Legal framework for creditors’ applications to commence bankruptcy proceedings under the 2025 Law on Recovery and Bankruptcy
Law No. 142/2025/QH15 on Recovery and Bankruptcy (the “2025 Law on Recovery and Bankruptcy”) establishes a new framework for addressing insolvency of enterprises and cooperatives. The Law gives creditors a number of important rights to take an active role in initiating and participating in bankruptcy proceedings.
For creditors, bankruptcy proceedings are not merely a last resort for dealing with an unrecoverable debt. A creditor’s decision to initiate bankruptcy proceedings, participate in establishing the list of creditors, monitor information on the debtor’s assets and liabilities, participate in creditors’ meetings and oversee asset realization may directly affect the protection and recovery of its claim.
This Legal Brief, prepared by Phan Quang Chung, Founding and Managing Lawyer of BFSC Law LLC, discusses the legal framework applicable to creditors’ applications to commence bankruptcy proceedings under the 2025 Law on Recovery and Bankruptcy.
1. A Creditor’s Right to Request Bankruptcy Proceedings During Recovery Proceedings
Under the 2025 Law on Recovery and Bankruptcy, the right to request the commencement of recovery proceedings is not granted to creditors. Rather, recovery proceedings may be proactively initiated by an enterprise or cooperative where there are grounds to determine that it is at risk of insolvency.
However, after the Court has accepted an application to commence recovery proceedings and received the enterprise’s or cooperative’s business recovery plan, creditors—including secured creditors, unsecured creditors and partially secured creditors—will be summoned to attend the creditors’ meeting. Creditors may vote at the meeting to adopt a resolution requesting the Court to apply bankruptcy proceedings to the enterprise or cooperative where there are sufficient grounds to determine that it has become insolvent.
The 2025 Law provides that a resolution of the creditors’ meeting is passed when creditors representing at least 65% of the total debt of creditors participating in the vote approve it, and the resolution is binding on all creditors. Accordingly, to exercise their rights during the Court’s handling of recovery proceedings, creditors should attend the creditors’ meeting in person or through an authorized representative, or submit written opinions to the Judge before the meeting.
2. A Creditor’s Right to Request Bankruptcy Proceedings Against an Insolvent Enterprise or Cooperative
Article 5.2 of the 2025 Law on Recovery and Bankruptcy provides that an enterprise or cooperative is insolvent when it fails to perform its payment obligation for a debt after six months from the due date.
For an enterprise or cooperative that is insolvent, Article 38 provides that an unsecured creditor or a partially secured creditor may file an application to commence bankruptcy proceedings. The 2025 Law does not prescribe a minimum debt amount as a condition for filing. Accordingly, an unsecured creditor or partially secured creditor may file an application where the relevant debt has remained unpaid for at least six months after its due date, irrespective of the amount of the overdue debt.
The right to file is, however, accompanied by an obligation to provide accurate and truthful information and not to act with the purpose of causing harm to the enterprise or cooperative concerned. Where a debt remains genuinely disputed as to the amount payable, security arrangement, payment date or other contractual matters, it may not automatically qualify as a debt that is sufficiently established and overdue if the relevant contracts or agreements do not permit the amount and due date to be determined for the purpose of triggering the creditor’s filing right.
Before filing, a creditor should therefore establish: (i) the legal basis of the debt; (ii) whether the debt has fallen due; (iii) whether it has remained unpaid for at least six months; and (iv) whether the creditor is an unsecured or partially secured creditor. This helps mitigate procedural and potential sanction risks.
3. Matters a Creditor Should Prove When Filing the Application
Article 39 requires the applicant to submit to the competent Court documents and evidence proving that its application is well-founded and lawful, together with a list of creditors and debtors, where applicable.
In practice, a creditor’s evidence package should establish a clear chain:
A legally grounded debt → the debt has fallen due → the debtor has failed to pay → the non-payment has continued for at least six months → the creditor falls within a category entitled to file.
Supporting documents may include:
• contracts and contractual appendices;
• acceptance, handover or completion records;
• invoices and payment records;
• debt reconciliation or debt acknowledgment records;
• payment demands;
• extension agreements or repayment undertakings;
• correspondence and emails concerning non-payment; and
• documents relating to security assets, where applicable.
For substantial claims or claims involving potential disputes, preparing the evidentiary record before filing may materially reduce procedural risk.
