Debt collection in Vietnam

Debt collection in Vietnam should begin with a practical assessment of the debtor, the documents confirming the debt and the debtor’s real connection with Vietnam. For a corporate debtor, it is important to identify the exact registered name, enterprise registration details, registered address, legal representative, current business status, business line, signs of continuing commercial activity, possible assets in Vietnam, ongoing court cases, enforcement records and insolvency indicators.

This assessment determines whether the creditor should start with out-of-court negotiations, prepare a court claim in Vietnam, enforce an existing judgment or arbitral award, initiate enforcement measures, or consider rehabilitation and bankruptcy-related recovery. The strength of the creditor’s position usually depends on the contract, invoices, delivery or service documents, correspondence, payment history, written acknowledgments of debt and the debtor’s ability to raise objections to the claim.

If the debtor is still operating, has a reachable address or identifiable representatives, and there are no pending proceedings that make voluntary recovery unrealistic, the out-of-court debt collection stage may be used before court proceedings. In Vietnam, this stage should be organized around a clear payment demand, documented communication and a settlement proposal that can later support the creditor’s position if the debtor refuses payment or defaults again.

This stage involves structured negotiations with the debtor aimed at repayment of the outstanding amount or another commercially acceptable settlement. Depending on the documents and the debtor’s position, settlement may include full payment, instalments, return of goods, partial repayment combined with security, transfer of the debt to a third party, set-off, exchange of services or another arrangement that is recorded in writing.

Communication with the debtor usually begins after a written payment demand is sent by mail, email or another traceable channel. Further contact by phone or messaging applications should be focused on confirming the debtor’s position, identifying the person authorized to make payment decisions, preserving evidence of communication, obtaining written acknowledgment of the debt where possible, and fixing a realistic payment schedule.

The average time for informal out-of-court debt collection in Vietnam is up to 60 days, unless the parties agree on a longer repayment schedule. If the debtor avoids communication, disputes the debt without supporting documents, refuses to provide a payment plan, starts moving assets, or uses negotiations only to delay payment, the creditor should proceed to judicial debt collection or another formal recovery route available under Vietnamese law.

Before initiating judicial collection, the creditor should assess the limitation period. For contractual debt claims in Vietnam, the limitation period for requesting a court to resolve a contract-related dispute is 3 years from the date on which the creditor knew or should have known that its lawful rights and interests were infringed. The court applies limitation rules only at the request of a party, provided that the request is filed before the first-instance court issues its judgment or decision.

The limitation period may recommence if the obligor acknowledges part or all of its obligations to the creditor, fulfills part of its obligations, or the parties become reconciled. After such an event, a new limitation period starts from the following day. Written acknowledgment of the debt, partial payment and documented reconciliation are therefore important not only for settlement, but also for the litigation strategy.

Vietnamese law provides for judicial debt collection in Vietnam through ordinary and simplified judicial procedures. The ordinary procedure is used where the debt is disputed, the evidence requires detailed examination, the debtor raises objections, additional participants may be involved, or the case cannot be resolved under simplified rules.

The ordinary judicial procedure starts with filing a statement of claim with the competent court. If the court considers that the case falls within its jurisdiction and the claim satisfies the procedural requirements, the judge notifies the claimant about the advance payment of court fees where such payment is required. The claimant must pay the court fee advance and submit the receipt within 7 days from receipt of the court’s notice.

After the case is accepted, the court sends a written notice of acceptance to the plaintiff, the defendant, persons with related rights and obligations, and the procuracy of the same level within 3 working days. Within 15 days from receipt of the notice, the defendant and persons with related rights and obligations must submit written opinions on the plaintiff’s claim, together with materials, evidence, counterclaims or independent claims, if any.

The period for preparing a debt collection case for first-instance trial is generally 4 months, except for cases resolved under simplified procedures and cases involving foreign elements. During the preparation stage, the judge forms the case file, determines the procedural status of the parties and other participants, identifies the disputed legal relationship and applicable law, examines the facts, considers temporary emergency measures, and may hold sessions concerning verification, handover, access to and disclosure of evidence, as well as mediation.

