1. What is debt collection?

Debt collection is the process by which a creditor requests a debtor to pay overdue or due debts according to the contract/agreement between the creditor and the debtor; or under the decision of a competent state authority in the case of a lawsuit in court that has resulted in a legally binding judgment or decision

Debt collection includes personal debt collection and business debt collection:

• Personal debt collection is the process of collecting debts that individuals have lent or borrowed which are due or overdue and have not been repaid;
• Business debt collection, also known as public debts, is the process of collecting the amount owed to a business that has arisen during its operations (through activities such as buying and selling goods, providing services, borrowing…) and are due or overdue but have not yet been paid.

2. How to evaluate debt profiles for effective and quick debt collection ?

Evaluating debt collection profiles is one of the basic steps in the debt collection process and serves as a crucial prerequisite that determines the success or failure of the debt collection process.

• For debts arising from loan relationships: To collect debts arising from loan relationships, the following important factors can be considered when evaluating debt collection profiles:
  • The legal validity of the loan transaction: Is there a sufficient legal basis for the transaction? Is the transaction invalid? Is there any documentation proving the debt?;
  • Documents and evidence proving the debt: messages, information exchanged between the parties, documents, information related to money transfer and transactions…;
  • Determine whether the debt is under dispute;
  • Legal status and information of the debtor.
• For debts arising from contractual relationships: The debt collection party will review and evaluate the information, documents, and events related to collecting the debt stemming from the contractual relationship between the two parties. The factors considered when evaluating the profile include:
  • Original contract: Review the legality and content of the original contract that established the debt;
  • Debt information: Identify detailed information about the debt, including the amount owed, the duration of the debt, any accrued fees, and any terms related to debt rcollection;
  • Debt reconciliation record/document with equivalent value of the debt reconciliation record: Examine the basis for preparing the record; Details of payment status, the outstanding balance; the agreed-upon balance at the time of reconciliation, and finally the Confirmation of the parties; Is the debt reconciliation record legally valid?;
  • Related documents: Review various supporting documents such as invoices, receipts, official letters, emails... and documents that prove the value of the executed contract;
  • Disputed value: Has the entire debt been determined or not? What is the disputed value? What is the reason?...

Based on the assessment of the above factors, appropriate directions, solutions, and debt collection strategies can be proposed for the specific situation.

3. How to assess the debtor’s payment ability andcredibility to collect debts effectively and quickly?

Verifying the debtor's payment ability, credibility is extremely important and greatly impacts the debt collection ability; this is one of the decisive factors in determining whether the debt can be collected and identifying an appropriate debt collection strategy.

• Assessing the debtor's payment ability:
  • For personal debts: It is necessary to consider the debtor's regular income to make an initial assessment of their payment ability. Next, it is essential to evaluate whether the debtor has assets that can be used to repay the debt, including real estate, vehicles, investment assets, savings, or other valuable assets. Additionally, one can refer to, consider, and further evaluate the family circumstances and relatives…
  • For corporate debt: It is necessary to assess the current operational status of the business, whether it is operating stably or facing financial distress - "clinical death", or temporarily ceasing operations; information about the company's assets. Additionally, it is important to evaluate the capital contributions of members and shareholders. 

• Assessing credibility: Credibility is a particularly important factor that greatly affects debt collection if the debtor knows how to apply it appropriately. The value of credibility can create pressure on the debtor and facilitate an easier  debt collection process.
  • For personal debt, the credibility of the debtor can be considered if the person hold a social standing, has a certain influence within a group of people, an organization, or holds specific positions...
  • For corporate debt, the credibility of the business, the CEO's credibility, members, and shareholders are factors to consider: the type of business, brand, relationships with partners, who the CEO, members, and shareholders are, whether they have influence, and their equity holdings...

4. What should be done to recover debts effectively and quickly? 

There are many methods to recover debts effectively and quickly, each with its own advantages and limitations. Therefore, each creditor needs to have an understanding and apply appropriate debt collection methods to achieve the best recovery results, including the debt collection options mentioned below.

