Tag: Barriers in Enforcement

Debt Collection Challenges: Barriers in Enforcement remain a major obstacle for many businesses, organizations, and individuals seeking to protect their legitimate rights. Even when a judgment favored the creditor, enforcing that judgment in practice often proves to be a difficult process. This article by TNTP analyzes key issues and offers specific solutions to help clients understand and effectively navigate the enforcement phase to recover debts.

1. An Overview of Debt Collection Challenges

Court proceedings in debt recovery usually conclude with a judgment, decision, or ruling by a competent authority that has taken legal effect. However, enforcement of a judgment does not always guarantee successful debt recovery.

The enforcement phase is inherently complex, involving procedures such as service of documents, verification of assets, and the application of security or coercive measures. It requires coordination among multiple parties – the creditor, the enforcement agency, and the debtor. Barriers in enforcement may arise from various sources, including the debtor’s lack of cooperation, the debtor’s financial condition, or the efficiency of the enforcement agency itself.

The two most common debt collection challenges faced by businesses are: (1) Ambiguous ruling in the judgment, and (2) The debtor ceasing operations or becoming insolvent. Both issues can significantly reduce the effectiveness of enforcement and delay the recovery process. TNTP will examine these two main challenges in detail below and suggest appropriate strategies for each.

2. Challenge 1: Lack of Clarity in the Court’s Judgment

The first barrier in enforcement arises when a judgment lacks precision and clarity, creating obstacles for enforcement agencies in implementing it. Common issues include:

• Legal errors: Misapplication of the law or absence of a clear legal basis, leaving enforcement officers uncertain about the lawful grounds for execution.
• Inaccurate descriptions: Ambiguities in identifying the debtor, assets, or the amount to be enforced, especially in cases involving multiple components such as principal debt, interest, late payment penalties, and ancillary costs.
• Lack of feasibility: The judgment imposes obligations that are practically impossible for the debtor to fulfill.

These shortcomings often prolong the enforcement process, increase costs for the creditor, and provide an opportunity for the debtor to transfer or conceal assets, withdraw capital, or engage in transactions to evade debt repayment, ultimately diminishing the chance of successful recovery.

To address the above issues, creditors may consider applying the following solutions:

• Judgment Assessment: Creditors should review the judgment carefully to assess the feasibility of enforcement, ensuring clarity in the rights, obligations, and amounts due, as well as the legal grounds for the judgment.
• Request for Clarification: Under Article 179 of the Law on Civil Judgment Enforcement 2008 (as amended in 2014), creditors or enforcement agencies may request the court to clarify any ambiguous provisions.
• Appeal or Judicial Review: If the judgment contains serious errors, the creditor may file an appeal (for first-instance judgments not yet effective) or request cassation or retrial proceedings. 
• Engaging Legal Services: This is the most effective solution for addressing debt collection challenges arising from unclear judgments. Experienced enforcement lawyers can identify legal errors at an early stage, provide strategic and practical advice, and represent clients in procedures for clarification, appeal, or judicial review (cassation or retrial).

3. Challenge 2: The Debtor Has Ceased Operations

The second debt collection challenge is when the debtor ceases operations, one of the most complex barriers in enforcement. This situation encompasses various scenarios, each with its own characteristics and requiring different approaches for effective resolution.

• Enterprise Dissolution: The debtor has completed all dissolution procedures under the Law on Enterprises 2020.
• De Facto Cessation: The debtor has ceased business operations in practice but has not yet completed formal dissolution procedures. In such cases, identifying the debtor’s assets becomes difficult because the company no longer generates revenue, its bank accounts may have been closed, and its assets may already have been transferred
• Legal Entity Conversion: The debtor changes its business structure or legal status through mergers, consolidations, or acquisitions. Under the Law on Enterprises 2020, when companies merge or consolidate, the new entity assumes all rights and obligations of the former entities. However, in practice, many successor companies deny such responsibilities, or it becomes difficult to identify which entity is legally liable for the outstanding debt.

