Khoá Luận Regulations On The Disposal Of Collateral Which Is The Right To Claim Debts At Commercial Banks.pdf

Furthermore, there are also many types of research on disposing of collateral being the right to claim debts in particular, namely: - Bachelor thesis "Pháp luật về thế chấp quyền đòi nợ

HO CHI MINH CITY UNIVERSITY OF LAW FACULTY OF COMMERCIAL LAW

NGUYEN PHAM MINH THAO

REGULATIONS ON THE DISPOSAL OF COLLATERAL WHICH IS THE

RIGHT TO CLAIM DEBTS AT COMMERCIAL BANKS

COMMERCIAL LAW MAJOR

HO CHI MINH CITY− 2021

HO CHI MINH CITY UNIVERSITY OF LAW FACULTY OF COMMERCIAL LAW

-

BACHELOR'S THESIS

REGULATIONS ON THE DISPOSAL OF COLLATERAL WHICH IS THE

RIGHT TO CLAIM DEBTS AT COMMERCIAL BANKS

STUDENT CODE : 1651101030129 SUPERVISOR : Dr PHAN THI THANH DUONG

HO CHI MINH CITY− 2021

COMMITMENT

I hereby commit that the thesis "Regulations on the disposal of collateral which is the right to claim debts at commercial banks" is my work of research All information in this thesis is completely cited honestly Besides, I also personally give opinions relevant to issued problems in the thesis with the instruction of Doctor Phan Thi Thanh Duong – lecturer of Faculty of Commercial Law, and I do not copy from any previous works I sincerely appreciate the devoted guidance from my instructor I am responsible for this commitment

June 28, 2021

Nguyen Pham Minh Thao

ABBREVIATION

Circular 20

Circular 20/2017/TT-NHNN issued by the State bank of Vietnam on

December 29, 2017, on Sale of receivables from financial leasing contracts

Circular 27

Circular 27/2002/TT-BTC issued by the Ministry of Finance on March 22,

2002, on Guiding the financial regime applicable to debt-managing and asset-exploiting companies under

commercial banks

Circular 219

Circular 219/2013/TT-BTC issued by the Ministry of Finance on December

31, 2013, on Guiding the implementation of the law on value-added tax and the government’s decree

no 209/2013/nd-cp of december 18,

2013, detailing and guiding a number

of articles of the law on value-added tax

Decision 150

Decision 150/2001/QD-TTg issued by the Prime Minister on October 5, 2001,

on The establishment of debt management and asset exploitation companies under commercial banks

Decree 163

Decree 163/2006/ND-CP issued by Government on December 29, 2006 on Security transactions

Decree 11

Decree 11/2012/ND-CP issued by Government on February 22, 2012, on Amending and supplementing a

number of articles of the Government’s Decree No 163/2006/ND-CP of

December 29, 2006, on secured transactions

Decree 21

Decree 21/2021/ND-CP issued by the Prime Minister on March 19, 2021, on The implementation of the Civil Code

to secure the performance of obligations

Joint Circular 16

Joint Circular BTNMT-NHNN issued by The Ministry of Justice - The Ministry of natural resources and environment - The State bank of Vietnam on June 6,

16/2014/TTLT-BTP-2014, on Guiding a number of matters

on disposal of security assets

TABLE OF CONTENTS

INTRODUCTION 1

CHAPTER 1: Overview of the disposal of collateral which is the right to claim debts at commercial banks 6

1.1 Overview of the right to claim debts 6

1.1.1 Concept of the right to claim debts 6

1.1.2 Characteristics of the right to claim debts 7

1.1.3 Classification of the right to claim debts 9

1.2 Mortgage of the right to claim debts at commercial banks 10

1.2.1 Overview of a mortgage contract 10

1.2.2 Mortgage of the right to claim debts at commercial banks 11

1.3 Overview of collateral disposal which is the right to claim debts at commercial banks 14

1.3.1 Overview of collateral disposal at commercial banks 14

1.3.2 The basic legal content of collateral disposal which is the right to claim debts 16

1.3.3 Significance of collateral disposal which is the right to claim debts 22

CONCLUSION CHAPTER 1 24

CHAPTER 2: Vietnamese legislation on the disposal of the collateral being the right to claim debts at commercial banks 25

2.1 Vietnamese legislation on the disposal of the collateral being the right to claim debts at commercial banks 25

2.1.1 Notification procedure for the disposal of the right to claim debts 25

2.1.2 Disposal methods for collateral being the right to claim debts 26

2.2 Risk identification when disposing of collateral which is the right to claim debts 30

2.2.1 Valuation of the right to claim debts 30

2.2.2 The priority of payment 31

2.2.3 Mortgagor being an individual dies 33

2.2.4 Mortgagor being a legal entity goes bankrupt 35

2.2.5 Defenses used by the debtor 37 2.3 Some recommendations for improvement to the disposal of collateral which is the right to claim debts 40 2.3.1 Some specific recommendations for improvement to the disposal of collateral which is the right to claim debts 40 2.3.2 Some general recommendations on debt claim mortgage contract at commercial banks 46 CONCLUSION CHAPTER 2 49 CONCLUSION 50 BIBLIOGRAPHY

INTRODUCTION

1 The necessity of research

The banking sector is one of the pillars of economic prosperity for many countries, especially for a developing country like Vietnam In Vietnam, many enterprises are lack incentives because of the capital shortage However, with commercial banks and their loan policies, enterprises have chances to change, grow, and succeed Nevertheless, the lending activities of banks include many potential risks Therefore, Vietnamese legislators have made regulations on security measures, including but not limited to pledge, mortgage, and guaranty

The right to claim debts is a common right in business transactions According

to Vietnam law, it is a property right and allowed to be used as collateral to secure the performance of obligations Because it is an intangible asset and carries hidden risks, collateral disposal, which is the right to claim debts, is more complex than other types of assets Due to this reason, commercial banks hesitate to accept the right to claim debts as collateral, and even if they accept, they have considerable difficulties in disposing of it It is thought that if the security measures system can provide a transparent and efficient mechanism

to dispose of this special asset, commercial banks will be more confident to accept the right to claim debts as collateral At that time, investors can mobilize a more considerable amount of capital to carry on and expand business activities, thereby contributing to national economic development Therefore, clarifying legal aspects of the disposal of this special collateral is

an issue that needs to be addressed so that investors can exploit their debt claims as efficiently as possible and banks can ensure their lawful rights and interests

The above reasons make the study of collateral disposal, which is the right to claim debts, valuable Additionally, it is of the author’s interest to learn more about the right to claim debts due to its unique characteristics Therefore, the topic "Regulations on the disposal of collateral which is the right to claim debts

at commercial banks" is selected to be the author’s graduation thesis

2 Literature review

Disposal of collateral is not a new issue and has been studied by many authors

at different levels such as bachelor thesis, master thesis, doctoral thesis, papers published in different journals, etc

