OVERDUE DEBTS & NON-PERFORMING LOANS (NPL): LEGAL SOLUTIONS AND PRACTICAL EXPERIENCE IN ASSET PROTECTION
HT Legal VN – Reputable Law Firm in Ho Chi Minh City & Hanoi
1. The Issue
Overdue debts and non-performing loans (NPL) undermine creditworthiness and, more importantly, expose borrowers and enterprises to the risk of enforcement against secured assets.
Although the law provides a regulatory framework, in practice, borrowers and enterprises who fail to understand and exercise their legal rights often suffer significant losses of legitimate interests.
2. Legal Framework on Enforcement of Secured Assets
Pursuant to Article 198a of Law No. 96/2025/QH15:
- Credit institutions are entitled to repossess secured assets if such right is expressly provided in the security agreement and all statutory conditions are satisfied.
- Borrowers and mortgagors are entitled to monitor valuation and auction proceedings, and to file complaints or initiate lawsuits in the event of violations.
3. Practical Recommendations
a. At the Onset of Financial Distress
- Engage with the bank as soon as financial difficulties arise.
- Seek interest reduction, debt restructuring, rescheduling, or other financial accommodations.
- Carefully review the loan agreement and security arrangements.
- Where disputes or repossession are foreseeable, retain specialized legal counsel to safeguard rights.
b. During Repossession or Enforcement Proceedings
- Verify legality of repossession: a valid contractual clause must exist; the asset must not be subject to dispute, attachment, or injunctive relief; and statutory public notices must be made.
- Supervise valuation and auction: demand transparency and disclosure; request revaluation when justified; lodge complaints or denunciations in cases of collusion or price manipulation.
In practice, HT Legal VN has frequently acted for clients in supervising enforcement and auction processes, ensuring maximum protection of their lawful rights.
c. Remedies: Complaints, Denunciations, and Litigation
- File complaints with credit institutions or debt-trading entities.
- Submit denunciations to competent investigative authorities in cases of abuse of authority, unlawful appropriation, or collusion in auctions.
- Institute civil proceedings before competent courts to annul auction results or claim damages.
d. Particular Considerations for Foreign-Invested Enterprises (FDI Enterprises)
FDI enterprises face heightened risks if secured assets are enforced:
- Loss of access to credit and disruptions in supply chains.
- Negative impact on corporate profile, procurement, and fundraising.
- Potential amendment or revocation of investment licenses if secured assets are tied to licensed projects.
Key considerations include:
- Whether the assets fall within restricted investment categories.
- Whether foreign ownership limitations are triggered.
- Whether amendments or notifications to the Investment Registration Certificate are required.
Engaging specialized lawyers in investment, credit, and secured transactions is critical to conduct comprehensive risk assessment and to design compliant solutions.
4. Conclusion
In cases of overdue debts and NPL, the decisive factor lies not only in the lender’s statutory right of repossession, but also in the borrower’s ability to exercise available legal remedies. Proactive negotiation, rigorous supervision of enforcement, and timely pursuit of complaints or litigation are essential to preserving lawful rights.
Experience demonstrates that many losses of secured assets result from insufficient legal knowledge or delayed action. Engaging specialized counsel from the outset mitigates risk, facilitates strategic responses, and safeguards long-term interests.
HT Legal VN is committed to delivering precise, in-depth, and effective legal solutions – accompanying clients through negotiation, supervision, and litigation – to ensure maximum protection of rights and secured assets.