If the defendant and the defendant’s representative fail to attend the hearing after proper summoning, the court may proceed with the trial in their absence under the procedural rules. If the court cannot complete the necessary preparatory actions in one hearing, the hearing may be postponed, and the period of postponement must not exceed one month from the date of the ruling on postponement.

After preparation is completed, the court proceeds to the hearing and judicial debate. The parties must base their arguments on the documents, evidence and facts examined at the court hearing. After the debate, the court issues a decision, which becomes legally effective after the expiry of the appellate period unless an appeal is filed within the statutory time limit.

The simplified judicial procedure may be used when all statutory conditions are satisfied: the case has simple facts, the legal relationship is clear, the parties have admitted their obligations, the available materials and evidence are sufficient for resolving the case, and the court does not need to collect additional evidence. The residence or headquarters address of all involved parties must also be identified.

This procedure is generally unavailable where an involved party resides overseas or the disputed property is located in a foreign country. An exception may apply where the parties residing overseas and in Vietnam agree to request resolution under simplified procedures, or where the parties present evidence of legitimate ownership rights and agree on the handling of the property. If new facts appear, additional evidence must be collected, valuation is required, provisional emergency measures become necessary, new parties are involved, or foreign evidence must be obtained through judicial assistance, the case may be transferred to the ordinary procedure.

Within one month from the date on which the case is accepted for simplified resolution, the assigned judge must issue a decision to bring the case to trial under simplified procedures and hold the trial within 10 days from the date of that decision.

The decision of the court of first instance may be appealed to the appellate court within 15 days from the date of judgment pronouncement. If an involved party or representative was absent from the hearing or absent when the judgment was pronounced for a valid reason, the appellate period is counted from the date when the judgment is handed to that party or publicly posted. For judgments or decisions issued under simplified procedures, the appeal period is 7 days. The appellate judgment or decision takes legal effect from the date of issuance.

If there are grounds established by procedural legislation, legally effective judgments and decisions may be reviewed under cassation procedures. Persons competent to appeal under cassation procedures may lodge such an appeal within 3 years from the date on which the court judgment or decision takes legal effect.

For international creditors, a separate route may be required where the creditor already has a foreign court judgment or a foreign arbitral award and the debtor or enforceable assets are located in Vietnam. In such cases, the practical task is usually recognition and enforcement of foreign judgments in Vietnam or recognition and enforcement of a foreign arbitral award, rather than proving the original debt again in a new ordinary claim.

An application for recognition and enforcement of a foreign civil judgment or decision must generally be submitted within 3 years from the date on which the foreign judgment or decision takes legal effect. The application may be submitted through Vietnam’s Ministry of Justice where an applicable international treaty provides that route, or to a competent Vietnamese court under the Civil Procedure Code. The application should identify the judgment creditor and judgment debtor, and where the debtor has no residence, workplace or head office in Vietnam, it should indicate the place where assets connected with enforcement exist in Vietnam.

For a foreign arbitral award, the creditor should prepare the arbitral award, the arbitration agreement and the evidence required for recognition and enforcement proceedings. The route depends on the arbitration clause, the place of arbitration, the finality of the award, proper notification of the debtor and the existence of assets in Vietnam that can be targeted after recognition.

After the court decision, recognized foreign judgment or recognized foreign arbitral award becomes enforceable in Vietnam, the creditor should initiate civil judgment enforcement by submitting an enforcement request to the competent civil judgment enforcement authority. The request should identify the creditor, the debtor, the enforceable decision, the amount to be recovered, the obligation to be performed and any available information about the debtor’s assets, bank accounts, receivables, business income or other enforcement conditions. The enforcement request may be filed within 5 years from the date on which the judgment or decision becomes legally effective, or from the date on which the obligation becomes due if the judgment sets a specific performance deadline.

