Bankruptcy Asset Liquidation and Payment Order under Article 46 of the 2025 Law

The court has declared bankruptcy — the enterprise's assets are sold and divided among creditors. But what is sold, how, and who gets paid first? The bankruptcy payment order is one of the most significantly changed rules in the 2025 Law on Recovery and Bankruptcy (142/2025/QH15, effective 01/3/2026). This guide explains the liquidation estate, the sale process, and the Article 46 distribution order, with a hypothetical numerical example.

Contents

• 1. What does the liquidation estate include?
• 2. The asset liquidation process
• 3. The Article 46 payment order
• 4. Hypothetical: how to divide VND 50 billion
• 5. What's new for creditors

1. What does the liquidation estate include?

Article 54 lists the assets of a bankrupt enterprise/cooperative:

• Assets and property rights existing at the time the court issues the decision opening bankruptcy proceedings;
• Assets and property rights acquired after the opening date;
• Land-use-right value determined under the law;
• Assets recovered from concealment or dissipation;
• Assets recovered from void transactions (transactions declared void by the court during proceedings);
• Other assets as prescribed by law.

Special note: for private enterprises and partnerships, the estate also includes assets of the private-enterprise owner / general partners not directly used in business operations — because these persons bear unlimited liability. Inference: the choice of business form on day one decides which personal wealth gets pulled in at bankruptcy.

2. The asset liquidation process

The main steps:

1. Inventory and valuation: all assets are inventoried and valued at market prices at the time of inventory. If the inventory is inaccurate, the court orders re-inventory and re-valuation.
2. Sale plan: the asset manager (quản tài viên) / asset-management-and-liquidation enterprise proposes sale methods (auction, offering…).
3. Sale: the principle is open, transparent sale. The 2025 Law pushes full digitalisation — asset sales and enterprise transfers may occur electronically, linked to the national recovery-and-bankruptcy information portal.
4. Proceeds pooled into a common account for distribution under the Article 46 order.

Practical inference: liquidation sale prices usually fall below book value — so creditors in later ranks (especially unsecured ones) should expect to recover only a fraction, possibly nothing.

3. The Article 46 payment order

When the judge declares bankruptcy, assets are distributed in this order:

1. Bankruptcy costs — the costs of running the procedure itself (asset-manager remuneration, valuation, auction costs…). Nothing gets done without costs, so this rank comes first, logically.
2. Salary debts owed to employees.
3. Compulsory social insurance, unemployment insurance, health insurance, occupational accident–disease insurance.
4. Severance allowances and other employee benefits under collective labour agreements and labour contracts.
5. Debts incurred for business recovery — a key innovation: creditors who lent fresh money to keep the business running during recovery rank ahead of even State obligations. This is the legal basis for DIP-financing-style "recovery credit."
6. Financial obligations to the State (taxes, fees…).
7. Unsecured debts and the unpaid portion of secured debts where collateral value fell short.

The golden rule: assets flow to a later rank only after earlier ranks are paid in full. Where assets are insufficient for claimants within the same rank, they are paid pro rata — e.g., two unsecured creditors owed 60 and 40 billion sharing 50 billion each receive 50% of their claim.

4. Hypothetical: how to divide VND 50 billion

Figures below are hypothetical, for illustration.

Company X is declared bankrupt; total liquidation proceeds are VND 50 billion. Claims:

Dividing the 50 billion:

1. Ranks 1–5: 2 + 8 + 5 + 3 + 10 = 28 billion — paid in full.
2. 22 billion remain for rank 6 (12 billion tax debt) — paid in full, 10 billion left.
3. Rank 7: three suppliers owed 40 billion share the remaining 10 billion → each receives 25% of its claim, pro rata.

One more practical point: distribution happens in waves as assets are sold — earlier-rank creditors are typically paid in full before later ranks receive anything, so unsecured creditors often wait longest and receive last.

Lesson: unsecured creditors sit at the very bottom — owed 40 billion, recovering 10. This is why suppliers must manage trade-credit risk up front rather than rely on bankruptcy proceedings.

5. What's new for creditors

• Recovery-debt priority (rank 5): absent under the 2014 law. Lenders extending fresh credit during recovery now have a clear legal basis for priority — a channel worth considering in NPL strategies.
• Digitalisation: asset sales and enterprise transfers on electronic platforms — more transparency, less room for sweetheart deals.
• Recovered assets join the common pool: dissipated or voided transactions have their assets clawed back — creditors should actively feed suspicious-transaction intelligence to the asset manager.

Are you a creditor in a bankruptcy case? Your position in the Article 46 order decides how much you recover — and your strategy must start there. Contact FLAT Law Firm — hotline 0988424851 — for a position assessment and maximum recovery.

6. Special situations

Secured creditor with insufficient collateral: the secured portion is paid from the collateral's value; the shortfall drops to rank 7, sharing pro rata with unsecured creditors. Example: a bank lent 30 billion secured by collateral selling for 20 billion — 20 billion is prioritised, the remaining 10 billion "queues" with suppliers at rank 7.

Set-off: if you are simultaneously a creditor and a debtor of the bankrupt enterprise (e.g., a supplier who also buys from it), set-off must follow the rules — no self-help netting after proceedings open. This needs separate counsel advice as it touches the principle of creditor equality.

Salary debts vs secured debts — who first? Many secured creditors are surprised that employee salary claims (rank 2) are paid before secured claims against the common pool. But distinguish: secured creditors are paid from their own collateral's value — the Article 46 order governs the remaining common pool. Understanding this boundary avoids needless disputes.

Taxes and fees: State financial obligations sit at rank 6 — behind recovery debts (rank 5). This is a major change from the 2014 Law, reflecting the policy of encouraging fresh funding for recovering enterprises.

7. Checklist for unsecured creditors

Are you a supplier or unsecured partner? Do this:

• [ ] At the first sign of distress: reconcile accounts; gather contracts, delivery records, and documents.
• [ ] Watch for the court's opening decision — the 15-day debt-claim clock (Article 55) starts here.
• [ ] File the debt claim on time with the asset manager, with full evidence.
• [ ] Know your place: rank 7 — expect partial recovery; a recovery plan may beat liquidation.
• [ ] Attend the creditors' meeting: ally with same-rank creditors to amplify your vote.
• [ ] Consider accepting a recovery plan if cash flows are credible — 70% over two years often beats 25% through liquidation.

Appendix: 2014 Law vs 2025 Law at a glance

Reading tip: if your knowledge of Vietnamese bankruptcy comes from the 2014 Law, the recovery-debt priority and the standalone recovery procedure are the two changes that most alter creditor strategy. Re-learn them before acting on old assumptions.

References

• Law on Recovery and Bankruptcy No. 142/2025/QH15 (effective 01/3/2026) — Article 54 (estate), Article 46 (distribution order), Articles 18, 23 (digitalisation, national portal)

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