4. Filing an Application Does Not Mean that the Debtor Will Automatically Be Declared Bankrupt
This distinction is important when assessing a creditor’s recovery strategy. Where a debt has remained unpaid and ordinary collection efforts have not produced results, a creditor may consider bankruptcy proceedings as a more formal mechanism. However, filing an application is only the exercise of a statutory right; whether bankruptcy proceedings are actually commenced depends on the Court’s assessment of the application and supporting evidence.
After receiving the application, the Court will carry out the statutory procedural steps, including assigning a Judge, reviewing the application and requiring amendment, supplementation or other necessary steps where applicable.
After the application has been accepted, the Judge must, within 30 days, issue a decision to commence or not to commence bankruptcy proceedings. The decision takes effect from the date of issuance.
Accordingly, a creditor may initiate the process for judicial consideration, but the decision to commence bankruptcy proceedings remains within the Court’s jurisdiction.
From a practical perspective, filing should therefore be treated as a legal and strategic debt-recovery decision, rather than merely a pressure tactic against the debtor.
5. Obligation to Submit a Debt Claim After Bankruptcy Proceedings Are Commenced
Although the creditor may already have submitted evidence of its overdue debt together with the application, once the Court issues a decision commencing bankruptcy proceedings, the creditor must take a further critical step: submit a debt claim together with supporting documents and evidence to the trustee or the asset management and liquidation enterprise within 15 days from the date of the Court’s decision commencing bankruptcy proceedings.
As a general rule, failure to submit the debt claim within this period results in loss of the right to participate in the bankruptcy proceedings. The Law provides an exception for cases of force majeure or objective obstacles.
This is therefore a key procedural deadline for creditors.
Submission of an application to commence bankruptcy proceedings does not replace the separate obligation to submit the debt claim after the proceedings have been commenced.
For institutional creditors, a dedicated case owner and deadline-monitoring process should be established immediately to avoid the claim being overlooked due to internal procedures.
6. Right to Review and Respond to the List of Creditors
After receiving debt claims, the trustee or asset management and liquidation enterprise is responsible for preparing the list of creditors and debtors and verifying the relevant debts.
The list must contain key information such as the creditor’s name and address, amount of debt, security status, whether the debt is due or not yet due, and other required information. The list must be publicly disclosed at least seven days before the creditors’ meeting.
Within 10 days from the date the Court publicly discloses the list, participants in the bankruptcy proceedings and persons with related rights and obligations may request the Judge to review the list.
A creditor should use this period to verify:
• whether its claim has been properly recorded;
• whether the amount of debt is accurate;
• whether the debt has been correctly classified as secured, partially secured or unsecured; and
• whether information concerning other debts may affect the creditor’s position.
Failure to review the list may create disadvantages at later stages of the proceedings.
7. Right to Attend and Vote at the Creditors’ Meeting
The creditors’ meeting is one of the central mechanisms through which creditors exercise their rights in bankruptcy proceedings.
A creditor listed on the creditors’ list may attend the meeting and may authorize another person in writing to attend on its behalf.
Notably, a creditor that does not attend in person but submits written opinions to the Judge before the date of the meeting is treated as participating and voting at the creditors’ meeting.
Under the Law, a resolution of the creditors’ meeting is passed when creditors representing at least 65% of the total unsecured debt vote in favour, and the resolution is binding on all creditors.
The creditors’ meeting may adopt resolutions on important matters, including:
• requesting suspension of the bankruptcy proceedings;
• approving a business recovery plan;
• requesting the Court to declare the enterprise or cooperative bankrupt; and
• transferring, as a whole, assets or part/all of the business operations of the enterprise or cooperative.
BFSC’s view: for a creditor with a substantial claim, participation in the creditors’ meeting should be treated as part of the overall debt-recovery strategy rather than as a mere administrative formality.
8. Right of Access to Information and Oversight of the Proceedings
In bankruptcy matters, information concerning the debtor’s assets, liabilities and transactions may be decisive to the creditor’s prospects of recovery.
The 2025 Law provides a mechanism for the creditors’ representative board to exercise oversight, including requesting the trustee or asset management and liquidation enterprise to examine the debtor’s financial position, requesting copies of relevant documents and evidence within the scope permitted by law, and exercising other rights and obligations under decisions of the Judge or the creditors’ meeting.
Authorities, organizations and individuals holding or maintaining documents and evidence relevant to the proceedings are also required to provide such documents and evidence upon a valid request within the statutory time limit, subject to applicable exceptions.