After receiving the enforcement request and the enforceable judgment or decision, the competent authority checks the request and issues an enforcement decision within 5 working days, unless there are grounds to refuse the request. Once enforcement proceedings in Vietnam are opened, the debtor must comply with the enforceable decision and provide truthful information about assets and enforcement conditions when requested.

The creditor’s claims may be satisfied through enforcement measures directed at the debtor’s money, bank accounts, income, receivables, movable and immovable property, securities, vessels, aircraft, intellectual property rights, business income and other executable assets. If the debtor has enforceable assets but does not voluntarily comply, coercive enforcement measures may be applied on the basis of the enforceable judgment or decision, the enforcement decision and the debtor’s failure to perform despite having enforcement conditions.

An alternative option for debt recovery is to use rehabilitation and bankruptcy procedures against the debtor. This route is relevant where the debtor’s default is not limited to one unpaid invoice, but indicates a broader inability to satisfy mature debts, continued non-payment to several creditors, asset transfers, suspension of normal business activity or enforcement difficulties.

An enterprise or cooperative is considered insolvent if it fails to perform a payment obligation after 6 months from the payment maturity date. An unsecured creditor or a partially secured creditor may initiate bankruptcy proceedings against an insolvent debtor. For the creditor, this procedure may be useful where ordinary enforcement is unlikely to produce payment, the debtor’s assets need to be identified and controlled, or suspicious transactions must be reviewed within the insolvency process.

The procedure may lead either to business rehabilitation or to bankruptcy liquidation. A rehabilitation plan may be approved by the creditors and recognized by the court. If the creditors do not determine the implementation period, the rehabilitation plan may be implemented for up to 3 years from the date on which the creditors approve it. During this period, the debtor’s business activity, asset position and implementation of the rehabilitation plan may be supervised by the relevant participants in the procedure.

If rehabilitation is not approved, is not implemented, or does not restore the debtor’s ability to pay, the case may proceed to bankruptcy. In bankruptcy, the debtor’s estate is formed and distributed according to the statutory order of priority. Bankruptcy costs, employee-related claims, compulsory social insurance, unemployment insurance, health insurance, occupational accident and disease insurance, severance and other employee benefits, debts arising for the purpose of business rehabilitation, financial obligations to the state, unsecured creditor claims and unpaid parts of secured claims are considered within the distribution framework.

At this stage, the creditor may also seek review of transactions that reduced the debtor’s estate. Transactions conducted within 6 months before the court issues the decision to open bankruptcy proceedings may be declared invalid if they involve transfer of assets not at market value, conversion of unsecured debts into secured or partially secured debts using the debtor’s assets, payment or set-off benefiting one creditor for an unmatured debt or for an amount exceeding the due debt, donation of assets, transactions not aimed at generating profit for the debtor, or other transactions aimed at dispersing the debtor’s assets.

Transactions with related persons may be challenged if they were conducted within 18 months before the court issues the decision to open bankruptcy proceedings. This is important where assets were transferred to shareholders, managers, affiliated companies, relatives or other connected persons before the bankruptcy case was opened.

If a transaction is declared invalid, the court may cancel related security measures and resolve the legal consequences of the invalid transaction. The purpose is to return assets or value to the debtor’s estate, increase the amount available for creditors and prevent the debtor or related persons from reducing the recovery base before bankruptcy. A bankruptcy decision also does not release the asset obligations of a private enterprise owner or a general partner of a partnership for unpaid creditor claims, unless the parties agree otherwise or the law provides another rule.

If you need support with debt collection in Vietnam, Grandliga can assist at each stage of the recovery process: assessment of the debtor and evidence, preparation of a payment demand, settlement negotiations, limitation analysis, court strategy, judicial debt collection, recognition and enforcement of foreign judgments or arbitral awards, enforcement proceedings, rehabilitation and bankruptcy-related recovery. Contact us to receive a preliminary assessment of your case and practical recommendations for recovering a commercial debt from a Vietnamese debtor.

07.10.2024

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