the debt’s actual value through inflation, accumulating legal costs and the risk that debtors may hide or transfer assets to avoid repayment.

2.Legal and practical barriers in the debt collection process in Vietnam

• Legal regulations on debt collection

Since January 1, 2021, under Point h Clause 1 Article 6 of the Law on Investment 2020, it is stipulated: “1. The business investment activities below are banned: h) Provision of debt collection services”. This ban completely prohibits all debt collection service businesses in Vietnam. Creditors (both domestic and foreign) may only pursue legitimate legal measures to collect debts, including negotiation, mediation, court or arbitration proceedings and judgment enforcement with support from lawyers or legal advisors. Vietnamese law clearly states that if negotiation and mediation fail, creditors have the right to file a lawsuit in court or through commercial arbitration to compel debtors to make payment.

Additionally, the law strictly prohibits violence, threats, intimidation or other illegal methods during debt collection. Violations may result in administrative sanctions or criminal prosecution, depending on their severity. In practice, impatient creditors who resort to illegal debt collection services often not only fail to recover their debts but also face criminal charges. Compliance with legal regulations is therefore essential, as it both protects creditors’ legitimate rights and helps them avoid serious legal consequences. 

• Litigation and enforcement

Foreign businesses conducting debt collection in Vietnam encounter numerous legal challenges throughout the litigation and enforcement processes. These challenges include:

• Litigation and enforcement in Vietnam require creditors to follow complex, specific rules regarding evidence, documentation and legal procedures. These regulations demand thorough understanding to prepare valid submissions that meet court or arbitration requirements. Article 93 of the CPC defines evidence as: “Evidences in civil cases are factual things which are handed to Courts by involved parties, agencies, organizations or individuals or gathered by Courts according to the order and procedures prescribed by this Code and are used by Courts as bases to determine objective details of the cases as well as to determine whether the involved parties’ claims or protests are well grounded and lawful or not”. This provision, along with other sections of the CPC and the Law on Enforcement of Civil Judgments, governs litigation and enforcement procedures. Foreign creditors often struggle to navigate these requirements due to cultural and legal differences, creating significant challenges when seeking assistance from courts or enforcement agencies for debt collection.
• Article 170 of the CPC states: “The courts, the procuracies and the judgment-executing bodies shall issue, send or notify procedural documents to the involved parties, other participants in procedures and relevant agencies, organizations and individuals according to the provisions of this Code and relevant law provisions”. However, serving documents and summoning parties often presents significant challenges in practice. This is especially true when defendants deliberately conceal information about their residence or headquarters, forcing courts or enforcement agencies to resort to public postings. These complications ultimately extend the debt recovery timeline.
• Verifying assets and assessing enforcement conditions presents a significant challenge in practice. Debtors commonly employ tactics such as dissipating assets, hiding information or transferring property to relatives to avoid repayment obligations. These evasive practices extend the verification and asset handling process, increasing both time and expenses while substantially reducing debt collection effectiveness.
• Foreign businesses often encounter significant challenges when interacting with Vietnamese dispute resolution or enforcement agencies due to language barriers, cultural differences and disparities between legal systems.
• Finally, Vietnamese legal grounds for protecting legitimate rights and interests often have unique characteristics that significantly differ from international law and other countries’ legal systems. This distinctiveness makes it challenging for foreign businesses to fully understand and formulate accurate, effective claims to protect their interests.

Therefore, expert legal counsel with deep knowledge of Vietnamese law and practice is essential for foreign businesses to effectively protect their legitimate rights throughout both dispute resolution and enforcement processes.

• Some specific cases in debt collection

Certain special situations make debt collection from Vietnamese debtors more complicated:

• Handling secured assets: Creditors must strictly comply with regulations on security interest registration (Civil Code 2015 (“the CC”), Decree 21/2021, Decree 99/2022). Failure to register or late registration can cause creditors to lose their priority rights when assets need to be liquidated.
• Debtor dissipating assets: Many debtors transfer property through fraudulent transactions to evade their obligations. Businesses may request the court to invalidate such transactions under Article 124 of the CC. However, Article 133 of the CC offers protection to good-faith third parties, which significantly complicates the debt recovery process.
• Debtor bankruptcy: According to the Law on Bankruptcy 2014, creditors can request bankruptcy proceedings against debtors. Unfortunately, this process typically extends over a long period and unsecured creditors often recover only a minimal fraction of their original debt.

Due to Vietnam’s legal and practical barriers, foreign creditors must exercise caution, choose appropriate legal strategies and engage qualified lawyers or legal advisors with expertise in Vietnamese regulations to maximize their debt recovery efforts.

For foreign businesses, collecting debts from Vietnamese debtors requires more than navigating complex legal procedures. It demands cultural sensitivity and a thorough understanding of Vietnam’s unique legal framework. Without careful preparation and proper handling, creditors risk facing prolonged timelines, excessive costs and diminished recovery outcomes. This article aims to provide comprehensive, practical insights into the challenges foreign businesses encounter when collecting debts in Vietnam, while offering effective solutions to help protect their legitimate rights and interests.