Should enterprises reconcile the debt?

In commercial activities, delayed payments and prolonged debts are common risks. When facing this situation, many enterprises struggle with a critical decision: should they pursue reconciliation to recover the debt or proceed directly to litigation? While reconciliation is encouraged by law, achieving effective results often requires the assistance of professional collection agencies who can ensure legal compliance and maximize the protection of the enterprise’s rights.

1. What is Debt Reconciliation?

Debt reconciliation is the process where disputing parties (creditor, debtor and related parties) either directly or through legal representatives negotiate to reach an agreement on outstanding payments. The agreement may include extended repayment periods, installment plans, partial reduction of principal/interest or alternative payment arrangements.

According to Clause 2, Article 3 of the Civil Procedure Code 2015, the State encourages parties to reconcile and settle disputes themselves before proceeding to Court. However, for reconciliation to be effective and legally binding, enterprises typically need consultation and representation from law-practicing organizations – entities authorized to provide debt collection services in Vietnam.

2. Business Perspectives on Debt Reconciliation

Many enterprises initially hesitate to pursue reconciliation, fearing it signals weakness or concession. Yet from a practical standpoint, reconciliation conducted with proper legal grounds, strategic planning and expert support offers clear benefits: faster capital recovery while maintaining valuable business relationships.

In fact, when enterprises authorize lawyers or collection agencies to represent them in reconciliation, negotiations are often more professional, reduce tension between the parties and create clear legal obligations, limiting the risk of avoiding performance of obligations later.

3. Analysis of Pros and Cons

Advantages:

• Increased recovery rate: Even if only part of the debt is recovered, it is more positive than not recovering anything.
• Time and cost savings: Instead of pursuing lengthy litigation, enterprises may quickly recover through agreement.
• Relationship preservation: Especially in cases where customers face temporary financial difficulties.
• Reduce legal risks: With lawyer support, the reconciliation agreement will be drafted strictly, with legal validity, preventing future disputes.
• Freed-up resources: Enterprises can focus on core business activities, authorizing reconciliation to professional organizations.

Disadvantages:

• Loss of part of the debt value because the enterprise has to accept reduction or extension.
• Risk of creating a bad precedent if reconciliation is not strictly controlled.
• Possibility of breach of agreement by the debtor if the agreement lacks binding mechanisms.

To minimize risks and maximize benefits, enterprises should consider using debt collection services from law firms to ensure a smooth, professional, legal and effective reconciliation process.

4. When to Reconcile Debt?

Enterprises should consider reconciliation when:

• The debtor demonstrates goodwill by proactively proposing a repayment plan.
• The debt amount is small compared to potential litigation costs.
• Quick capital recovery is needed to maintain cash flow.
• Preserving strategic partnerships is a priority.

During this phase, collection agencies play a crucial role by assessing the debtor’s payment ability, developing appropriate negotiation strategies and ensuring the agreement receives legal recognition.

5. Basic Debt Reconciliation Process

TNTP International Law Firm & Associates Co., Ltd. (“TNTP”) offers clients the following debt recovery reconciliation process:

• Case document review: TNTP examines and analyzes contracts, invoices, receipts and debt-related evidence provided by the creditor and/or collected independently by TNTP.
• Legal consultation: Lawyers analyzing the situation and proposing feasible reconciliation options.
• Conducting reconciliation: Either through direct lawyer representation or jointly with the enterprise.
• Drafting the agreement: Ensuring the written agreement contains comprehensive terms, legal binding clauses and breach remedies.
• Monitoring performance: Joint supervision of payment with readiness to apply legal measures if the debtor fails to comply.

6. Debt Collection Services in Vietnam

Debt collection services in Vietnam are legally recognized services that allow providers to act on clients’ behalf throughout the debt recovery process. Professional collection agencies employ teams of lawyers and specialists with extensive negotiation, reconciliation and litigation experience.

Enterprises using these services receive comprehensive support: from document review and reconciliation planning to direct negotiation participation and if necessary, lawsuit initiation and judgment enforcement. This approach ensures legal protection while increasing successful recovery chances.

Reconciliation is an effective debt recovery solution that helps enterprises save time and costs while maintaining business relationships. However, the process carries risks if poorly prepared or lacking legal enforcement mechanisms. Therefore, enterprises should consult with and authorize law firms to guide them through the reconciliation process, maximizing debt recovery potential while maintaining marketplace reputation.