DEBT RECOVERY METHODS AND SOME NOTES FOR THESE

Depending on the object and nature of the debt, individuals, organizations and businesses can choose different settlement methods to recover the outstanding debt. Some methods of settlement can be listed as negotiation, mediation, arbitration or litigation.

1. Negotiation method

Among all debt recovery methods, the voluntary negotiation in goodwill of the two parties is always considered the most basic method and is the first priority to be applied because of its simplicity, and rifts and conflicts in the relationship between the two parties could be reduced to a minimum; the good cooperation between the two parties could also be maintained. It can be seen that it is good to complete the debt collection at a stage when it is still possible to apply the method of self-negotiation in order to keep the opportunity to supply goods and services between the parties as well as avoiding finance waste, time and damage during the tough debt collection process.

Whether negotiation of debt recovery will be successful or not? It depends much on the financial status and goodwill of the parties; however, in order to increase the possibility of debt recovery, businesses should consider the following issues:

(i) a debt collector should be a person who has a good communication skill, patience and flexibility to discuss with the person in charge of debt or the person authorized to settle the debt.

(ii) a negotiation can be performed through methods such as contacting by phone, sending a letter requesting for payment or meeting in person to request or remind for payment.

(iii) Avoiding causing conflicts and tensions, making debt collection unsuccessful and cooperative business unable to continue.

2. Mediation method

An another measure of debt collection is the mediation method as agreed by the parties and supported by the mediator as a mediator to resolve the dispute and recovery the debt. In other words, mediation is the process by which the parties negotiate with each other to resolve a dispute with the help of an independent third party officially known as a mediator. According to the provisions of Clause 1, Article 3 of Decree No. 22/2017/ND-CP on Commercial Mediation, this is a method of commercial dispute resolution agreed by the parties and mediated by a commercial mediator.

The difference between the two methods of negotiation and conciliation is the presence of a mediator to help the parties discuss and find a solution to settle the debt. The method of mediation is performed to maintain the relationship between the parties because this method also promotes the spirit of cooperation, voluntary agreement and constructiveness of both the creditor and the debtor.

Like the negotiation method, the successful mediation or not, it depends much on the goodwill and financial status of the debtor. However, businesses need to keep in mind when choosing a mediation solution, specifically:

(i) Choose a mediator or mediation center with a good reputation and knowledge, in-depth understanding, experience and practical skills in the field of dispute;

(ii) Maintain a spirit of goodwill, peace and flexibility in the mediation process to request debt payment.

3. Arbitration method

This method of dispute settlement shall be agreed upon by the parties and conducted in accordance with the law on commercial arbitration.

In order to recover debts by commercial arbitration, businesses should note that the first thing is that the parties must have an arbitration agreement. The debt must arise from commercial activities. The arbitration agreement is often agreed by the parties into a clause in the commercial contract. When there is a dispute over the payment obligation, one party submits the dispute to arbitration for settlement under the arbitration clause. The arbitral award is final and binding on the parties. When there is an effective arbitration award to settle the debt, the parties have the right to request the judgment enforcement to recover the debt.

4. Litigation method

In case that the negotiation fails and the two parties do not have an agreement to settle the debt dispute at the arbitration centre, the creditor may initiate a lawsuit against the debtor at the competent People's Court to request for payment of the debt.

Unlike in the arbitration method, the case settled in litigation method, can go through two levels of trial, namely the first instance and the appellate court. Upon obtaining an effective judgment or decision, the creditor can request for enforcement to order the debtor to pay as the judgment/decision has been declared.

With regard to the method of debt settlement through arbitration or court, enterprises should pay attention to prepare a lawsuit file including a petition and supporting documents to prove that the claim for debt collection is based on legal grounds and legitimate.

ADK & Co Vietnam Lawyers Law Firm