Temporary exit suspension and its effectiveness in debt recovery

As financial institutions face mounting challenges with non-performing loans and deliberate debt avoidance in both civil and commercial domains, strategic preventive measures, notably temporary exit restrictions, have proven instrumental in debt collection efforts. This article analyzes the current legal framework governing exit suspension and evaluates its practical effectiveness in protecting the rights and interests of creditors.

1.What is temporary exit suspension? 

According to Clause 7, Article 2 of the 2019 Law on Exit and Entry of Vietnamese Citizens and Clause 7, Article 3 of the 2014 Law on Entry, Exit, Transit and Residence of Foreigners in Vietnam, a temporary exit suspension is a preventive measure imposed by competent authorities on Vietnamese citizens or foreigners residing in Vietnam, prohibiting them from leaving Vietnamese territory for a certain period, when falling under circumstances prescribed by law. This is not a punitive measure but rather a restriction on the right to exit aimed at ensuring compliance with financial obligations, execution of court judgments or cooperation during legal proceedings.

2.Subjects to whom exit suspension may apply

Under Article 36 of the 2019 Law on Exit and Entry of Vietnamese Citizens and Article 28 of the 2014 Law on Entry, Exit, Transit and Residence of Foreigners in Vietnam, exit suspension may be applied to individuals whose departure may affect national interests, public order or the lawful rights and interests of other individuals, organizations or the State. Specific circumstances include:

• Risk of evading legal liability or obstructing legal proceedings: Individuals such as suspects, defendants or persons under investigation may flee abroad to avoid criminal prosecution or to destroy evidence.
• Risk of impairing the enforcement of judgments: Persons subject to deferred sentences, civil judgment debtors or tax defaulters may hinder enforcement if they leave the country, making it difficult to recover assets or collect taxes owed.
• Cases involving public interest or third-party legal rights: Individuals with outstanding tax obligations, subject to coercive enforcement or under other legal obligations to the State may cause financial or legal harm to other entities if allowed to exit.
• Risk to national security or defense: Certain individuals may pose threats to national security or defense if permitted to leave the country.
• Public health concerns: Individuals suffering from dangerous infectious diseases may spread such diseases internationally if they are allowed to travel abroad.

3.Impacts of exit suspension on debt recovery

Although administrative in nature, exit suspension is a powerful and effective measure in debt recovery, especially in civil and commercial cases. Its impacts include:

• Immediate pressure on debtors

When exit suspension is imposed, debtors often experience significant psychological pressure due to restricted mobility. For those involved in international business, such restrictions can seriously affect travel and commercial operations. Being “held” in Vietnam may prompt them to proactively negotiate with creditors or enforcement authorities to settle debts, accelerating the resolution process.

• Prevention of asset dissipation and evasion of obligations

One of the major risks in financial enforcement is that debtors may attempt to conceal or transfer assets abroad. Exit suspension greatly reduces this risk by preventing the debtor from fleeing and avoiding execution. When applied at the right time, it helps ensure that the debtor’s assets remain within reach of enforcement authorities, avoiding deadlocks in judgment enforcement.

• Strengthening the creditor’s bargaining position

In practice, exit suspension increases the leverage of creditors. When debtors are restricted from leaving the country, they are more likely to fear legal consequences for continued noncompliance. This often leads to proactive proposals for settlement, partial repayments or reasonable payment plans. As a result, creditors may reach efficient and timely debt settlement agreements, avoiding prolonged disputes.

• Improving enforcement of judgments

An essential factor in debt recovery is ensuring that debtors fulfill their obligations. Exit suspension contributes significantly to the enforcement process, particularly in cases involving potential asset concealment or evasion. It serves as an effective supervisory and coercive mechanism, providing enforcement authorities with an additional legal tool to facilitate debt collection and judgment execution.

That said, the application of this measure must strictly follow legal procedures and be supported by adequate evidence of financial obligations, evasive conduct and potential harm to others. If applied incorrectly, the affected person may have grounds to initiate legal action and claim compensation for damages.

In the face of difficulties in civil judgment enforcement and debt recovery, exit suspension proves to be a highly effective legal instrument to compel debtors to fulfill their financial obligations. From a practical standpoint, individuals and organizations are advised to consult with legal counsel before seeking to apply this measure as part of their debt recovery strategy – particularly in cases where the debtor shows signs of evasion or frequently travels abroad – to ensure compliance with applicable laws.

Sincerely,