From october 15, 2025, can banks seize collateral without filling a lawsuit?

The right of credit institutions to repossess collateral assets (“Collateral”) was previously governed under Resolution No. 42/2017/QH14 on the pilot handling of non-performing loans (“Resolution 42”). After Resolution 42 expired on January 1, 2024, this right was formally incorporated into the Law to amend and supplemetn the Law on Credit Institutions No. 96/2025/QH15 (“Law on Credit Institutions 2025”), which takes effect on October 15, 2025. This article summarizes the key provisions of the Law on Credit Institutions 2025 concerning the right to repossess Collateral and assesses the practical feasibility of enforcing this right.

1.New provisions of Law on Credit Institutions 2025 on the right of Credit Institutions to self-repossess Collateral

The Law on Credit Institutions 2025 introduces Article 198a, which sets out in detail the conditions and procedures under which a Credit Institution may self-repossess Collateral. Article 198a.1 provides that the collateral provider or the person currently holding the Collateral (“Collateral Provider”) securing a non-performing loan has the obligation to hand over the Collateral together with all relevant documents and legal records to the Credit Institutions for debt recovery. If the Collateral Provider fails to voluntarily hand over the Collateral, the Credit Institution is entitled to repossess it in accordance with Article 198a.

However, the Credit Institutions may only exercise this self-repossession right when all conditions in Article 198a.2 of the Law on Credit Institutions 2025 are satisfied:

• First, one of the circumstances for handling Collateral under Article 299 of the Civil Code occurs (e.g., the secured obligation becomes due but is not performed or is improperly performed; or the obligor must perform the secured obligation before maturity due to breach of obligations under the agreement or the law, etc.).
• Second, the security agreement must expressly provide that the Collateral Provider agrees to allow the secured party (Credit Institutions) to repossess the Collateral when the circumstances for handling Collateral arise under the laws on secured transactions. This requirement reinforces the principle of freedom of contract and aligns with the Constitution and the Civil Code 2015.
• Third, the Collateral must not be subject to a dispute accepted or being handled by a court, must not be under any injunctive relief measure, must not be seized or frozen, and must not be subject to suspension of handling under the laws on bankruptcy.
• Fourth, the secured transaction must have taken effect against third parties in accordance with the laws on secured transactions.
• Fifth, the Credit Institutions must have fulfilled the obligation to publicly disclose the repossession of the Collateral. Article 198a.3 and 198a.4 require Credit Institutions to publish information on the repossession and the reasons for the repossession before proceeding. Disclosure must be made by posting information on the online platforms; sending a written notice to the People’s Committee and the Commune Police where the Collateral is located; and notifying the Collateral Provider and holders of the Collateral (if any) through agreed methods or authorized service providers, including postal services. For real estate, disclosure may also include posting the notice at the headquarters of the Commune People’s Committee where the Collateral Provider is registered or where the Collateral is located; and the disclosure must be completed at least 15 days before the repossession date.

In cases where the Collateral Provider does not cooperate or is absent despite notice, a representative of the Commune People’s Committee where the repossession occurs must witness the repossession and sign the repossession minutes, as provided in Article 198a.5.

2.Assessing the feasibility of Credit Institutions’ right to repossess Collateral

The ability to repossess Collateral is a critical tool for Credit Institutions in dealing with non-performing loans efficiently and effectively. However, whether this right can be exercised smoothly in practice heavily depends on the cooperation of the Collateral Provider.

When the Collateral Provider voluntarily delivers the asset, and all statutory conditions for repossession are fully met – including proper disclosure procedures – the Credit Institutions may repossess the Collateral without filing a lawsuit with a court or arbitration. In such cases, the debt recovery process becomes more streamlined, proactive, and efficient for the Credit Institutions.

When the Collateral Provider refuses to voluntarily hand over the Collateral, the situation becomes significantly more complex. In this circumstance, a dispute over the obligation to deliver the Collateral is deemed to have arisen between the Credit Institutions and the Collateral Provider. The Credit Institution, however, does not have the authority to enforce or apply coercive measures against the Collateral Provider. Moreover, under Article 198a.5, of the Law on Credit Institutions 2025, the Commune People’s Committee and Commune Police at the location of the Collateral are only responsible for maintaining public order and security during the repossession; they are not authorized to participate in or support coercive measures compelling the Collateral Provider to hand over the asset. Accordingly, the critical question arises: If the Collateral Provider does not agree to hand over the Collateral, how can Credit Institutions enforce its repossession right on their own? Is it necessary for the Credit Institutions to revert to filing a lawsuit with a competent court to request resolution of the dispute over the obligation to deliver the Collateral – similar to the procedural path previously guided under Resolution No. 03/2018/NQ-HĐTP of the Council of Judges of the Supreme People’s Court (now expired)?

This article, “From october 15, 2025, can banks seize collateral without filling a lawsuit?”, is presented by TNTP. Should you have any inquiries, please feel free to contact TNTP for further clarification.

Sincerely.