Credit Debt Collection

With the growing demand for loans, debts in credit activities have significantly impacted the operations of credit institutions. This article clarifies key issues related to credit debt collection in Vietnam.

1. How do debts arise in credit activities?

Debts in credit activities arise from various reasons. On the borrower’s side, common causes include unstable income or fluctuating business revenue, leading to the inability to repay debts. Additionally, many loans are used for high-risk investments, excessive personal spending, or without a clear financial plan. Taking multiple loans simultaneously without a proper repayment schedule also increases the risk of overdue debts.

On the credit institutions’ side, market competition often leads to simplified procedures and relaxed lending conditions to attract clients. Unsecured credit assessment, weak risk management systems, and the lack of timely portfolio adjustments during market fluctuations also increase the likelihood of debts.

Moreover, objective factors contribute to the problem, such as economic downturns, inflation, rising input costs, epidemics, or natural disasters, all of which directly affect borrowers’ financial capacity. In addition, both borrowers and credit institutions may struggle to adapt quickly to changes in credit or tax policies, causing loans to become debts. These factors make debt collection more complex, costly, and risky.

2. Legal Basis for Credit Debt Collection in Vietnam

The collection of debts in Vietnam is governed by several key legal instruments, specifying the rights and obligations of debtors while protecting the interests of credit institutions, including:

• Civil Code 2015: Provides for debt repayment obligations, parties’ rights, and liabilities for late payments.
• Law on Credit Institutions 2024: Regulates lending activities, debt repayment obligations, and mechanisms for handling bad debts.
• Civil Procedure Code 2015 and Law on Commercial Arbitration 2010: Provide litigation procedures and dispute resolution mechanisms for credit contracts in courts and arbitral tribunals.
• Law on Civil Judgment Enforcement 2008 (amended in 2014, 2018, 2020, and 2022).
• Other relevant legal documents.

3. Common Issues in Credit Debt Collection

One common difficulty is debtors losing repayment capacity due to unstable income or poor financial management. Prolonged overdue debts are easily accumulated and making repayment impossible.

In other cases, debtors deliberately evade payment by delaying or evading when the debt exceeds their capacity. Some debtors disregard unsecured loans and intentionally default on their obligations.

Collateral may also become a problem if it is disputed in court cases or has been dissipated, recovering the debt through collateral enforcement can be difficult.

4. Credit Debt Collection Process

Debt collection in Vietnam is typically conducted in the following steps:

Step 1: Negotiation with the debtor

Credit institutions send official requests for payment to debtors to discuss repayment obligations and agree on a repayment plan. They also assess the debtor’s financial capacity and the status of collateral.

Step 2: Litigation at a competent agency

If negotiations fail, credit institutions may file lawsuits with competent dispute settlement body in Vietnam. This involves preparing petitions, collecting supporting evidence, and participating in hearings. The Judgment/Decision/Award serves as legal grounds for enforcement.

Step 3: Enforcement

Once the Judgment/Decision/Award takes effect, credit institutions may request the Civil Judgment Enforcement Agency to verify the debtor’s assets, apply interim measures, or liquidate collateral to enforce repayment.

5. Where Are Credit Debt Disputes Resolved in Vietnam?

Currently, disputes over credit debt collection in Vietnam are resolved by People’s Courts and Commercial Arbitration Centers. If the loan contract contains an arbitration clause, or if the parties agree to arbitration after a dispute arises, the case will be resolved at an arbitral tribunal under Article 5 of the Law on Commercial Arbitration 2010. If no such agreement exists, disputes will be resolved by competent People’s Courts under the Civil Procedure Code 2015.

The parties may also consider commercial mediation before litigation. This is a flexible option that saves time and costs. However, mediation results are non-binding, and the debtor may still refuse to perform obligations.

6. Timeframe for Credit Debt Recovery

The duration of credit debt collection in Vietnam depends on the chosen dispute resolution method as well as the complexity of the case.

In cases resolved through negotiation or commercial mediation, the process typically lasts from 01 to 03 months at relatively low cost. However, the effectiveness of this approach largely depends on the debtor’s willingness to cooperate.

If the case is brought before a court or arbitration, the process will take longer and incur higher expenses. At the court, the time from filing the lawsuit to the conclusion of the first-instance trial is usually 04 to 05 months; if there is an appeal, the process may be extended by an additional 02 to 03 months. With arbitration, the process is generally faster than in court, with an average duration of 06 months. However, arbitration proceedings are more costly and may be extended by 01 to 03 months if the debtor requests the court to annul the arbitral award.

After a judgment, decision, or arbitral award takes legal effect but the debtor still refuses to comply, the credit institution has the right to request the Civil Judgment Enforcement Agency to apply coercive measures under the Law on Civil Judgment Enforcement. The enforcement period may last from 03 months to several years, depending on the measures applied, such as deductions from bank accounts, seizure and liquidation of money or valuable papers, wage garnishment, or disposal of collateral.

7. Required Documents for Credit Debt Recovery

To ensure a smooth debt collection process, credit institutions must prepare all necessary documents, such as the Statement of Claim, loan agreements or contracts between the parties, debt-related documents (including Debt Acknowledgment Letter, mortgage files, and official letters regarding repayment), as well as all correspondence with the debtor. Having complete evidence helps shorten the handling time and increases the likelihood of successful debt recovery.

8. Credit Debt Collection Services in Vietnam

In cases of overdue debts, credit institutions may engage professional debt collection services to accelerate the process. With over 10 years of experience handling high-value debt recovery cases, TNTP has established a strong reputation in this challenging field, achieving a success rate of over 70%. TNTP’s team of lawyers is highly trained, skilled in analysis, and capable of devising tailored recovery strategies for each case. TNTP flexibly applies various methods, including negotiation, mediation, litigation, and arbitration, to minimize costs, shorten timelines, and maximize clients’ legal rights and benefits.

In summary, credit debt collection in Vietnam requires a flexible and cooperative approach among stakeholders. Adequate preparation of documents, appropriate dispute resolution methods, and professional support enhance recovery efficiency, reduce risks, and ensure the sustainable development of credit institutions and the broader economy.

This article “Credit Debt Collection in Vietnam” is provided by TNTP. For further inquiries, please contact TNTP for assistance.

Best regards,