When a Bank Seizes Mortgaged Assets, What Rights Does the Borrower Have?

Pursuant to Article 198a of the Law on Credit Institutions as Amended and Supplemented in 2025

This article analyzes the legal rights of borrowers and collateral providers when a bank proceeds with the seizure of collateral assets, strictly based on Article 198a of the Law on Credit Institutions as amended and supplemented in 2025, and from the perspective of protecting the lawful rights and interests of borrowers in banking and credit disputes.

1. When a bank seizes collateral, does the borrower really “lose everything”?

When a loan becomes non-performing and a bank proceeds to seize mortgaged assets such as real estate, vehicles, or other secured property, many borrowers fall into a passive position and assume that they have lost all rights over the assets.

However, Vietnamese law does not permit arbitrary seizure. A seizure is lawful only when statutory conditions are fully satisfied and prescribed procedures are strictly followed. Throughout the process of seizure and subsequent handling of collateral assets, borrowers retain legal grounds to examine the legality of the bank’s actions and to protect their lawful rights and interests.

2. Does a bank have the right to seize mortgaged assets?

2.1. Seizure arises only when the collateral provider fails to hand over the assets

Article 198a establishes the obligation of the collateral provider to hand over secured assets for handling and provides that seizure may only occur when such obligation is not fulfilled.

Accordingly, the right of seizure is not an automatic or inherent right of the bank. Seizure arises only within the framework of Article 198a and is closely linked to the existence of a non-performing loan.

2.2. A bank may seize collateral only when all statutory conditions are satisfied

Pursuant to Clause 2 of Article 198a of the Law on Credit Institutions as amended in 2025, a credit institution is entitled to seize collateral assets securing a non-performing loan only when all statutory conditions are met, including:

• A case of handling secured assets has occurred in accordance with Article 299 of the Civil Code;
• The security contract contains an agreement whereby the collateral provider consents to the secured party’s right to seize the collateral assets;
• The security measure has taken effect with respect to third parties in accordance with the law on security for performance of obligations;
• The collateral assets are not subject to court disputes, interim urgent measures, distraint, enforcement security measures, or suspension of handling under bankruptcy proceedings;
• The collateral assets meet the conditions prescribed by the Government;
• The credit institution has fulfilled its obligation to publicly disclose information as required by law.

This set of conditions constitutes the core legal basis for borrowers to assess the legality of a seizure. The absence of any single condition deprives the credit institution of the legal basis to seize the collateral assets.

3. What rights does the borrower have when a bank seizes mortgaged assets?

3.1. The right to examine the legal grounds and conditions for seizure

Upon receiving a seizure notice or witnessing the seizure, the borrower has the right to request the bank to clarify and verify compliance with each statutory condition under Clause 2 of Article 198a, particularly:

• Whether the security contract includes an agreement on seizure;
• Whether the security measure has taken effect against third parties;
• Whether the collateral assets are subject to disputes, interim measures, distraint, or suspension under bankruptcy law;
• Whether the bank has fulfilled its obligation to publicly disclose information.

Such examination enables the borrower to proactively determine whether the seizure is lawful.

3.2. The right to lawful notification and public disclosure prior to seizure

For collateral assets being real estate, Article 198a requires the bank to publicly disclose information on the time and place of seizure, the assets to be seized, and the reasons for seizure at least fifteen (15) days prior to the seizure date, through multiple legally prescribed forms.

For movable assets, the law likewise requires prior public disclosure of information regarding the assets to be seized and the reasons for seizure.

Borrowers therefore have the right to verify whether notification and disclosure obligations have been lawfully fulfilled before the seizure is carried out.

3.3. The right to supervise the seizure process and require proper records

Article 198a assigns local authorities the role of ensuring security, order, and social safety during the seizure process.

Where the collateral provider does not cooperate or is absent, representatives of the local People’s Committee are required to witness the seizure and sign the minutes of seizure.

Borrowers have the right to supervise the seizure, request the preparation of minutes, and ensure that the condition and status of the collateral assets are properly recorded for purposes of protecting their rights in the event of disputes.

3.4. The right to require that the seizure does not exceed legal limits

Article 198a expressly prohibits the use of measures that violate prohibitions of law or are contrary to social ethics during the seizure process.

In addition, credit institutions are required to promulgate internal regulations governing seizure procedures and authorization. Borrowers have the right to request clarification regarding compliance with such internal procedures, particularly in situations where conflicts or disputes arise during the seizure.

4. Common risks faced by borrowers who misunderstand their rights

From practical experience in resolving banking and credit disputes, borrowers often face legal risks due to:

• Assuming that banks have absolute authority over mortgaged assets;
• Failing to verify whether all statutory conditions for seizure are satisfied;
• Failing to examine compliance with public disclosure obligations;
• Not requiring proper minutes or records of the seizure process;
• Delaying actions to protect their lawful rights and interests.

These shortcomings may cause borrowers to lose opportunities to protect their assets or significantly weaken their bargaining position.

5. When should a borrower seek legal representation?

Borrowers should consider engaging legal counsel in the following circumstances:

• The bank proceeds with seizure while lacking one or more statutory conditions under Article 198a;
• Disputes arise concerning collateral assets, disclosure obligations, or seizure procedures;
• Disputes arise over valuation or methods of handling collateral assets;
• The bank initiates litigation or enforcement proceedings in relation to the loan.

Legal counsel can assess the legality of the seizure strictly under Article 198a and protect the borrower’s lawful rights and interests in accordance with the law and proper procedures.

6. Conclusion

A bank’s seizure of mortgaged assets does not mean that the borrower loses all rights to the assets. Article 198a of the Law on Credit Institutions as amended in 2025 places the right of seizure within a strict framework of statutory conditions and procedures.

In banking and credit disputes, the role of lawyers representing borrowers is not to create confrontation, but to ensure that all seizure and asset-handling actions are conducted lawfully, procedurally, and fairly.

See also: Lawyers for the Protection of Borrowers and Collateral Providers – HT Legal VN.

Firm Information

HT Legal VN Law Firm is a professional law firm specializing in contract disputes, banking and credit disputes, security transactions, and civil enforcement proceedings.

With extensive experience in representing borrowers and collateral providers in credit relationships with banks, HT Legal VN focuses on protecting clients’ lawful rights and interests through strict compliance with the law, proper procedures, and prudent legal strategies.

HT Legal VN adheres to the professional philosophy: “Right Solutions – Effective Outcomes – Trustworthiness.”

HT Legal VN
Right Solutions – Effective Results – Trust.
Law is not merely regulation, but trust.

CONTACT INFORMATION

HT LEGAL VN LAW FIRM
A Vietnamese Limited Liability Law Firm

📞 Hotline: +84 9 6161 4040 | +84 9 2222 4040
📧 Email: info@htlegalvn.com
🌐 Website: www.htlegalvn.com

Head Office (Ho Chi Minh City):
Office 1: No. 207B, Nguyen Phuc Chu Street, Tan Son Ward, Ho Chi Minh City, Vietnam

Branch Office (Ho Chi Minh City):
Office 2: No. 12, Alley 602/37, Dien Bien Phu Street, Thanh My Tay Ward, Ho Chi Minh City, Vietnam

Branch Office (Hanoi):
Office 3: No. 5, Alley 252/115, Tay Son Street, Dong Da Ward, Hanoi, Vietnam