Many outstanding studies have been given on topic analyzing the disposal of collateral from an overview perspective, namely:

- Master thesis "Pháp luật về xử lí tài sản bảo đảm tiền vay tại các tổ chức

tín dụng- Thực trạng và hướng hoàn thiện" [Trans: Regulations on loan collateral disposal at credit institutions – Practical issues and recommendations] by Tran Thi Thuy Anh protected at Ho Chi Minh City

University of Law in 2006 This thesis focuses on clarifying some theoretical issues as well as practical issues of the disposal of loan collateral at credit institutions, thereby recommending for improvement The problems and difficulties in collateral disposal mentioned in the thesis are still controversial, such as property auction, collateral valuation when handling, judgment enforcement related to bankruptcy proceedings

- Master thesis "Pháp luật về xử lý tài sản thế chấp trong hoạt động cho vay

của tổ chức tín dụng" [Trans: Regulations on collateral disposal in lending activities of credit institutions] by Lam Minh Duc protected at Ho Chi

Minh City University of Law in 2009 The thesis analyzes very specifically the difficulties when applying the collateral disposal regulations in practical situations, such as property auction, problems when disposing of land use rights, properties formed from the loan capital The thesis also mentions some problems when dealing with property rights, which are still challenging issues for lawmakers, such as in case a debtor acknowledges the mortgage and commits to make a payment to the mortgagee, but then fails to perform or incorrectly perform the payment, what are the sanctions for the debtor?

- Doctoral thesis "Tài sản thế chấp và xử lý tài sản thế chấp theo quy định

của pháp luật dân sự Việt Nam hiện hành" [Trans: Collateral and collateral disposal in accordance with the current Vietnamese Civil Law]

by Vu Thi Hong Yen protected at Ha Noi University of Law in 2013 The thesis contributes scientific concepts and characteristics on collateral disposal Moreover, the thesis analyzes the inadequacies when disposing

of collateral in some specific cases, including land use rights and houses to

be formed in the future, disposal when the mortgagor goes bankrupt, etc The thesis also mentions the disposal of the right to claim debts, raising typical issues such as the debtor's defenses, the notification obligation Additionally, the thesis contributes a lot of recommendations so that the

mortgagee can promptly handle the collateral, especially on step-by-step instructions for disposing of collateral

Furthermore, there are also many types of research on disposing of collateral being the right to claim debts in particular, namely:

- Bachelor thesis "Pháp luật về thế chấp quyền đòi nợ trong hoạt động cho

vay của các ngân hàng thương mại" [Trans: Regulations on the mortgage

of the right to claim debts in lending transactions of commercial banks] by

Vo Thi Dai protected at Ho Chi Minh City University of Law in 2011 The thesis has specifically analyzed the theoretical issues of the right to claim debts, such as the concept and characteristics of the right to claim debts, the concept and characteristics of mortgage of the right to claim debts However, the thesis does not analyze in-depth the issues related to debt claim disposal, such as notification obligation, order of payment priority

- Bachelor thesis "Thế chấp quyền đòi nợ bảo đảm nghĩa vụ thanh toán trong

hợp đồng tín dụng" [Trans: Mortgage of the right to claim debts to ensure payment obligations in credit agreement] by Pham Thi Huynh Nhu

protected at Ho Chi Minh City University of Law in 2014 The thesis has analyzed many aspects of mortgage of the right to claim debts, such as conditions for the right to claim debts used as collateral, valuation of the right to claim debts, registration and notarization of mortgage contracts The thesis also mentions the disposal of the right to claim debts, typical issues such as the order of payment priority, the debtor's defenses However, the thesis has not fully exploited all aspects of it, for example, it has not mentioned the disposal of the right to claim debts when the mortgagor goes bankrupt

- Master thesis "Pháp luật về xử lý tài sản đảm bảo là quyền đòi nợ trong

hoạt động cho vay tại các ngân hàng thương mại" [Trans: Regulations on the disposal of collateral being the right to claim debts in lending activities

at commercial banks] by Nguyen Thanh Luan protected at Ho Chi Minh

City University of Law in 2014 The thesis focuses on analyzing the issues

of disposal of the right to claim debts; thus, it examines comprehensively all aspects of debt claim disposal, such as regulations, risk identifications

in specific situations It has given particular recommendations for improvement However, the thesis omitted general theoretical issues of collateral disposal, such as its concept, characteristics, and significance

Other outstanding papers regarding disposal of the right to claim debts include the article "Một số hạn chế của chế định thế chấp quyền đòi nợ theo quy định hiện hành" [Trans: Some limitations of the mortgage regulations on the right

to claim debts under the current law] by Bui Duc Giang published in Banking Journal No 21/2011; the article "Quyền ưu tiên thanh toán của bên nhận thế chấp quyền đòi nợ" [Trans: Priority of payment of the mortgagee of debt claim] by Bui Duc Giang published in Banking Journal No 17/2012; the article "Pháp luật về xử lý tài sản bảo đảm là quyền đòi nợ" [Trans: The law

on collateral disposal being the right to claim debts] by Bui Duc Giang published in State and Law Journal No 03/2013, etc These articles do not examine all aspects of the disposal of the right to claim debts but instead focuses on an in-depth analysis of a specific aspect

It can be seen that the research topics on collateral disposal from an overview perspective have not delved deeply into the issue of debt claim disposal For topics focusing on analyzing the mortgage of the right to claim debts at credit institutions, the disposal of debt claim has been mentioned but is not an essential part To a certain extent, these studies are valuable references for approaching the issue of the disposal of the right to claim debts at commercial banks However, most of the legal instruments used in the above topics have ceased their effectiveness

The author inherits theoretical issues, such as the concept and characteristics

of the right to claim debts, the concept and characteristics of collateral disposal; and practical issues such as risk identification when disposing of the right to claim debts The author also refers to recommendations for the improvement of debt claim disposal Based on prevailing regulations, the author analyzes more specifically and compares the prevailing regulation and the obsolete one to point out the advancement of the prevailing as well as its shortcomings Thereby, the author makes some recommendations to further refine the disposal process of the right to claim debts

3 Research purposes

This thesis aims to provide an overview of prevailing law provisions on the disposal of collateral, which is the right to claim debts The thesis evaluates the pros and cons when commercial banks apply laws on collateral disposal, which is the right to claim debts to its debt recovery activity Additionally, the thesis points out limitations of the law and enforcement mechanism, thereby suggesting remedy to solve those issues, contribute to perfecting the

mechanism of collateral disposal being the right to claim debts at commercial banks

