In the business environment in Vietnam, debt management has always been one of the key challenges for companies – from small and medium-sized enterprises to large corporations. The emergence of difficult-to-collect debts not only affects cash flow and business operations but can also impact brand reputation and sustainable development. Drawing on over two decades of experience in managing debts for both domestic and international clients, Phuoc & Partners has gleaned a wealth of valuable lessons. This article shares practical insights, effective debt management approaches, and important warnings – with the aim of helping businesses adopt a more strategic approach to managing and recovering debts.
Understanding the nature of debt and debt classification
Definition of debt and the importance of classification
Debt includes obligations that are not fulfilled on time – it may arise from loans, trade credit, service provision with deferred payment, or financial guarantees. In the process of managing debt, the first and most important step is to understand the nature of the debt: whether it arises from a loan or a service contract, whether it is secured, and what payment terms have been agreed.
Phuoc & Partners recommends that businesses classify debts into groups: easily recoverable debts, debts requiring restructuring, and irrecoverable debts. Classification helps allocate resources effectively – for instance: actively pursuing easily recoverable debts; designing flexible repayment plans for debts that need restructuring; and preparing strategies for preserving assets, initiating legal action, or temporarily suspending action for irrecoverable debts.
Lessons from practical debt management
Over the past 20 years, Phuoc & Partners has observed that many businesses get “stuck” because they do not distinguish between different types of debts and pursue collections “indiscriminately”. For example, sending identical payment requests for both feasible and hopeless debts often leads to failure and wasted costs. The key lesson here is: assess the recoverability of debt before taking action and classify debts clearly to establish an appropriate strategy from the outset.
Preparing documentation and assessing recoverability
Reviewing contracts, guarantees and identifying risks
One of the first lessons Phuoc & Partners has drawn is that many businesses initiate debt collection without properly preparing contracts and guarantees – and so face difficulties when it comes to actual recovery. Lawyers will review all contracts, appendices, security agreements (such as mortgages, pledges, guarantees), payment records, and transaction documents. The aim is to identify:
The nature of the debt (loan, sale, service);
The timing of default;
The legal validity of commitments and secured assets.
Assessing the debtor’s repayment capacity and assets
A crucial step in the pre-litigation stage of debt management is a comprehensive assessment of the debtor’s repayment ability. This forms the foundation for lawyers to advise businesses on the feasibility of recovery and the selection of an appropriate strategy. Phuoc & Partners conducts analyses based on financial statements, company registration data, information from the secured transactions registry, and other public sources to evaluate the debtor’s operations. From this, the business can determine whether to pursue negotiation, restructuring, or litigation.
Identifying legal risks
Phuoc & Partners’ lawyers always recognise that success depends not only on the debtor’s capacity to repay but also on legal risks. Risks may arise from invalid contracts, improperly registered guarantees, impending statute-of-limitations issues, or actions by the creditor that could be deemed unlawful debt recovery. Lawyers help businesses build safe and effective recovery strategies, acting as a “risk filter” before any aggressive action is taken.
Negotiation and mediation – cost-effective solutions that preserve relationships
Preparing a negotiation strategy
Once a business has determined the debtor’s capacity and legal risks, the next step is negotiation. Phuoc & Partners notes that, in many cases, the best solution is not immediate litigation but negotiation and mediation. Lawyers will prepare a strategy including: sending clear payment demands outlining obligations and consequences; planning direct meetings or negotiations; and proposing flexible repayment options (installments, deferred payments, restructuring). An effective negotiation strategy must be firm enough to exert pressure while flexible enough to maintain potential future cooperation.
Representing the business in negotiations
Lawyers participate directly or support the business during meetings with the debtor. Their presence ensures that negotiations are conducted professionally, according to procedures, and that agreements are legally binding. Practical experience shows that the involvement of a lawyer carries psychological weight – debtors tend to take matters more seriously when they know the business has prepared legal documentation and is ready to initiate litigation if necessary.
Drafting new agreements or mediation records
Once an agreement is reached, the lawyer’s next task is to draft a mediation record or a debt restructuring agreement. The content should be clear: outstanding debt, repayment schedule, penalty interest, and additional guarantees if any. This agreement serves as crucial evidence should litigation later be required. Using this approach, Phuoc & Partners has helped many clients recover debts without resorting to court, saving time and costs from the pre-litigation stage.
When negotiation fails – preparing for litigation
Reviewing limitation periods and jurisdiction
Phuoc & Partners emphasises that when negotiations prove unfruitful, moving to litigation becomes a necessary option – but missteps at this stage can be costly. Lawyers will review and determine the correct limitation period for filing a claim and the competent court in accordance with the Civil Procedure Code. Accurate determination ensures that the case is not returned and that the creditor does not lose the right to initiate proceedings.
