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M&A and Restructuring

Counterparty Bankruptcy: Asset Recovery Guide

5 min readFLAT LAW FIRM
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The worst news for a creditor: a business counterparty becomes insolvent and enters bankruptcy proceedings. From that point, "debt collection" is no longer between two parties — it is a race within collective proceedings, where whoever understands the law better recovers more.

This article covers asset recovery when a counterparty goes bankrupt under the Law on Recovery and Bankruptcy 2025 (No. 142/2025/QH15, effective 01/3/2026).

Table of contents

1. New framework: the 2025 Recovery and Bankruptcy Law

From 01/3/2026, Law No. 142/2025/QH15 on Recovery and Bankruptcy replaces the 2014 Bankruptcy Law (with transitional rules). Its directional novelty: emphasis on enterprise recovery — giving insolvent businesses restructuring opportunities instead of straight liquidation.

For creditors this cuts two ways: (i) better recovery chances if the business is successfully rehabilitated; (ii) more complex proceedings demanding active creditor participation from the start.

2. Know your position: three creditor classes

Legal position decides recovery prospects:

  • Secured creditors (mortgage, pledge): priority payment from the secured asset's value;
  • Partially secured creditors: the secured portion gets priority, the rest ranks as unsecured;
  • Unsecured creditors: paid only from remaining assets after priority creditors — in practice often a small fraction.

Lesson: when contracting with risky counterparties, demand security upfront — it is the "priority ticket" if they go bankrupt.

3. Claim filing: documents and deadlines

All debts must be declared in the proceedings — undeclared debts may not be resolved.

Claim-filing documents:

  • Creditor declaration forms;
  • Underlying contracts;
  • Invoices, payment vouchers;
  • Debt-reconciliation minutes;
  • Security documentation (if any).

Principle: the fuller and earlier the file, the higher the recognition chances. Late or poorly documented filings commonly cost creditors their rights.

4. Secured assets: the biggest advantage

Secured creditors get priority from the secured asset's value — but note:

  • Security must be validly created (registered per secured-transaction rules);
  • Recovery depends on the asset's actual value at realization;
  • Disputes over security validity can still arise — have counsel review.

5. Voidable transactions: recovering dissipated assets

The law provides that an insolvent enterprise's transactions may be declared void within a defined period before court acceptance — e.g.:

  • Asset gifts, undervalue transfers;
  • Prepaying undue debts;
  • Mortgaging assets for previously unsecured debts.

If the counterparty dissipated assets pre-bankruptcy, creditors may ask the asset manager/court to void transactions and recover assets for distribution.

6. Set-off: tread carefully

Set-off against an enterprise in recovery/bankruptcy proceedings is governed by specialist law — not every ordinary set-off is accepted after proceedings begin.

Businesses with two-way debts should consult counsel before self-help set-off.

7. Retention, title: other tools

Beyond security, creditors may rely on:

  • Retention rights over the counterparty's assets lawfully held;
  • Retention-of-title clauses in sale contracts — the unpaid seller still owns the goods;
  • Third-party guarantees — claim against the guarantor instead of queuing in bankruptcy.

These tools only work when set up in advance — not after insolvency.

8. Emergency action checklist

  1. ☐ Identify your creditor class (secured/unsecured)
  2. ☐ Gather complete debt and security documentation
  3. ☐ File claims on time and in full
  4. ☐ Review the counterparty's suspect pre-bankruptcy transactions
  5. ☐ No self-help set-off without counsel
  6. ☐ Closely track proceedings; attend creditors' meetings

9. FAQs

What should a creditor do first when a counterparty goes bankrupt? Three urgent steps: (1) identify your creditor class; (2) prepare complete claim-filing documents; (3) track proceedings to file on time. Late or poorly documented filings commonly cost creditors their rights.

How do secured and unsecured creditors differ? Secured creditors get priority from the secured asset's value; unsecured creditors are paid only from remaining assets after priority creditors — in practice often a small fraction.

What documents are needed to file a bankruptcy claim? Declaration forms, contracts, invoices, payment vouchers, debt-reconciliation minutes, security documentation (if any). All debts must be declared.

Which transactions can be declared void in bankruptcy? An insolvent enterprise's transactions within a defined pre-acceptance period — e.g., asset gifts, prepaying undue debts, mortgaging for previously unsecured debts. Creditors may seek voidance to recover assets.

Can debts be set off against a bankrupt enterprise? Set-off is governed by specialist law — not every ordinary set-off is accepted after proceedings begin. Consult counsel before self-help set-off.

What is new in the 2025 Recovery and Bankruptcy Law vs. the 2014 Law? Law 142/2025/QH15 effective 01/3/2026 replaces the 2014 Law. Directional novelty: emphasis on enterprise recovery — restructuring opportunities instead of straight liquidation.

10. When to work with counsel

Bankruptcy is collective proceedings with strict deadlines — one deadline or filing mistake can cost a creditor everything. Counsel helps: classify creditor position, prepare filings, handle secured assets, seek voidance of transactions, and represent at creditors' meetings.

For asset-recovery advice when a counterparty goes bankrupt, contact FLAT Law Firm — hotline 0988424851.

References

  1. Law on Recovery and Bankruptcy No. 142/2025/QH15 (effective 01/3/2026, replacing the 2014 Bankruptcy Law).