4 Scope of study

This thesis focuses on the disposal of collateral which is the right to claim debts at commercial banks Other methods that are not mentioned in the thesis are not in the scope of this thesis including but not limited to the conversion

of debts into capital contribution portions, initiating a lawsuit at court, or arbitration Also, other receivables that may arise from the right to claim debts including but not limited to fines against violations, compensation for damages are not in the thesis's scope of the study The future debt claim can be mentioned but is not the main object of this study This study only focuses on the disposal of collateral being the existing debt claim

5 Research methodology

The author has applied multiple methods in the research process, namely:

- Dialectical and historical materialism: This method is used to view and evaluate issues objectively The author is based on the history and the laws

to provide an overview of the right to claim debts, thereby, clarify characteristics of it, explaining the difference in the collateral disposal method between the right to claim debts and other property

- Comparison: the primary aim of this method is to identify similarities and differences among subjects For example, the author compares the expired one and the prevailing law to point out the progress and innovation of the latter

- Statistical method: For instance, the author collects opinions from the previous researcher to indicate the efficiency and limitations of the collateral disposal methods, base on which the author has a better - overview and in-depth understanding of the disposal methods, then the author will be able to recommend regarding the issue more appropriately

- Other methods such as induction, deduction, analysis, and synthesis methods, are also used in this thesis

6 Thesis structure

The content of this legal research is presented into two chapters as followed: Chapter 1 : Overview of the disposal of collateral which is the right to claim debts at commercial banks

Chapter 2 : Vietnamese legislation on the disposal of the collateral being the right to claim debts at commercial banks

CHAPTER 1: Overview of the disposal of collateral which is the right to claim

debts at commercial banks

1.1 Overview of the right to claim debts

1.1.1 Concept of the right to claim debts

Historically, the right to claim debts was formed a long time ago Article 117 of the Code of Hammurabi stipulates "If any one fail to meet a claim for debt, and sell himself, his wife, his son, and daughter for money or give them away to forced labor: they shall work for three years in the house of the man who bought them, or the proprietor, and in the fourth year they shall be set free"1 It shows that the Code of Hammurabi has indirectly allowed creditors to keep debtors as slaves to pay off debts The Twelve Tables also mentions the right to claim debts in Table III, "On the third market day the creditors shall cut shares If they have cut more or less than their shares

it shall be without prejudice"2 This means creditors have the right to cut debtors into pieces if debtors fail to pay off the debt Vietnamese law in medieval times also refers

to the right to claim debts The official law of Vietnam in the early Nguyen Dynasty, which also known as "Hoàng Việt luật lệ", provides that if anyone fails to pay off debt, they shall suffer corporal punishment3

From the aforementioned regulations, the right to claim debts of creditors were protected by coercive behavior of the state In that old times, the right to claim debts were interpreted as a right of the creditor to force the debtor to pay off the debt and it was supported by barbaric rules of the state

Regarding modern law, there is no specific definition of the right to claim debts However, debt is defined as a specific sum of money or a nonmonetary thing that one person owes another4 And right means freedom to exercise any power conferred by law5 Therefore, the right to claim debts can be perceived as power conferred by law

to demand a specific sum of money or a nonmonetary thing

Base on Article 450 (2) of Civil Code 2015, the right to claim debts is defined as a type of property right More particularly, Decree 21 Article 14 regulates property rights arising from contracts, "The obligee in the contract is entitled to use the right

to claim debts… to secure the performance of obligations" Thereby, the right to claim debts is a property right arising from contracts Such regulation is more reasonable than only defining it as property right as stipulated in the Civil Code 2005 Article

1 "The Code of Hammurabi", https://avalon.law.yale.edu/ancient/hamframe.asp, accessed 5/5/2021

2 "The Twelve Tables", https://avalon.law.yale.edu/ancient/twelve_tables.asp, accessed 5/5/2021

3 See Nguyen Ngoc Nhuan (2011), Điển chế và pháp luật Việt Nam thời trung đại, Tập III [Trans: Medieval

Vietnamese legislation, Chapter III], Social Science Publisher, page 419

4 See Black’s Law dictionary (2003), second pocket edition, page 176

5 Oxford Dictionary of Law (2003), page 435

322(1) In general, property rights may or may not arise from a contract In fact, some property rights do not arise from a contract, such as property rights arising from compensation for damages If regulations only define the right to claim debts as a property right, it does not fully describe the nature of the right to claim debts

Formerly, Article 22(4) of Decree 163 stipulates, "When the debt claim is transferred according to the provisions of Article 309 of the Civil Code, the order of priority between the debt claim transferee and mortgagee is determined according to the time

of registration of transfer and mortgage transactions at the competent security transaction registry" Article 309 of the Civil Code 2005 regulates about "Transfer of the right to claim" Therefore, the right to claim debts can be inferred as a form of the right to claim Though such regulation has been no longer specified in Decree 21, the right to claim debts can still be inferred as a form of the right to claim base on Article

33 of Decree 21, "Mortgage by the right to claim debts, accounts receivable and other right to claim payment"

Through the above analysis, the right to claim debts can be understood as "the right

to claim payment, which arises from contracts, of one subject towards other subjects; the specific object can be in cash or in kind"

Nevertheless, because the law does not define the right to claim debts, there is a problem that the legal documents do not agree on the usage of the term "the right to claim debts" Some documents use the term "the right to claim debts", while others use the term "creditor's rights" And these two terms are used interchangeably with the same meaning However, according to Le Trong Dung:

"In nature, only the right to claim debts is considered the property expressed

in the form of property rights of individuals and organizations used to request other individuals and organizations to perform their obligations Creditor's rights are a collection of creditor's rights formed from the moment the parties enter into a transaction, are not considered property, cannot be valued in cash, and cannot be assigned Because of that, the Civil Code 2005 and 2015 do not recognize the creditor's rights as the property but only specify the right to claim debts as the property and is allowed to mortgage to secure the performance of

an obligation"6

1.1.2 Characteristics of the right to claim debts

The right to claim debts has the following characteristics:

6 Le Trong Dung (2020), "Điều kiện để quyền đòi nợ được làm tài sản thế chấp theo pháp luật Việt Nam''

[Trans: Conditions for the right to claim debt as collateral under Vietnamese law], Procuracy's Journal

20/2020, page 34

First of all, the right to claim debts is a relative intangible asset As mentioned above,

the right to claim debts is a type of property right In terms of nature, property right

is an intangible asset; it does not exist as a physical thing or an amount of money; it

is the right to demand, human behavior related to property Many authors assimilate property rights with the intangible property; however, there are still property rights that are not absolute intangible, and the right to claim debts is one of them because the right to claim debts itself exists by materializing (it is represented on paper and has a specified amount of debt) Only property rights arising from intellectual property subject matters are an absolute intangible asset7

