Decree 304 and new developments in the seizure of secured assets

One of the notable legal documents that will take effect from December 2025 is Decree 304/2025/ND-CP of the Government stipulating conditions for collateral (TSBĐ) of bad debts to be seized according to Point d, Clause 2, Article 198a of the Law on Credit Institutions (as amended and supplemented). The promulgation of Decree 304 is considered an important step forward in perfecting the legal framework for bad debt handling activities, both increasing strictness and transparency and clearly demonstrating the humane factor towards borrowers.

The important new point of the Decree is to strictly regulate the conditions for confiscation when the property is determined to belong to a special group. In case the collateral is the borrower's only residence, the credit institution must allocate to the guarantor an amount equivalent to 12 months of minimum wage. This support is considered a "buffer" of security, helping the borrower have time to find a new place to live and stabilize his life after losing the property. In case of confiscation of the main labor tools that are not formed from loan capital, the borrower will receive support equivalent to 6 months of minimum wage to maintain the ability to generate income during difficult times. This is a completely new mechanism compared to previous regulations, demonstrating a more flexible and practical policy mindset and a clear humane nature in handling bad debt.

To ensure transparency in the processing, Decree 304 clearly stipulates that the burden of proof lies with the borrower. Within 10 working days of receiving the request from the secured party, the borrower must provide documents proving that the property belongs or does not belong to the special group. The dossier includes documents confirming ownership, income statements, documents proving residence or documents related to the property being the only means of work. The borrower is responsible for the accuracy and legality of all information provided. In case of failure to provide the information within the deadline, the property will be automatically determined as not belonging to the supported group. This regulation aims to prevent the abuse of the mechanism to prolong debt settlement, while creating a clear legal basis and avoiding disputes.

Along with the requirements for borrowers, the Decree also clarifies the responsibilities of credit institutions in the entire process of asset seizure. Accordingly, the secured party is obliged to provide full information so that the borrower understands his/her rights, obligations and support mechanisms as prescribed. Financial support must be provided before seizure and included in the cost of handling secured assets. The entire seizure process must comply with Article 198a of the Law on Credit Institutions, from notification, coordination with local authorities to actual seizure organization. Standardizing this process helps limit legal risks, ensure publicity, transparency and prevent abuse of power or improper implementation of procedures.

Commenting on the significance of Decree 304, Mr. Nguyen Duc Lenh - Deputy Director of the State Bank of Vietnam Region 2 said that this document has comprehensive and far-reaching significance. On the one hand, the Decree creates conditions for credit institutions to be more proactive in handling and recovering debts, thereby clearing capital flows for the economy and improving the efficiency of credit activities. On the other hand, the clear legal framework also contributes to raising the sense of responsibility of borrowers, forcing customers to proactively use capital for the right purposes and be responsible for repaying debts in full and on time. At the same time, the support mechanism for vulnerable groups clearly demonstrates humanity, sharing responsibility, reducing financial shocks and ensuring social security. When Resolution 42 has been legalized and Decree 304 is implemented synchronously, bad debt handling activities will enter a more stable framework, creating an important foundation to promote safe and sustainable credit development.

Sharing the same view, an economic expert commented that with the new legal framework, the rights of creditors are still protected to ensure the smooth flow of capital, but they are required to strictly comply with the procedures of notification, public listing and a series of other conditions to protect the legitimate rights and interests of borrowers. "Banks are forced to professionalize debt settlement activities instead of focusing only on recovery results at all costs," this expert emphasized. According to him, the most obvious progress of Decree 304 is the re-establishment of the balance between economic efficiency and social security in bad debt settlement. The regulation that banks must deduct a support amount equivalent to 6-12 months of minimum wage when seizing assets that are the only residence or main means of work has filled the previous legal gap, helping people avoid losing their minimum living facilities after fulfilling their debt repayment obligations.

A strict legal framework, a humane approach and a clear operating mechanism are the core values ​​that Decree 304 is laying the foundation for the future of bad debt handling of the Vietnamese banking system in the new period.

Source: https://thoibaonganhang.vn/nghi-dinh-304-va-buoc-chuyen-moi-trong-thu-giu-tai-san-bao-dam-174847.html