The issue of bad debt disputes in Vietnam has become increasingly complex and widespread — are you an individual or small business currently facing this challenge? This article explores key concepts, risks, and practical legal solutions to handle bad debt disputes effectively, helping you protect your rights, avoid legal violations, and find the most appropriate resolution.

1. Understanding Bad Debt Disputes: Concepts, Causes, and Risks

When it comes to bad debts and bad debt disputes in the Vietnamese context, many individuals and small businesses often do not fully understand their nature, leaving them unprepared when partners delay payments or when banks/credit institutions initiate lawsuits.

1.1. What Is Bad Debt and When Does a Dispute Arise?

Under Vietnamese law, bad debts include overdue loans of 90 days or more, or debts deemed at risk of loss. When a secured or unsecured loan cannot be repaid — or remains in default even after restructuring — it is classified as a bad debt.

Bad debt disputes often arise in cases where:

Credit or service contracts contain vague terms;
The collateral is under ownership dispute;
The borrower fails to fulfill obligations; or
The lender takes possession of collateral in a manner deemed unlawful by the borrower.

1.2. Common Causes and Risks for Individuals and Small Businesses

Frequent causes include:

Credit, security, or supply contracts lacking clear protective clauses or risk management mechanisms.
Ambiguous or disputed collateral ownership.
Economic downturns or poor cash flow disrupting repayment ability — leading to bad debts and ensuing disputes with creditors.

If left unresolved, these issues can result in extended insolvency, lawsuits by banks or creditors, asset seizure, loss of reputation, and restricted access to future financing. In severe cases, individuals may lose their homes, and small businesses may face operational paralysis due to cash flow blockage.

2. Legal Solutions and Practical Steps for Resolving Bad Debt Disputes

For individuals or small businesses, handling bad debt disputes is not about waiting for the debtor to repay. It requires a well-planned legal strategy, sound contract management, and proper collateral control.

2.1. Negotiation and Settlement Before Litigation

Once delayed payments or signs of bad debt appear, the creditor should immediately verify the debt status — classify the debt (overdue, doubtful, or irrecoverable) and review the loan or collateral agreements to clarify each party’s rights and obligations.

Next, initiate negotiations with the debtor to explore options such as debt restructuring, repayment extensions, revised repayment agreements, or debt transfers. This proactive step avoids costly litigation, which can damage both finances and reputation.

All new agreements and addenda must be documented in writing with authorized signatures. If collateral is involved, confirm its legal status and ownership (e.g., land certificate, registration, ownership confirmation).

2.2. Litigation, Collateral Enforcement, and Judgment Execution

If negotiation fails, the next step is to file a lawsuit in a competent Vietnamese court. According to Resolution No. 03/2018/NQ-HĐTP of the Supreme People’s Court, disputes involving the recovery or enforcement of collateral for bad debts may qualify for simplified judicial procedures.

Regarding collateral enforcement, recent reforms in Vietnam strengthen borrower protections — for example, prohibiting arbitrary seizure of essential living assets such as a person’s primary residence or livelihood means.

Additionally, the 2025 Law on Credit Institutions (Law No. 96/2025/QH15) expands the legal framework for bad debt and collateral handling, giving individuals and small businesses more clarity in dispute resolution.

Once a court judgment takes effect, if the debtor still fails to comply, the creditor may request enforcement under the Law on Civil Judgment Execution — including asset seizure and auction. However, enforcement can face obstacles if collateral is under dispute or ownership is unclear.

3. The Role of Legal Advisors and How to Prevent Bad Debt Disputes

Proactive risk prevention and timely engagement of professional legal services are key to minimizing the risk of bad debt disputes for individuals and small businesses.

3.1. Preventive Measures Before Bad Debt Occurs

When signing loan, collateral, or sales contracts, carefully review all terms regarding interest rates, late payment penalties, recovery procedures, collateral details, and rights to enforce payment.
Establish a debt management system and regularly evaluate counterparties’ repayment capacity.
Maintain comprehensive documentation — contracts, meeting minutes, payment reminders — to serve as evidence in case of dispute.
Verify collateral registration and ownership to avoid assets that are already pledged or in legal dispute.

3.2. Engaging Legal Experts and Ensuring Sustainable Solutions

Individuals and small businesses facing bad debt disputes should consider working with experienced legal professionals — including lawyers specializing in credit, collateral, and debt recovery. These experts can assist with verification, negotiation, contract drafting, litigation, and enforcement.

The focus should be on long-term sustainability — not just debt collection but also financial restructuring to ensure continued stability and business viability. Acting promptly can significantly reduce costs, preserve reputation, and even maintain business relationships when possible.

4. Conclusion

Bad debt disputes, whether involving individuals or small businesses, can paralyze operations, harm reputations, and cause significant losses if mishandled. As Vietnam’s legal system continues to evolve to better address bad debts, mastering relevant regulations, preventing risks, and seeking timely legal advice are essential to safeguard lawful interests.

Instead of waiting or responding emotionally, every individual and business should:

Routinely review contracts and assess financial risks.
Consult a lawyer before signing or restructuring debt agreements.
Proactively negotiate or mediate before resorting to litigation.

With the right legal strategy, bad debt disputes can be transformed from a threat into an opportunity for restructuring and long-term stability.

Contact DEDICA Law Firm for expert legal consultation!

📞 Hotline: (+84) 39 969 0012 (Available on WhatsApp, WeChat, and Zalo)

🏢 Head Office: 144 Vo Van Tan Street, Xuan Hoa Ward, Ho Chi Minh City (144 Vo Van Tan Street, Vo Thi Sau Ward, District 3, Ho Chi Minh City)

🕒 Business Hours: Monday – Friday (8:30 AM – 6:00 PM)

Reach out today for a free initial consultation with our team of professional lawyers!

Resolving Bad Debt Disputes for Individuals and Small Businesses in Vietnam