Secondly, the right to claim debts is a people-oriented property right that can be valued in money Property rights include people-oriented property rights, object-

oriented property rights, litigation right on property, and absolute intangible property rights from the perspective of theory and practice law The right to claim debts is neither absolute intangible property rights nor litigation right on the property8 The object-oriented property right is the right of the subject to directly exercise on objects

to satisfy interests without requiring any cooperation from others Considering the nature of the right to claim debts, it cannot be an object-oriented property right because it needs cooperation from others to satisfy interests Additionally, different from other people-oriented rights such as the right to ask the person who offends the honor, the reputation to apologize, the right to claim debts can be valued in money as

it is a demand payment right

Thirdly, the ground for arising the right to claim debts is a lawful bilateral contract

Based on the correlation of rights and obligations of subjects in the contract, there are two types of contracts: unilateral and bilateral contracts A unilateral contract is a contract under which only one party has obligations9 In a unilateral contract, from the time the contract becomes effective until the contract ceases to be effective, only one party has an obligation to the other The rights and obligations of the parties are not reciprocal and incompatible10 A typical contract of unilateral contract is contracts for donation of property Conversely, a bilateral contract is a contract under which

7 See Ho Chi Minh City University of Law (2019), Giáo trình pháp luật về tài sản, quyền sở hữu và thừa kế [Trans: Textbook Law on Property, Ownership and Inheritance], Hong Duc Publisher, page 39

8 Litigation right on property is the right to request through legal proceedings such as the right to initiate a lawsuit, the right to complain, or the right to request These rights are protected by a competent agency by compelling the identified subjects to hand over the property or to pay a certain amount of money in order to restore material benefits to the obligee

9 The Civil Code 2015 Article 402(2)

10 See Ho Chi Minh City University of Law (2017), Giáo trình pháp luật về hợp đồng và bồi thường thiệt hại

ngoài hợp đồng [Trans: Textbook Law on Contracts and Compensation for non-contractual damage], Hong

Duc Publisher, page 128

each party has obligations to the other11 The rights and obligations of the parties are always reciprocal The rights of one party are the obligations of the other party and vice versa Because of the difference in nature between these two types of contracts, the law provides separate regulations for them For example, in a bilateral contract, the parties can agree on penalties for breach of contract, claim compensation for damage, etc Another difference is the time a contract becomes valid between unilateral contract and bilateral contract According to the Civil Code 2015 Article 401(1), "A contract that is legally entered into shall become valid on the time of its entry"; however, Article 458(1) specifies, "A contract for donation of movable property shall become effective from the time the donee receives the property" According to the words in the law, the author understands that even though there is a contract between donor and donee, the contract is not valid until the donee receives property from the donor Therefore, it makes no sense to raise the issue of the right

to claim debts in such cases

The right to claim debts mainly arises from bilateral contracts If the obligor fails to make the payment, the obligee may initiate a lawsuit order the obligor to perform obligations together with compensation for damage and penalties if agreed Besides,

a bilateral contract shall be a lawful one for the right to claim debts becomes effective

Fourthly, the object that the right to claim debts aims at is a sum of money paid out

at a specific time In a bilateral contract, when a party has fulfilled its obligations,

such as transfer goods, provide service, the other shall fulfill its obligations by making

a payment at a specific time agreed under a contract In such cases, the right to claim debts arises when the obligor fails to fulfill its obligation to make a payment at the due date, and the right to claim debts only terminates when the obligor has fulfilled the payment obligations12

1.1.3 Classification of the right to claim debts

According to Decree 163 Article 22, it can be inferred that there are two types of the right to claim debts: existing debt claim and future debt claim An existing debt claim

is a property over which its subject has established ownership rights prior to or at the time of establishing the transaction Particularly, it is an amount of money that will

be paid out at a specific time in the future under a contract or in accordance with the law In other words, an existing debt claim is a debt claim that arises upon or before

11 The Civil Code 2015 Article 402(1)

12 See Vo Thi Dai (2011), Pháp luật về thế chấp quyền đòi nợ trong hoạt động cho vay của các ngân hàng

thương mại [Trans: Regulations on the mortgage of the right to claim debts in lending transactions of commercial banks], Bachelor thesis, Ho Chi Minh City University of Law, page 8

the conclusion of the security contract Contrary to an existing debt claim, a future debt claim is a debt claim that arises after the conclusion of the security contract

To distinguish between an existing debt claim mortgage and a future debt claim mortgage, it is necessary to determine whether the mortgagor's right to demand payment has arisen at the time of the conclusion of the mortgage If it has arisen, it is

an existing debt claim even though it is future receivables A debt to be paid in the future under a signed contract is an existing debt claim, not a future debt claim13 Conversely, if the right to claim payment has not arisen at the time the mortgage transaction is concluded, it is a future debt claim For example, a mortgagor is an office lessor who wants to mortgage the debt claim arising from a promise to lease contract in which stipulates that only when the lessee obtains a work permit and a license for the establishment of representative offices in Vietnam, does it has an obligation to lease the office and pay money to the lessor If the lessor uses a debt claim arising from such a contract to mortgage at the bank, it is a mortgage of a future debt claim as a debt claim has not formed at the time concluding the mortgage contract

An existing debt claim itself has more potential risks to the commercial banks than other types of assets when being collateral because it depends on the debtor's cooperation Future debt claim is even riskier because it has both an "uncertain" and

"dependent" nature According to Truong Thanh Duc, "the mortgage of the future property, especially future debt claim, is a huge risk for the mortgagee because there

is almost no financial guarantee If the payment obligation arises right after signing a future property mortgage contract, there will be no collateral to handle"14

1.2 Mortgage of the right to claim debts at commercial banks

1.2.1 Overview of a mortgage contract

Commercial banks are monetary trading enterprises in the form of borrowing to grant loans Therefore, commercial banks shall assure the safety of the loan source For this reason, when lending, commercial banks must rely on financial factors, such as security measures for loans15 And the mortgage is a property security measure that plays a significant role in reducing the risk of losing credit capital of commercial banks

13 Bui Duc Giang, "Giao dịch có đối tượng quyền đòi nợ" [Trans: Transaction that has an object being the debt claim], https://thongtinphapluatdansu.edu.vn/2013/11/12/giao-dich-c-doi-tuong-quyen-di-no/, accessed 29/06/2021