Where there are indications of asset transfers, unusual transactions or disputes concerning the scope of the debtor’s assets, access to such information becomes particularly important.
9. Right to Request Review of a Creditors’ Meeting Resolution
A creditor’s rights do not end when the creditors’ meeting adopts a resolution.
Where a participant in the creditors’ meeting disagrees with the resolution, the person with rights and obligations in the proceedings may submit a request to the Chief Judge of the Court for review within five working days from receipt of the resolution.
This mechanism allows creditors to continue protecting their lawful rights and interests where they consider that a creditors’ meeting resolution is inconsistent with the law or adversely affects their position.
10. Creditor Rights in the Distribution of Assets
When an enterprise or cooperative is declared bankrupt, its assets are distributed in accordance with the statutory order of priority.
After bankruptcy expenses and priority claims relating to employees, debts incurred for business recovery purposes and financial obligations to the State, unsecured debts and the unpaid portion of partially secured debts resulting from insufficient security value are paid in accordance with the statutory order.
Where the assets are insufficient to satisfy claims within the same priority rank, creditors within that rank are paid in proportion to the amount of their respective claims.
Accordingly, accurate recognition and classification of a creditor’s claim from the outset are important to its entitlement in the subsequent asset distribution process.
11. Practical Considerations
From a practical perspective, a creditor should assess bankruptcy proceedings as part of an overall debt-recovery strategy rather than focusing solely on whether to file an application.
11.1. Assess the Debt Before Filing
The creditor should first establish:
• whether the debt exists and has a legal basis;
• whether the debt has fallen due;
• whether six months have elapsed since the due date;
• whether the debt is disputed; and
• whether the creditor falls within a category entitled to file an application.
11.2. Assess Assets and Recovery Prospects
A sound filing decision should not be based solely on the amount owed. The creditor should also consider:
• the debtor’s existing assets;
• secured assets;
• priority obligations;
• other creditors;
• transactions that may be subject to review;
• the practical prospects of recovery; and
• the potential impact of filing on the recovery process.
In other words, having the right to file does not necessarily mean that the creditor will recover its debt.
11.3. Monitor the Proceedings After Filing
After filing, the creditor should closely monitor:
• Court notices;
• the decision to commence or not to commence bankruptcy proceedings;
• the 15-day deadline for submitting the debt claim and supporting evidence;
• the lists of creditors and debtors;
• the creditors’ meeting;
• resolutions of the creditors’ meeting;
• inventory and realization of assets; and
• other decisions that may affect recovery prospects.
11.4. Prepare for the Creditors’ Meeting
For a substantial claim, the creditor should determine its position in advance regarding:
• the prospects of business recovery;
• whether to continue seeking bankruptcy proceedings or request suspension;
• the proposed treatment of assets;
• whether to request a bankruptcy declaration; and
• potential transfers of assets or business operations.
This enables the creditor to move from merely “responding to the proceedings” to actively managing its position throughout the proceedings.
Conclusion
The 2025 Law on Recovery and Bankruptcy gives creditors a more active role in addressing the insolvency of enterprises and cooperatives.
For unsecured and partially secured creditors, the right to file an application to commence bankruptcy proceedings may be an important tool where an enterprise or cooperative fails to perform its payment obligation within the statutory period. However, the effectiveness of this tool depends not only on satisfying the filing conditions, but also on the creditor’s ability to prove its claim, comply with procedural deadlines and actively participate in the subsequent stages of the proceedings.
From a practical perspective, bankruptcy should be viewed as a strategic debt-recovery process. Each decision—from filing the application and submitting the debt claim to participating in the creditors’ meeting and monitoring asset realization—may affect the ultimate recovery outcome.
In particular, failure to observe critical deadlines, including the 15-day period for submitting the debt claim after the Court commences bankruptcy proceedings, may result in loss of the right to participate in the proceedings.
Accordingly, for substantial claims or where an enterprise or cooperative shows signs of insolvency, creditors should conduct an early legal and asset assessment and develop a participation strategy aligned with their recovery objectives.
Disclaimer
This article is provided for general legal information and reference purposes only and does not constitute legal advice or an opinion of the author or BFSC Law LLC on any specific matter. Readers should not rely on this article as legal advice for any particular case. Each specific matter should be carefully assessed and advised upon by qualified legal counsel before any action is taken.
For legal advice on recovery and bankruptcy proceedings, please contact BFSC Law LLC, Hanoi Office.
For comments or enquiries regarding this article, please contact the author, Lawyer Phan Quang Chung.