Preparing evidence and documentation
Once litigation is deemed necessary, lawyers assist businesses in collecting and organising all relevant evidence: contracts, payment records, meeting minutes, notices, emails confirming debts, and mediation records. A logical and comprehensive dossier shortens the court process and increases the likelihood of a successful outcome.
Advising on costs and enforceability
Phuoc & Partners’ experience shows that many businesses, even when successful in court, fail to recover debts because enforcement proves impossible. Lawyers analyse the debtor’s ability to satisfy a judgment (current assets, disputes, or attachments) and advise businesses on whether to proceed with litigation or continue negotiation, thereby ensuring the highest possible recovery.
Practical lessons from cases – applying experience
Over more than 20 years of working with businesses, Phuoc & Partners has accumulated extensive practical experience in managing debt effectively, legally, and in line with Vietnamese business practices. This process requires not only solid legal knowledge but also keen risk management skills and the ability to communicate and negotiate with partners.
Firstly, proactivity is always key. Early identification of potentially risky debts helps businesses minimise financial losses and provides time to prepare suitable responses. Depending on the circumstances, companies may choose measures such as direct negotiation, proposing flexible repayment plans, restructuring contracts, or, if necessary, initiating legal action. Businesses that wait until debts become seriously overdue often encounter major difficulties in recovery, as the counterparty may be in financial distress or lack the willingness to cooperate.
Secondly, adherence to legal procedures and careful documentation management is decisive. Businesses that maintain a comprehensive, transparent system of contracts, payment records, debt confirmations, and regular reporting are always in a stronger position when disputes arise. Clear documentation not only protects a company’s legal rights but also serves as an effective negotiation tool. In many cases, having sufficient legal evidence encourages the counterparty to settle rather than prolong disputes.
Thirdly, a flexible yet resolute approach is the key to success. Experience shows that excessive rigidity can cause partners to lose goodwill, prolonging recovery or escalating disputes, which increases legal costs. Conversely, a measured approach grounded in legal principles facilitates smoother negotiations, achieving faster and more sustainable results while preserving long-term business relationships.
Finally, having a lawyer on board from the pre-litigation stage is a smart investment. Lawyers help businesses minimise legal risks, design negotiation strategies, prepare full legal dossiers, and safeguard their rights in any scenario. Early professional advice helps companies avoid common mistakes, prioritise actions effectively, and optimise debt recovery outcomes. In many cases, the timely involvement of a lawyer creates sufficient legal pressure to induce voluntary payment by the debtor.
In summary, debt management is not merely a financial issue; it is also a lesson in governance, negotiation skills, and the effective coordination of legal and business strategies. Businesses that act proactively, maintain thorough documentation, approach negotiations flexibly, and have legal support will always be well-positioned to protect their rights and sustain strong business relationships.
Practical advice for businesses
Act early: When a counterparty delays payment or shows signs of financial weakness, engage a lawyer from the outset to assess, classify, and develop a strategy.
Ensure contracts and guarantees are sound: Draft clear contracts, register guarantees promptly, and have pledged assets properly appraised.
Monitor secured assets closely: Maintain a system to track assets, check registration records, and observe transfers – if anomalies arise, take preservation measures immediately.
Negotiate before litigating: Negotiation and restructuring may be cost-effective solutions compared to litigation.
Prepare dossiers meticulously: If litigation is necessary, ensure all documents are complete, logically structured, and well-evidenced – this shortens proceedings and improves the chances of success.
Consider enforceability: Lawyers will analyse the likelihood of enforcement before initiating litigation – if recovery is unlikely, alternative approaches should be considered.
Through over 20 years of advisory and litigation experience, Phuoc & Partners affirms that debt management is not only about recovering money but also about risk management, asset protection, and ensuring sustainable business operations. Practical lessons from legal experts demonstrate that thorough preparation (dossiers, guarantees, strategy), flexible negotiation and restructuring, transitioning to litigation when necessary, and always assessing enforceability are the keys to success. Companies equipped with these measures can overcome debt-related challenges, maintain cash flow, and grow steadily in a competitive environment.
We wish your business every success in managing debts and achieving timely, effective recovery of receivables!
The above is an overview of 20 Years of Experience in Debt Management: Practical Lessons from Phuoc & Partners. If you have difficulties in finding a Law Firm to advise and support in the relevant legal field, please contact us. Phuoc & Partners is a professional consulting firm established in Vietnam and currently has nearly 100 members working in three offices in Ho Chi Minh City, Hanoi and Danang. Phuoc & Partners is also rated as one of the leading consulting firms in Vietnam with highly specialised teams in top legal fields such as Labour and Employment, Taxation, Merger and acquisition, Litigation. We are confident in providing customers with optimal and effective service.