14 Truong Thanh Duc (2017), Chín biện pháp bảo đảm nghĩa vụ hợp đồng [Trans: Nine measures to secure

contractual obligations], Chinh tri Quoc Gia Su that Publisher, page 161

15 See Ho Chi Minh City University of Law (2019), Giáo trình luật ngân hàng [Trans: Textbook Law on

Banking], Hong Duc Publisher, page 331

According to Article 317 of the Civil Code 2015, a mortgage can be understood: a party (mortgagor) uses its own property to secure the performance of an obligation Mortgaged property can be immovables or movables; however, there will be no transfer of mortgaged property to the other party (mortgagee)

When comparing a mortgage with other security measures, there are many similarities between mortgage and pledge:

Firstly, pledge and mortgage are both use the property to secure the performance of

an obligation

Secondly, the type of property used in both measures is objects, money, valuable

papers, and property right

Thirdly, pledge and mortgage both exist in the form of contracts

Lastly, only when the obligor fails to perform its obligations agreed in the contract

will the obligee have the right to dispose of the property

The most significant difference between these two security measures is property management Pledge is a security measure by which one party has to hand over its own property to the other to secure the performance of an obligation But for the mortgage, the mortgagor only has to hand over the certificate of ownership to the mortgagee if agreed upon As such, the property still belongs to the possession and use of the mortgagor

From the above analysis, the concept can be given as follows: the mortgage contract

at a commercial bank is an agreement between the borrower (the mortgagor) and the commercial bank (the mortgagee), under which the mortgagor undertakes to use its own property to secure the performance of payment obligation without transferring such property to the mortgagee

1.2.2 Mortgage of the right to claim debts at commercial banks

Considering nine security measures specified in Article 292 of Civil Code 2015, the mortgage is the most suitable measure reserve for the right to claim debts because the right to claim debts is intangible property, which cannot be transferred

1.2.2.1 Characteristics of the debt claim mortgage contract

Firstly, The mortgage of the right to claim debt arises on the basis of an agreement among the parties

Civil obligations may arise from different bases, such as prescribed by law or agreed upon by parties; however, security measures only arise when there is an agreement between parties The mortgage of the right to claim debts is no exception In banking operations, the contracts are usually drafted by the commercial bank, including mortgage contracts Nevertheless, it does not eliminate the negotiation element in the

transaction In fact, customers are still allowed to read the draft, give opinions to make amendments if necessary16

Secondly, there are at least three subjects that exist in this relation

In the debt claim mortgage contract, there are three subjects at least, including the mortgagee (commercial banks), the mortgagor (the owner of the right to claim debts), the debtor (the subject that must pay off the debt to the mortgagor)

According to the Civil Code 2015 Article 317, "mortgagor uses his/her/its own property to secure the performance of an obligation"; however, it does not specify whether such obligation shall belong to mortgagor only Therefore, it can be understood that the secured obligation is not necessarily the obligation of the mortgagor Therefore, the debt claim mortgage contract can also exist in two cases: (1) Mortgaging the right to claim debts to secure the performance of the obligations for the mortgagor; (2) Mortgaging the right to claim debts to secure the performance

of the obligations for the third party

Noted, the second case should be distinguished from the mortgage to secure the guarantee obligations17 In the case of a mortgage to secure the performance of the obligations for the third party, if the value of the mortgaged property is insufficient

to cover the obligation, the mortgagor is not required to pay for the deficit However,

in the case of the mortgage to secure the guarantee obligations, if the value of the mortgaged property is insufficient to cover the obligation, the mortgagor is obliged

to pay for the deficit

In reality, there are many cases in which commercial banks incorrectly identify the name of the security measures When brought to trial, the court usually declared those contracts invalid However, Decree 21 Article 4(4)18 has completely solved this problem Nevertheless, there is still another issue that some courts have declared mortgage contracts to secure the performance of the obligations for the third party invalid on the grounds that they are not recognized by the law19 Decree 21 Article

16 See Pham Thi Huynh Nhu (2014), Thế chấp quyền đòi nợ bảo đảm nghĩa vụ thanh toán trong hợp đồng tín

dụng [Trans: Mortgage of the right to claim debts to ensure payment obligations in the credit contract],

Bachelor Thesis, Ho Chi Minh City University of Law, page 9

17 The Civil Code 2015 Article 336 (3) provides, "The parties may agree to use property as security for the performance of the guaranteed obligation"

18 In cases where an agreement contains contents on security for the performance of obligations, but the parties

do not specify or incorrectly identify the name of the security measures which are consistent with the security measures prescribed in the Civil Code, the provisions on security measures corresponding to such contents of the agreement will be applied

19 Bui Duc Giang, "Bảo đảm khoản vay bằng tài sản của bên thứ ba: từ quy định pháp luật đến thực tiễn áp dụng'' [Trans: Loan security with third-party assets: from legal regulations to practice], http://tapchinganhang.gov.vn/bao-dam-khoan-vay-bang-tai-san-cua-ben-thu-ba-tu-quy-dinh-phap-luat-den- thuc-tien-ap-dung.htm, accessed 8/5/2021

3(3)20 has also solved this problem With such regulation, it can be understood that the mortgagor may not be the obligor at the same time, which infer that a mortgage contract to secure the performance of the obligations for the third party is recognized

Fourthly, the debt claim mortgage contract is a supplementary and preventive measure for the main obligation

A mortgage is a supplementary measure to deduct for the performance of a credit contract's obligation The mortgaged property is only disposed of when the borrower fails to pay the debt when it is due Besides, a mortgage is a measure to prevent credit risk, not a prerequisite that the commercial banks based on to decide granting loan The revenues from the disposal of mortgaged property recover the loan that commercial banks grant their clients, prevent and minimize the risk of loss of credit capital21

1.2.2.2 Conditions for the right to claim debts become a mortgaged property in a mortgage contract at commercial banks

Firstly, the right to claim debts must come under the ownership of the mortgagor

According to The Civil Code 2015 Article 295(1), "Collateral must come under the ownership of the securing party, except for the cases of lien on property and retention

of title" Such regulation stems from the principle that only the owner of the property has the right to dispose of the property unless the owner authorizes or assigns that right to another person In addition, when the collateral is disposed of, the ownership rights of the collateral may be assigned to the mortgagee (or a third party) If the right

to claim the debts does not come under the ownership of the mortgagor, it cannot be

20 The secured obligor means a person whose obligations are guaranteed to be performed through a security measure The secured obligor may or may not be the securing party at the same time

21 See Ho Chi Minh City University of Law (2019), tldd(15), page 334-335

assigned22 In addition, the right to claim debts must be without dispute to minimize potential risks for commercial banks