The direct consequence is that the likelihood of debt recovery is reduced to a minimum due to the difficulty in identifying enforceable assets, increasing the risk of losing the entire debt. During enforcement, if the debtor’s assets cannot be located or verified, the process will be prolonged and may eventually become unenforceable. 

Solutions in this situation include:

• Asset Tracing and Verification: Methods include checking property registration records, searching for registered vehicles with the Department of Transport, requesting banks to disclose account information, and investigating movable assets of significant value, such as machinery or equipment. In certain cases, creditors may pursue the personal assets of business owners or company members if legally justified.
• Filing a Request with Competent Authorities to Prevent the Debtor from Conducting Dissolution or Bankruptcy Procedures: If the creditor discovers that the debtor is preparing to dissolve or declare bankruptcy, they should promptly file a petition with the relevant state authority to prevent such actions. In cases where the debtor has already filed for bankruptcy, the creditor must submit a debt claim and participate in the creditors’ meeting to ensure their debt is repaid in accordance with the statutory order under bankruptcy law.
• Engaging Professional Debt Collection Services: Professional debt recovery firms, equipped with experienced investigators, lawyers, and financial experts, can assist in locating assets, analyzing the debtor’s financial condition, and applying suitable legal measures to facilitate recovery.

4. Comprehensive Solutions and Actionable Steps

To overcome enforcement barriers, creditors must act proactively and implement measures to ensure effective debt recovery during the enforcement phase:

• Act Swiftly: Immediately after the judgment takes legal effect, creditors should file a request for enforcement with the competent enforcement agency and simultaneously request the application of security measures to prevent the debtor from transferring or concealing assets, thereby safeguarding the assets available for debt recovery.
• Coordinate Closely with Enforcement Authorities: Creditors should maintain proactive communication with the enforcement officer in charge of the case, providing comprehensive information about the debtor, including asset details, contact addresses, and any other relevant information to facilitate efficient enforcement.
• Maintain Complete Documentation: The clearer and more complete the file, the smoother the enforcement process. During enforcement, creditors should continue to collect and supplement documents related to the debtor’s assets and legal status.
• Seek In-Depth Legal Consultation: Lawyers specializing in enforcement and debt recovery possess in-depth knowledge of the process, procedural nuances, and effective legal strategies to maximize the likelihood of successful recovery.

5. Comparison: Domestic and International Debt Recovery Barriers

Similarities:

• Both domestic and international debt collection share the same foundation, respecting legally binding judgments and protecting the creditor’s rights.. 
• Common barriers include a lack of asset transparency, debtor non-cooperation, and jurisdictional limits of enforcement agencies.

Differences:

• International enforcement is far more complex due to differences in legal systems, judicial procedures, and administrative requirements between countries. While domestic debt recovery involves only one legal system, international enforcement must reconcile at least two: the jurisdiction issuing the judgment and the jurisdiction where enforcement is sought.
• Recognition and enforcement of foreign judgments require additional procedures such as legalization, authentication, and compliance with bilateral or multilateral treaties. 
• The costs of international debt recovery are substantially higher. Creditors often incur expenses for certified translations, consular legalization, and legal representation in both jurisdictions, in addition to travel and communication costs. 

6. Debt Collection Services in Vietnam by TNTP

With a team of experienced lawyers specializing in litigation and civil judgment enforcement, TNTP has supported numerous domestic and international clients in recovering debts effectively. Our debt collection services include:

• Reviewing case files, assessing legal grounds, enforcement feasibility, and potential risks;
• Providing legal advice, evaluating recovery prospects, and proposing appropriate strategies;
• Verifying the debtor’s assets and legal status;
• Representing clients in negotiations and settlement discussions with debtors;
• Representing clients in court proceedings and civil enforcement procedures;
• Requesting competent authorities to take additional legal actions such as judgment clarification, appeals, or participation in bankruptcy proceedings if necessary..

Debt Collection Challenges: Barriers in Enforcement are a reality many businesses face when exercising their lawful debt recovery rights. With extensive experience and a team of highly specialized lawyers, TNTP is committed to supporting clients in overcoming these enforcement challenges, protecting their legitimate interests, and achieving optimal outcomes in debt recovery.