What is the right to debt recovery? The lawful debt recovery process for businesses

In activities involving the sale of goods and provision of services, receivables and delayed payments are among the common issues encountered. The failure of an obligated party to perform its payment obligations, or to perform them fully and on time not only affects the lawful rights and interests of the entitled party but also directly impacts the financial operations of individuals and businesses.

In practice, requesting an obligated party to pay an outstanding amount is commonly referred to as “claim debt”. However, from a legal perspective, this activity is more comprehensively characterized as “debt recovery”. Accordingly, properly identifying the legal nature of debt recovery activities and selecting an appropriate and legally compliant approach are important factors in ensuring recovery effectiveness and minimizing risks. On that basis, the article below will analyze the debt recovery process in accordance with legal regulations, ensuring legality and practical feasibility in implementation.

1. What is the right to debt recovery?

Debt recovery may be understood as the act whereby an entitled party (creditor) requests an obligated party (debtor) to fulfill payment obligations or property-related obligations in accordance with an agreement or as prescribed by law. From a legal perspective, debt recovery is a process involving the application of appropriate measures to require the obligated party to perform its payment obligations, including stages such as negotiation, litigation, and judgment enforcement in accordance with legal regulations.

Accordingly, the right to debt recovery means as the right of a subject to make a claim against an obligated party, whereby such subject has the right to require the obligated party to fulfill lawfully incurred payment obligations or property-related obligations, and the right to take appropriate legal measures in compliance with the law against the obligated party in order to protect its lawful rights and interests.

The right to debt recovery only arises when there is a clear legal basis, including the existence of lawful obligations established between the parties, obligations that have become due under the agreement or applicable laws, and the failure of the obligated party to perform or fully perform the committed obligations. Accordingly, the entitled party may only request payment where there are sufficient grounds to prove the existence of the debt through lawful documents and evidence, such as contracts, transaction records, debt reconciliation minutes, debt confirmations, or other documents and electronic data with evidentiary value. On that basis, debt recovery must be conducted in accordance with legal regulations, ensuring compliance with the prescribed order, procedures, and legal limitations in order to protect the lawful rights and interests of the relevant parties.

2. Matters to be determined before debt recovery

Before carrying out debt recovery, the entitled party needs to review and clearly determine the basic matters in order to ensure that the payment request has sufficient grounds and complies with legal regulations.

Identify the correct party having payment obligations:

Clarifying the party having the obligation to repay the debt (individual, legal entity, purchaser, borrower, etc.) is important in establishing the obligation relationship. Incorrect identification of the obligated party may lead to the payment request having no legal validity or not being accepted in dispute resolution proceedings.

Accurately determine the amount and content of the obligation:

This includes the principal debt, interest, penalties for breaches (if any), and other related amounts. The determination must be based on the agreement between the parties and comply with legal regulations, in order to avoid requesting amounts beyond the scope of the obligation, which could affect the legality of the debt recovery claim.

Have documents and evidence proving the debt:

Documents evidencing the payment obligation may include contracts, contract appendices, invoices, bank statements, receipts, debt reconciliation minutes, emails, messages, or other documents demonstrating the existence of the debt and the fact that the payment obligation has not yet been fulfilled.

3. Lawful debt recovery process

Step 1: Verify and review outstanding debts

The entitled party needs to review all relevant documents to clearly determine the basis giving rise to the obligation, the amount payable, the payment deadline, and the obligated party. Where necessary, the parties may conduct debt reconciliation and confirmation procedures. This step aims to ensure that the debt recovery request is made against the correct party, for the correct amount, and with sufficient supporting evidence, thereby forming the basis for negotiation or the application of subsequent legal measures.

Step 2: Send a notice or written request for payment performance

This document needs to clearly state the basis giving rise to the obligation, the amount payable, the performance deadline; specify a deadline for performance of the obligation; and clearly express the position that legal measures will be applied if the obligation is not performed.

Sending a notice not only demonstrates goodwill but is also important evidence proving that the debtor has been requested to perform the obligation, while serving as a basis for subsequent handling steps in cases where the obligated party still fails to comply with the request of the entitled party.

Step 3: Negotiate and work with the debtor

After verifying and/or establishing the debt, the entitled party should prioritize negotiating and working directly with the debtor to reach a payment agreement on a voluntary basis.

At this stage, the entitled party needs to clearly notify the payment obligation, including the amount payable, the overdue period, and the basis giving rise to the obligation. At the same time, appropriate payment options may be proposed, such as lump-sum payment or payment according to a schedule, depending on the debtor’s financial capacity and level of cooperation. This process should be documented (emails, debt reconciliation and confirmation minutes) to serve as supporting evidence when necessary. Where the debtor fails to cooperate or perform its commitments, the entitled party may proceed with subsequent legal measures.

Step 4: Initiate legal proceedings before the court or arbitration

Where the obligated party fails to make payment after the above steps have been taken, the entitled party may initiate legal proceedings to request dispute resolution in accordance with legal regulations. Depending on the agreement between the parties, the dispute may be resolved by the court or commercial arbitration. The case file includes the statement of claim together with documents and evidence proving the debt and the process of requesting payment.

Step 5: Request judgment enforcement after the judgment or decision becomes legally effective

To protect its lawful rights and interests, the entitled party, which at this stage becomes the judgment creditor, needs to exercise the right to request judgment enforcement in accordance with the Law on Civil Judgment Enforcement. Accordingly, the judgment creditor submits a request for judgment enforcement and cooperates with the civil judgment enforcement authority during the enforcement process, including verification of enforcement conditions and application of compulsory enforcement measures.