Secondly, the right to claim debts can be assigned in civil transactions

There are two basic elements to consider that the property is transferable in civil transactions: (1) the property is not associated with the personal identity, such as the right to claim support money; (2) property which is not prohibited by law23 Moreover, in many cases, the parties in the contract agree to prohibit the assignment

of the right to claim debts Thus, in addition to meeting the two above conditions, the right to claim debts need to meet the third condition: the contract does not prohibit the assignment of the right to claim debts, in other words, the contract does not stipulate an anti-assignment clause

Thirdly, the right to claim debts must be identified

According to The Civil Code 2015 Article 295, "Collateral may be described in general terms but must be identified" The property description is one of the methods

to identify the mortgaged property in order to help others identify the object of the mortgage contract If the parties describe the property too general, unclear; thus, cannot identify the property in the mortgage contract, a dispute will arise, and the mortgaged property cannot be disposed of The Decree 163 does not stipulate the description of property rights in general and the right to claim debts in particular; however, Decree 21 Article 9(4)24 has resolved this shortcoming with the specific regulation on the description of property rights

1.3 Overview of collateral disposal which is the right to claim debts at commercial banks

1.3.1 Overview of collateral disposal at commercial banks

1.3.1.1 Concept of collateral disposal

Until now, the concept of collateral disposal has not been mentioned in any legal document However, through research, some authors have given their views on the concept of collateral disposal According to Le Thi Thu Thuy, "loan collateral disposal is a stage of loan security with properties, the stage of taking measures over collateral to recover debts that credit institutions have lent when there is a breach of the performance of obligations, which the borrowers have committed in the credit

22 See Nguyen Van Cu, Tran Thi Hue (2017), Bình luận khoa học bộ luật dân sự năm 2015 của nước cộng hòa

xã hội chủ nghĩa Việt Nam [Trans: Scientific commentary of the Civil Code 2015], People Police Publishing

House, page 488

23 See Vu Thi Hong Yen (2017), Collateral and collateral disposal under Civil Code 2015, National Political

Publishing House, page 51-52

24 In cases where the collateral is a property right, the agreed description shall include the name and legal grounds in which the property right arises

contract"25 From the perspective of Vu Thi Hong Yen, "Mortgaged property disposal

is the process of exercising the mortgagee's rights by carrying out procedures for disposing of ownership rights of the mortgaged property and the earned proceeds will

be paid to the mortgagee and other subjects who have the same benefit on such property according to the order of priority prescribed by law or agreed upon"26 Another view on the concept of collateral disposal, "Loan collateral disposal means that the parties to a security transaction apply the methods and measures as agreed upon or in accordance with the law to dispose of collateral to satisfy the right to claim

of the obligee in the event that the obligor fails to perform or incorrectly perform its obligations in an established obligation relationship"27

Learning from the above definitions, the author draws a brief definition as follows: Collateral disposal at a commercial bank is a process of changing the collateral into money or equivalent material value to recover a debt that a commercial bank has lent,

in accordance with law or as agreed upon

1.3.1.2 Characteristics of collateral disposal at commercial banks

Collateral disposal at commercial banks has the following characteristics:

Firstly, the collateral disposal shall be performed as agreed upon by the parties in the security contract

One of the fundamental principles of civil law is that the parties are free to agree upon

as long as the agreement is neither prohibited by law nor contrary to social morality

A security contract is a civil transaction, so the parties in the contract are free to agree upon the method to dispose of the collateral And this method shall prevail when a collateral disposal base arises

Secondly, collateral disposal needs to comply with certain principles and procedures

of law

Collateral disposal is the process of assigning the ownership of property from one subject to another Therefore, when disposing of collateral, parties must comply with certain procedures such as administrative procedures, even though it is not specified

in the security contract Furthermore, the disposal of collateral, if not well managed, can transform into extortion Therefore, the law also sets out other principles and regulations that require subjects to comply with to protect social order and safety as well as interests of others

25 Phan Thi Ngoc Huyen (2010), Pháp luật về xử lý tài sản bảo đảm tiền vay là bất động sản [Trans:

Regulations on loan collateral disposal being immovables at commercial banks], Bachelor Thesis, Ho Chi

Minh City University of Law, page 9

26 Vu Thi Hong Yen, tldd(23), page 46

27 University of Economics and Law (2020), Giáo trình pháp luật về bảo đảm nghĩa vụ [Trans: Textbook on

the Law of obligation security], Ho Chi Minh City National University Publisher, page 308

Thirdly, the purpose of collateral disposal is debt recovery

If it is not for the purpose of recovering the amount of debt that might be lost, there will be no process of disposing of the collateral It is thought that if the debt has been repaid in accordance with the agreement, the collateral disposal will not occur Therefore, only proceeding to collateral disposal when a commercial bank cannot recover debts that are due, and only for the purpose of debt recovery, not for making

1.3.2 The basic legal content of collateral disposal which is the right to claim debts 1.3.2.1 Principles for disposal of collateral which is the right to claim debts

Collateral disposal is not only related to the lawful rights and interests of the secured party and the securing party but also the interests of other subjects Therefore, the law has set out general principles when disposing of collateral Collateral disposal being the right to claim debts shall follow such principles

Firstly, the principle of agreement

When establishing a security transaction, the parties also set out the terms of the disposal of collateral According to the provisions of the law, the parties are free to agree on all matters on the collateral disposal, such as the method, the time, and the subject having the right to dispose of the collateral These terms are given priority to apply when disposing of collateral

According to Decree 163 Article 58(1), "In case an asset is used to secure the performance of an obligation, the disposal of that asset shall be carried out as agreed upon by the parties If there is no agreement, that asset shall be put on auction according to the provisions of law" However, such regulations exist shortcomings because not all property types can be put on auction, particularly the right to claim debts Debt claim auction is inappropriate, or in other words, it is meaningless, and assuming that debt claim auction is implemented, the buyers seem to have only

28 Phan Thi Ngoc Huyen, tldd (25), page 9

29 Vu Thi Hong Yen, tldd(23), page 47

speculative intentions30 For this reason, Decree 21 Article 49 (1) only stipulates,

"The realization of collateral shall be carried out in accordance with the parties' agreements", and provide separate provisions for different types of property when disposing of collateral Such regulations have resolved the shortcoming mentioned above, and it is more reasonable as it allows for flexibility when disposing of a different kind of collateral

Secondly, the secured party shall perform the realization of collateral based on the agreement in the security contract without acquiring written authorization or written consent from the securing party31

This principle is inherited from Article 58(4) of Decree 163 The principle once again emphasizes the principle of agreement between the parties when disposing of collateral Additionally, it also has an important meaning: saving time and cost for parties when disposing of collateral Specifically, in the case of the disposal of collateral which is the right to claim debts at commercial banks, if the commercial bank can immediately dispose of the debt claim as agreed in the contract without relying on the cooperation of the securing party It is clear that the bank saves both time and costs (by reducing cumbersome administrative procedures and time for waiting for the consent from the securing party)

