FIVE COMMON MISTAKES BORROWERS MAKE WHEN A BANK PREPARES TO REPOSSESS MORTGAGED PROPERTY IN VIETNAM
Category: Legal Insights
Practice Area: Banking & Finance Disputes | Secured Transactions
Focus: Legal Representation for Borrowers and Mortgagors in Banking Disputes
Prepared by: HT Legal VN Law Firm
Introduction
In Vietnam, when a loan becomes overdue or is classified as a non-performing loan (NPL), banks or credit institutions may initiate procedures to enforce collateral or repossess mortgaged property in order to recover outstanding debts.
Under Vietnamese law, the enforcement of secured assets is primarily governed by:
- The Civil Code of Vietnam 2015, particularly provisions on secured transactions; and
- The Law on Credit Institutions 2024, as amended in 2025, which introduces clearer legal grounds for the repossession of collateral in cases involving non-performing loans.
In practice, borrowers and mortgagors often face significant financial and psychological pressure during this stage. However, many individuals unintentionally make mistakes that may further complicate their legal position.
Below are five common mistakes borrowers frequently make when a bank prepares to repossess mortgaged property in Vietnam.
1. Failing to Review the Credit and Mortgage Agreements
One of the most common mistakes is failing to review the contractual documents governing the loan.
Credit agreements and mortgage agreements typically contain detailed provisions regarding:
- Events of default;
- The lender’s rights to enforce collateral;
- Methods of disposing of secured assets;
- Calculation of overdue interest and penalties.
Pursuant to Article 299 of the Civil Code of Vietnam 2015, a secured party may enforce collateral when the secured obligation is not performed or is performed improperly, or in other cases agreed upon by the parties or provided by law.
Without carefully reviewing these contractual provisions, borrowers may fail to fully understand their legal rights and obligations during the enforcement process.
2. Focusing Only on Raising Funds Without Considering Legal Issues
When borrowers receive notices regarding debt recovery or collateral enforcement, many individuals focus solely on finding financial resources to repay the debt, while overlooking the legal aspects of the situation.
However, the enforcement of collateral must comply with several legal requirements, including:
- Provisions of the Civil Code 2015 on secured transactions;
- The specific terms of the mortgage or security agreement;
- Relevant provisions of the Law on Credit Institutions 2024 (as amended in 2025) concerning the handling of non-performing loans and the repossession of secured assets.
Ignoring these legal aspects may prevent borrowers from identifying potential issues in the enforcement process that require clarification or review.
3. Failing to Preserve Relevant Documentation
Another common mistake is the failure to maintain complete records of loan-related documentation.
Important documents may include:
- credit agreements;
- mortgage or security agreements;
- notices issued by the bank;
- payment receipts and transaction records;
- written communications with the lender.
In the event of a dispute concerning the enforcement of collateral, the absence of documentation may create significant difficulties in establishing the factual and legal basis of the borrower’s position.
4. Responding Emotionally or Confrontationally During the Enforcement Process
Facing the potential loss of property can create strong emotional reactions. Some borrowers may respond by:
- refusing to communicate with the bank;
- engaging in heated disputes with bank representatives;
- or taking confrontational actions.
Such reactions generally do not resolve the underlying legal issues and may further complicate the enforcement process.
In many situations, maintaining a cooperative and legally informed approach can help the parties identify more appropriate solutions, such as debt restructuring or negotiated settlement.
5. Seeking Legal Advice Only at a Late Stage
A further common mistake is seeking legal advice only after the situation has escalated, sometimes when the collateral enforcement process has already begun.
Early legal consultation may assist borrowers in:
- understanding their legal rights and obligations under Vietnamese law;
- reviewing the loan and security documentation;
- assessing the legality of the bank’s enforcement procedures;
- identifying potential legal strategies to mitigate risks.
Timely legal guidance can often play an important role in ensuring that the enforcement process is conducted in accordance with applicable laws and contractual obligations.
Conclusion
The enforcement of collateral and the repossession of mortgaged property in Vietnam involve complex legal procedures and significant financial implications for borrowers and mortgagors.
Understanding the applicable legal framework, maintaining clear communication with the lender, and seeking professional legal advice when necessary may help borrowers protect their legitimate rights and minimize potential legal risks during the debt enforcement process.
Legal Assistance in Banking and Secured Transaction Disputes