• Calling to request debt payment: Calling to request debt payment is one of the first steps in the debt collection process. Clearly and firmly present the amount owed, the payment deadline, and the potential legal or financial consequences if the debt is not paid. Specify the terms of the contract or legal regulations that the borrower has violated;
• Sending a written debt payment request: Sending a written debt payment request is also an effective way to collect debt. Depending on each partner/client, situation, and debt amount, the content of the document may express goodwill in debt collection and a desire to maintain a good relationship with the partner/client. For reputable partners/clients who wish for long-term cooperation, they will be willing to fully pay the debt to the creditor. Alternatively, the document may contain harsh content or apply strong pressure to compel the partner/client to fulfill their obligation if they have been reminded multiple times but refuse to pay; 
• Negotiating mediate regarding debt payment: This method is preferred when beginning to implement debt collection activities, as it is seen as a quick and cost-effective approach. With this method, both parties will negotiate and mediate to find the most appropriate solution for the debt based on the actual capabilities of each party. Creditors can apply measures such as reducing interest rates, offsetting debts, extending the repayment period with goods, and so on, to encourage partners/clients to quickly pay off their debts. However, in order to negotiate effectively, the negotiator must possess both knowledge and skills in debt collection, as well as being tactful and flexible to achieve the highest results;
• Submitting documents to investigative agencies if there are signs of crime: If there are signs or evidence indicating that the debtor is involved a criminal activity during the debt collection process, the creditor may decide to send documents or information to the appropriate investigative agency;
• Submitting documents to the press for intervention: Sending documents to the press for intervention is one of the common measures used in debt collection from an individual or another organization; this measure aims to create public pressure on the debtor, prompting them to fully repay the debt to avoid affecting their reputation and honor;
• Filing a lawsuit in court to demand debt payment: When partners/clients are uncooperative, evading payment, or when dealing with significant outstanding debts, this is a suitable and effective solution in handling and collecting debts. This measure will create considerable pressure on the partners/customers, especially those still conducting normal business operations. One of the main advantages of this approach is the possibility of applying urgent temporary legal measures to prevent the debtor from evading their obligations, such as sealing or not allowing the transfer of assets, freezing bank accounts, or prohibiting certain members of the debtor's board from leaving the country... This method requires the creditor to gather sufficient legal evidence, which will inevitably incur time and costs, and to implement this approach, knowledge of legal procedures and issues related to the content of the dispute is necessary;
• Requesting the declaration of bankruptcy of the business to collect debts: In cases where the debt amount is substantial and the debtor has limited ability to pay, the creditor should also consider filing for bankruptcy proceedings against the debtor. At that point, the creditor will have the opportunity (however small) to recover part of the difficult-to-collect debt through the liquidation of the debtor's remaining assets in accordance with bankruptcy procedures. If the debtor is unwilling to pay, the request for bankruptcy declaration is also a means of putting pressure on the debtor to repay the debt.

5. Should one hire a lawyer for effective and quick debt collection? 

Debt collection is a challenging process that not everyone can handle well; to recover debts effectively and quickly, ordinary knowledge and understanding are not sufficient. There are many situations where creditors face legal consequences due to improper debt collection. Choosing a reputable lawyer with expertise and experience to handle debt recovery will help clients ensure that the debt collection process is conducted effectively, quickly, and legally. Here are some reasons why customers should consider hiring a lawyer during the debt collection process:

• First, reliability: Lawyers are knowledgeable about legal regulations. A lawyer involved in a debt collection case will use legally compliant methods to recover the debt. Creditors can be completely confident when entrusting the task of debt collection to a lawyer, without worrying about the legal consequences they may face due to illegal debt collection. This is the value of reliability that lawyers provide to their clients;
• Second, expertise and experience, understanding in the field of debt collection: A deep knowledge of the law is the foundation for lawyers to practice. Evaluating debt collection documents, assessing the likelihood of successful debt collection, and flexibly applying various debt collection methods require lawyers to have high professional qualifications and expertise. With a lawyer, the debt collection process becomes more effective and quicker;
• Third, negotiation skills: A good lawyer is one who can resolve disputes out of court. At this point, negotiation skills are a key factor that helps lawyers achieve this goal. Lawyers with professional negotiation skills can interact with the debtor, make offers, agreements on terms to reach a settlement that satisfies both the creditor and the debtor, thereby facilitating a quicker and more efficient debt collection process;
• Fourth, ensuring customer rights: When collecting debts, the lawyer will protect the client's interests by researching and seeking options to maximize the receivable amount, while also considering the circumstances. Additionally, ensuring compliance with legal regulations throughout the debt collection process, preventing their clients from facing unnecessary legal consequences;
• Fifth, analytical, synthetic, and logical thinking skills: For complex cases with a large volume of documents, strong analytical skills are required, followed by synthesizing information to grasp the overall situation and make accurate decisions that benefit the client;
• Sixth, having a support team: The lawyer has a well-structured team to coordinate and support each other effectively, thereby providing optimal solutions for clients.