Thirdly, in cases where the Civil Code and other relevant law provisions prescribe that the property being used as collateral shall be realized in order for the securing party to perform another obligationin, such property shall be realized in accordance with such provision32

This principle is to protect the lawful rights and interests of other subjects Particularly, according to the Civil Code 2015 Article 296(3), "In case the property has to be realized for the performance of a due obligation, other undue obligations shall all be regarded as due, and all secured parties may participate in the realization

of the property" Such principle is quite similar to the principle mentioned in Article 58(3) of Decree 16333 Both provisions are aimed at protecting the lawful rights and interests of other subjects However, Decree 21 Article 49 does not mention the principle of objectivity, publicity, and transparency specified in Article 58(3) of Decree 163 Thus, can it be understood that the principle of objectivity, publicity, and

30 See more Bui Duc Giang, "Pháp luật về xử lý tài sản bảo đảm là quyền đòi nợ'' [Trans: The law on collateral disposal being the right to claim debts], https://thongtinphapluatdansu.edu.vn/2013/06/22/php-luat-ve-xu-l-ti- san-bao-dam-l-quyen-di-no/, accessed 10/5/2021

31 Decree 21 Article 49(2)

32 Decree 21 Article 49(3)

33 The disposal of security assets must be carried out in an objective, public and transparent manner so as to ensure the legitimate rights and interests of the parties to security transactions, the concerned organizations and individuals and in compliance with the provisions of this Decree

transparency is no longer necessary when disposing of collateral? Decree 21 does not provide for the principle of objectivity, publicity and transparency because this principle has been applied throughout the process of disposing of collateral Objectivity means not subjective, not arbitrarily disposing of collateral based on the intention of one party, but it must be based on the agreement or the provisions of the law This is already mentioned in Decree 21 Article 49(1) Publicity and transparency mean disclosing information in the process of disposing of property to relevant subjects to protect their lawful rights and interests This aspect has also been specified

by the law when stipulating the notification obligation of the mortgagee when disposing of one collateral used to secure performance of many obligations

Fourthly, the realization of the collateral by the secured party to collect the debts shall not be considered as property trading activity by the secured party34

According to the Law on Enterprise 2020 Article 4(21)35, the purpose of conducting business is to make a profit Property trading activity can be understood as any activity of investing, producing, buying, and selling property for the purpose of making a profit However, the commercial bank's collateral disposal is only for the purpose of debt recovery, not for profit-making purposes This is reflected in the fact that the bank must dispose of the collateral in accordance with the agreement between the parties and in accordance with the law The bank will not be allowed to invest in assets and then wait for a while for the assets to appreciate before selling them, just like a property trading activity for making a profit And because the collateral disposal is only for the purpose of debt recovery, not for profit-making business, the law stipulates that the sale of collateral by a commercial bank is not subject to value-added tax36

1.3.2.2 Cases of realization of collateral which is the right to claim debts

The legal consequences of disposing of collateral affect many subjects; hence, the disposal of collateral is implemented only when it is so prescribed by law37 Cases of realization of collateral in general and the right to claim debts, in particular, are prescribed in the Civil Code 2015 Article 299

Firstly, The obligor fails to perform or improperly performs the secured obligation when it becomes due 38

34 Decree 21 Article 49(4)

35 Conducting business means the continuous performance of one, several or all of the stages of the process from investment and production to the sale of products or provision of services in the market for making profits

36 Circular 219 Article 4(8)

37 Vu Thi Hong Yen, tldd(23), page 58-59

38 The Civil Code 2015 Article 299(1)

The relationship between the loan contract and the security contract is the relationship between the principal contract and the subcontract The main task of the security contract is to ensure that the commercial bank's loan is recovered When commercial banks grant a loan, the principle of payment of both principal and interest is one of the significant principles of lending activities at commercial banks The principle infers that there are two main obligations in a loan contract: principal payment obligation and interest payment obligation There is an opinion that only when violating the obligation to pay principal does a bank have the right to dispose of the collateral However, violating the obligation to pay interest also constitutes the bank's right to dispose of collateral because interest is a vital factor in the bank's lending activities Interest is the price of the loan; it is the same as the rental in the lease The purpose of a lessor is to receive rental, just like the purpose of a bank when granting

a loan is to receive interest This point of view is consistent with the law According

to the Civil Code 2015 Article 293(1)39, unless otherwise agreed upon, the interest payment obligation is also a secured obligation This means that if borrowers fail to perform or improperly perform the interest payment obligation, a commercial bank

is entitled to dispose of the collateral

Secondly, The obligor has to fulfill the secured obligation ahead of time because the obligor violates the obligation as agreed upon or prescribed by law40

The obligor has to fulfill the secured obligation ahead of time because the obligor violates the obligation as agreed upon For instance, the parties may agree that if the securing party does not use the loan properly with the purpose agreed in the credit contract, the commercial bank is entitled to dispose of collateral even the secured obligation is not due This type of agreement is reasonable, and it stems from the principle of using loan capital properly with the purposes as agreed in the credit contract The source of capital that a commercial bank lends is the capital that the commercial bank borrows from others; hence, the commercial bank has the responsibility to preserve such capital Requiring the borrower to use the loan for the agreed purpose has partly helped the commercial bank control the capital it has lent41 Additionally, the obligor has to fulfill the secured obligation ahead of time prescribed

by law For example, in case one property used to secure performance of many obligations, if one obligation is due, other undue obligations shall all be regarded as

39 An obligation may be secured in part or in whole as agreed upon or prescribed by law; if the scope of security

is neither agreed upon nor prescribed by law, the obligation shall be regarded to be secured in whole, even the obligation to pay interests, fines and compensation

40 The Civil Code 2015 Article 299(2)

41 See Ho Chi Minh City University of Law (2019), tldd(15), page 313

due, and all secured parties may participate in the realization of the property42 Or according to Law on Enforcement of Civil Judgments 2008, amended and supplemented 2014 Article 9043, although the obligor has not violated the secured obligation, the collateral will still be disposed of for the performance of the judgment enforcement obligation44

Thirdly, other cases as agreed upon by the parties or prescribed by law45

The collateral disposal, in this case, is not because of any breach of contract but due

to the will of the parties For example, the mortgagor agrees with the mortgagee; if the right to claim debts is due before the secured obligation contract (loan contract), the mortgagee is entitled to dispose of the collateral to offset the debt

In other cases, as prescribed by law, such as when the securing party goes bankrupt, the people's court may dispose of collateral following the law on bankruptcy