At this stage, proactively monitoring and providing information relating to the assets and enforcement conditions of the judgment debtor is important in ensuring that enforcement is carried out in practice.

4. Approaches to handling cases where the debtor does not cooperate

During the debt recovery process, an obligated party may be considered non-cooperative where one or more of the following signs exist: avoiding communication or meetings, failing to respond to payment requests; failing to perform obligations on time despite having been requested to do so; or repeatedly delaying performance of obligations without legitimate reasons. These signs demonstrate a lack of good faith in performing obligations and may directly affect the ability to recover the debt.

In such cases, the entitled party should continue requesting performance of the payment obligation, while sending a written request for performance to specify a definite deadline. Where the obligated party still fails to perform, the entitled party may initiate legal proceedings before the court or commercial arbitration in accordance with the agreement between the parties and applicable laws.

For high-value debts, complex nature, or where the obligated party shows signs of intentionally failing to perform obligations, the use of legal debt recovery services is necessary to ensure the selection of appropriate handling measures and the protection of the lawful rights and interests of the entitled party.

5. Acts that should not be carried out during debt recovery

During the debt recovery process, the entitled party needs to comply with applicable laws and avoid actions that may lead to legal risks. Certain acts that should not be carried out include:

• Using force or threatening to use force to compel the obligated party to make payment;
• Intimidating or exerting unlawful pressure to force performance of obligations;
• Arbitrarily possessing or dealing with the assets of the obligated party without legal grounds or outside the order and procedures carried out by competent authorities;
• Infringing upon the honour, reputation, or private life of the obligated party during the debt recovery process.

The above acts may be subject to penalties under the 2015 Criminal Code or other relevant legal regulations. Therefore, debt recovery needs to be carried out on a lawful basis, with sufficient grounds and in accordance with the proper order and procedures, in order to protect the lawful rights and interests of the relevant parties.

6. Comparison between debt recovery in civil relationships and debt recovery arising from business and commercial activities

Similarities: Whether arising in civil relationships or in business and commercial activities, debt recovery must be based on grounds establishing payment obligations and be carried out in accordance with applicable laws.

Differences:

Debt recovery in civil relationships usually arises from transactions between individuals (such as loans or borrowing of property), where the content of obligations and the system of evidence are relatively simple, mainly based on civil agreements and documents confirming obligations.

Meanwhile, debt recovery arising from business and commercial activities is often associated with contractual relationships such as the sale of goods, provision of services, or other commercial transactions between traders. These debts are often of significant value, arise during the performance of contracts, and may involve multiple parties and successive transactions. The establishment, performance, and handling of obligations in such cases are governed not only by the Civil Code 2015 but also by the Commercial Law 2005 and other relevant specialized regulations.

Accordingly, debt records within enterprises are often systematic in nature, including contracts, contract appendices, delivery and acceptance documents, invoices, debt reconciliation records, and other related documents. Debt recovery therefore requires a strict process of management, reconciliation, and handling, ensuring sufficient evidence and compliance with the prescribed legal order and procedures in order to minimize risks and improve recovery effectiveness.

7. Frequently asked questions

Is there a right to recover debt when there is only a loan document, contract, or confirmation message?

Answer: The entitled party may recover debt when there is only a loan document, contract, or confirmation message. Pursuant to Article 91 of the Civil Procedure Code 2015, a party has the obligation to provide documents and evidence to prove that its claims are well-grounded and lawful. At the same time, Article 95 of the Civil Procedure Code 2015 provides that evidence includes readable, audible, and visible materials, as well as electronic data (including emails, messages, and others).

Accordingly, documents such as loan agreements, contracts, emails, messages, or debt confirmations may all be used as evidence if they demonstrate the content of the agreement, the parties involved, and specific obligations.

What should be done if the obligated party still fails to make payment despite repeated requests?

Answer: In cases where the obligated party fails to perform the payment obligation despite having been reminded multiple times, the entitled party may send an official written request for payment (official letter of demand/formal notice), clearly stating: the basis giving rise to the obligation, the amount payable, the final deadline for performance, and the legal consequences if the violation continues.

If the obligated party still fails to perform after the deadline expires, the entitled party may initiate legal proceedings before the competent court or commercial arbitration to request dispute resolution, compel performance of the payment obligation, and claim damages (if any) and late payment interest in accordance with the Civil Code 2015 and other relevant laws.

What should be done if the obligated party still fails to make payment after a judgment has been issued?

Answer: In cases where a judgment or decision of the court has become legally effective but the judgment debtor still fails to voluntarily perform, the judgment creditor needs to submit a request for judgment enforcement to the competent civil judgment enforcement authority in accordance with the Law on Civil Judgment Enforcement. After receiving the request, the judgment enforcement authority will issue a judgment enforcement decision and verify the conditions for enforcement. In addition, where the judgment debtor fails to voluntarily perform, compulsory enforcement measures may be applied, such as distraint and disposal of assets or deduction of money from accounts to ensure enforcement. Proactively cooperating and providing information relating to the assets of the judgment debtor will contribute to improving the effectiveness of debt recovery.

Debt recovery needs to be carried out on the basis of compliance with applicable laws and the application of proper order and procedures at each stage, from negotiation and legal proceedings to judgment enforcement. Understanding legal regulations and selecting appropriate handling methods not only help protect the lawful rights and interests of the entitled party but also contribute to minimizing legal risks and improving the effectiveness of debt recovery in practice.

Best regards,