6. Should debts be sold to a debt trading company for quick and effective debt collection?

Currently, Vietnamese law allows for debt trading, so individuals and businesses selling hard-to-collect debts to specialized debt trading companies do not violate the law. Therefore, selling hard-to-collect debts to specialized debt trading companies should be considered. This can be seen as an optimal method for individuals and businesses facing difficulties in debt collection.

The debt trading companies can provide upfront payment for all or part of the debtor’s oustanding amounts, and they bear all risks associated with non-recovery. A reputable and professional debt trading company will have the legal procedures for debt collection and ensure high effectiveness.

7. Phong & Partners Law Firm for quick and efficient debt collection

Phong & Partners Law Firm provides quick and effective debt collection services with the scope of work as outlined below:

Consulting on issues arising during the debt  collection process, specifically:

• Consulting clients on identifying debts, measures, processes, and procedures for debt handling;
• Consulting on completing legal documentation regarding debts to ensure a sufficient legal basis for debt collection;
• Consulting on options for clients to handle cases where the debtor is uncooperative at any stage;
• Consulting on other legal issues arising related to the debt collection process for clients, such as advising on procedures and processes for resolving debt collection disputes in court/arbitration;
• Consulting on issues related to court fees; resolution time…

Drafting documents arising during the debt collection process:

• Drafting official letters, notices, and related documents to request the debtor to settle the debts;
• Drafting the lawsuit petition, statements of opinion, and related documents when initiating legal proceedings at the competent People's court or at the commercial arbitration center to handle the debts;
• Drafting requests for enforcement of judgments and verifying enforcement conditions to enforce legally effective judgments or decisions;
• Drafting documents to request urgent temporary measures to prevent the debtor from evading debt responsibilities or dissipating assets , to be submitted  to the Court/ competent enforcement agency, such as: requests for coercive measures, asset seizure, account freezing, exit bans…;
• Drafting petitions or complaints when necessary;
• Drafting documents to request the Court or relevant authorities to address the bankruptcy declaration of the business;
• Drafting documents to send to investigative authorities if there are signs of criminal offenses;
• Drafting other legal opinions to protect the client's rights at the Court/ arbitration center and relevant agencies, organizations, or individuals involved in the resolution of the case.

Representing/ protecting of the creditor's rights throughout the debt collection process:

• Representing and/or participating with the creditor throughout the negotiation and mediation process with the debtor, using either a conciliatory approach to avoid conflicts or negotiating firmly and vigorously when the debtor is uncooperative in repaying the debt;
• Representing the creditor working with competent state agencies, organizations, and individuals involved to request cooperation in the debt recovery process;
• Representing the creditor to protect their legal rights and interests in court/arbitration centers when disputes arise;
• Representing the creditor during the execution of judgments to request the enforcement agency to issue decisions to execute legally effective judgments;
• Representing the creditor to coordinate with relevant agencies to implement debt recovery measures such as asset seizure, bank account freezing, exit bans, etc.
• Representing the creditor in the process of requesting the Court and relevant state authorities to declare the bankruptcy of the business;
• Representing the creditor throughout the process of the investigative police handling the criminal complaint.

8. FAQ

(1) What is illegal debt collection? 

Illegal debt collection (also known as unlawful debt collection) refers to the collection of debts that does not comply with legal regulations or valid procedures. This may include unlawful activities or violations of the debtor's privacy, such as: posting the debtor's photos and information on social media, insulting or defaming the debtor's honor and dignity, using debt collection agencies, engaging in extortion-like debt collection, threatening or intimidating mentally or physically... 

(2) What are the consequences of illegal debt collection?

Illegal debt collection can lead to legal disputes and lawsuits or result in imprisonment penalties. The debtor may appeal or file a counterclaim against debt collector if they believe that the debt collection measures do not comply with legal regulations or violate their legal rights. This can result in a loss of time, money, and energy spent in the process of resolving legal disputes. 

(3) Are recordings considered evidence for debt collection? 

See more at: https://phong-partners.com/en/thu-hoi-cong-no-personal-debt-recovery-can-audio-recordings-be-considered-evidence-for-debt-recovery-1114-html

(4) Is the creditor jointly liable when buying and selling debt? 

Debt trading is understood as the sale of ownership rights as per legal regulations. Accordingly, based on the provisions of Clause 2, Article 450 of the Civil Code 2015, when selling the right to claim debt and the seller (the creditor) commits to ensuring the debtor's payment ability, the seller must bear joint responsibility for payment if the debtor does not pay when the debt is due. Therefore, unless the parties have other agreements, the buyer is solely responsible for the debtor's payment ability and for their own debt collection actions; the seller will not bear joint liability in debt trading transaction.