1.3.2.3 Subjects having the right to dispose of collateral which is the right to claim debts

The right to claim debts is a mortgaged property at a commercial bank to secure the payment obligation of the borrowers When grounds for collateral disposal arise according to Article 299 of the Civil Code 2015, it is necessary to determine who has the right to dispose of such collateral

The mortgagee or other subject who has been authorized by the mortgagee

According to the Civil Code 2015 Article 323(7), one of the rights of the mortgagee

is to realize the mortgaged property in the cases prescribed in Article 299 of this Code This proves that the commercial bank is the subject having the right to dispose

of the right to claim debts

According to Decree 163 Article 58(4), the commercial bank was allowed to authorize a third party to dispose of the mortgaged property However, such regulation is no longer mentioned in Decree 21 However, this does not mean that under Decree 21, the commercial bank is no longer allowed to authorize the third party to dispose of the right to claim debts Decree 21 does not mention such authorization because it has been mentioned in other regulations, such as The Civil Code 2015 Article 138 Additionally, according to Decision 150, commercial banks are allowed to establish Asset Management Company And according to Circular 27

42 The Civil Code 2015 Article 296(3)

43 In case judgment debtors have no more assets or have assets insufficient for judgment enforcement, enforcers may distrain and handle assets of judgment debtors currently in pledges or mortgages if the value of these assets is larger than the secured obligation and expenses for judgment enforcement

44 See Nguyen Van Cu, Tran Thi Hue (2017), tldd(22), page 495

45 The Civil Code 2015 Article 299(3)

section I(3), commercial banks are allowed to authorize Asset Management Company

to dispose of the collateral

Of note, authorization of the mortgagee to a third party (authorized party) does not assign the right to claim debts from the mortgagee (authorizing party) to the authorized party According to Article 562 of the Civil Code 2015, the authorized party will perform civil transactions on behalf of and for the benefit of the authorizing party The authorized party is obligated to return the property received and the benefits obtained during the performance of the authorization to the authorizing party The authorizing party is responsible for the acts performed by the authorized party within the scope of authorization Different from authorization, the assignment of the right to claim debts means one person (assignor) assigns its right to claim debts to another (assignee) After the assignment, the assignee becomes the owner of the right

to claim debts; therefore, the assignee is entitled to keep all the benefits received without returning them to the assignor Simultaneously, the assignor holds no responsibility for the debtor's ability to perform the payment obligation

In summary, after authorization, the authorizing party retains its right to claim debts, the authorized party just a party performs the right on behalf of the authorizing This

is not the case for assignment of the right to claim debts as after assignment, the assignor has no right towards a debtor, assignee steps in the shoes of the assignor and become the party having the right to claim and retain all the benefits received Of note, for the authorized party to be able to perform the receipt of property from the debtor, the authorized party is obliged to notify the debtor but not obliged to receive consent from the debtor

Other subjects in case the parties have agreed or prescribed by law

According to Decree 21 Article 49(1)46 if parties agree to have the third party dispose

of collateral, the third party will have the right to dispose of the right to claim debts Besides, in case the right to claim debt is used to secure the performance of many obligations, "the secured party that has notified the realization of the property shall realize the property unless otherwise agreed upon by the secured parties47" As such, there will be cases where the co-mortgagee, such as another commercial bank, has the right to dispose of the collateral Another case prescribed by law is that when the mortgagor goes bankrupt, the subject having the right to dispose of the collateral is the people's court48

46 The realization of collateral shall be carried out in accordance with the parties' agreements

47 The Civil Code 2015 Article 296(3)

48 The Law on Bankruptcy 2014 Article 53

1.3.3 Significance of collateral disposal which is the right to claim debts

With the strong development of the market economy, the trend of using the right to claim debts in secured transactions is increasing Firstly, not all individuals or organizations have real estate or tangible movables to secure payment obligations in the loan contract Secondly, currently, property rights cover a high proportion of a company’s assets, and the right to claim debts is one of them However, violation of payment obligations in credit contracts is very common nowadays Therefore, legal provisions on the disposal of collateral in general and the right to claim debts, in particular, are essential It is of great importance for the bank, the borrower, and the state

For the bank: Regulations on disposing of collateral in general and the right to claim

debts in particular help commercial banks quickly and proactively reclaim their benefits The quicker the bank recovers the loan, the more business opportunities the bank can take advantage of, thereby promoting the bank's business activities In addition, if the bank can dispose of the collateral quickly and conveniently, the bank will be more confident in lending activities, thereby creating more chances for individuals and organizations to have the capital to serve their plan of action, which results in promoting the development of the economy Without regulations on disposing of collateral, it is difficult for the bank to recover debts In such a case, the bank must rely on the goodwill of the borrowers or go through court proceedings that are time-consuming and costly

For the borrower: Disposing of collateral in general, the right to claim debts in

particular, not only ensuring the interests of banks, but also the interests of borrowers Firstly, it helps borrowers fulfill their payment obligations, avoiding complications related to court proceedings Secondly, the borrowers are not adversely affected in terms of reputation, ensuring the borrower's future business activities Thirdly, disposing of property in accordance with the law will ensure that it is handled in the right way, at the right time, with the right value The property will not be extorted or disposed of improperly in terms of its actual value

For the state: Disposing of the right to claim debts in accordance with the law

contributes to ensuring social order and safety Suppose the parties are allowed to dispose of the collateral arbitrarily In that case, it may lead to the lender's use of all means to recover the debt, for example, using violence, mental terrorism The right

to claim debts is an intangible asset of great value to a business If the law creates a good legal corridor for the mortgage of debt claims and debt claim disposal, it will stimulate individuals and companies to use this asset to secure loan contracts at a

commercial bank Individuals and businesses will have enough capital to carry out their necessary business activities promptly Effective disposing of collateral which

is the right to claim debts will help reduce the non-performing loan ratio at commercial banks, thereby contributing to promoting a stable economy

The right to claim debts being a mortgaged property at commercial banks is handled only when: (1) The obligor fails to perform or improperly performs the secured obligation when it becomes due; (2) The obligor has to fulfill the secured obligation ahead of time because the obligor violates the obligation as agreed upon or prescribed

by law; (3) other cases as agreed upon by the parties or prescribed by law Of note, there are four principles that must be followed when disposing of the right to claim debts

Normally, the mortgagee is the subject having the right to dispose of the debt claim However, in some situations, other subjects also have the right to dispose of the right

to claim debts, including the third party authorized by the mortgagee, the people's court, etc

Regulations on the disposal of the right to claim debts have a significant role in promoting debt claim mortgage transactions; thereby, increasing income for the bank, expanding opportunities for businesses and promoting the country's economic development Therefore, the disposal of collateral which is the right to claim debts,

if executed effectively, will be beneficial not only to the commercial bank, the mortgagor but also to the state