Bankruptcy: Vietnam vs the United States

Bankruptcy in Vietnam and the United States shares one goal — an orderly answer to insolvency — but the two systems pull in opposite directions. Vietnam’s Law on Recovery and Bankruptcy 142/2025/QH15 (in force since 1 March 2026, replacing Bankruptcy Law 51/2014/QH13) builds a court-supervised, asset-preservation process around the asset management officer and the creditors’ meeting. The US Bankruptcy Code (11 U.S.C.) builds a debtor-driven system in which Chapter 11 lets management stay in possession and reorganise under an automatic stay.

Vietnam: court-supervised and creditor-centred

Vietnamese proceedings open when an enterprise or cooperative that is unable to pay its debts (or its creditors) petitions the people’s court — under clause 2, Article 5 of Law 142/2025/QH15, inability to pay means failing to perform a payment obligation within 06 months of its due date. The court appoints an asset management officer or asset management and liquidation enterprise, which inventories assets, supervises transactions and reports. A creditors’ meeting votes on the recovery plan or liquidation; the court confirms. Suspicious transactions (asset transfers, debt waivers) made before opening can be declared void. After recovery and bankruptcy costs, remaining assets are distributed in the order set by Article 46 of Law 142/2025/QH15: wage debts; social insurance, unemployment insurance, health insurance and occupational accident and disease insurance debts; severance allowances and other employee entitlements; debts incurred during business recovery; financial obligations to the State; and finally unsecured debts together with any shortfall of secured debts (secured creditors are paid first from their collateral). Criminal liability can follow fraudulent bankruptcy. The governing framework is Law 142/2025/QH15, which replaced Law 51/2014/QH13 on 1 March 2026; filings today proceed under the new law.

United States: Chapters 7 and 11

US cases begin with a voluntary or involuntary petition. Chapter 7 is liquidation: a trustee sells non-exempt assets and distributes proceeds by statutory priority. Chapter 11 is reorganisation: the debtor usually remains in possession, proposes a plan of reorganisation, and creditors vote by class; the court confirms if statutory tests (including the “best interests” and feasibility tests) are met. Filing triggers the automatic stay (11 U.S.C. 362), freezing most collection action instantly. Avoidance powers let the estate claw back preferential and fraudulent transfers. Venue shopping and debtor-in-possession financing make Chapter 11 a restructuring tool, not just a funeral.

Key differences in practice

Control differs: in Vietnam, the asset management officer and the court steer; in the US, management often keeps the wheel in Chapter 11. Speed differs: Vietnamese cases have historically moved slowly through overloaded courts, while US cases can run on expedited timetables (pre-packaged Chapter 11 plans can confirm in weeks). Creditor power differs: Vietnam’s creditors’ meeting decides the fork between recovery and liquidation, while US creditors negotiate within class voting and court oversight. Director exposure differs too: both systems punish fraudulent conveyance, but US law adds the automatic stay and a developed body of fiduciary-duty litigation.

Cross-border angles

A Vietnamese company with US assets (or vice versa) raises recognition questions. The US recognises foreign proceedings under Chapter 15; Vietnam has no equivalent cross-border chapter — foreign judgments face case-by-case recognition. Contractual governing law, where assets sit, and where creditors will actually enforce all shape the forum choice. Groups with both footprints should coordinate filings so that an automatic stay in one jurisdiction is not undermined by enforcement in the other.

Checklist

Vietnam: confirm insolvency facts and file before asset dissipation; engage an asset management officer early.
Vietnam: apply Law 142/2025/QH15 (in force); inability to pay = 06 months overdue (clause 2, Article 5).
US: decide Chapter 7 vs Chapter 11 — liquidation vs reorganisation.
US: prepare for the automatic stay and preference-period review (90 days, one year for insiders).
Cross-border: map where assets and creditors sit before choosing the forum; consider Chapter 15.

Frequently asked questions

Can a foreign creditor file in Vietnam?

Yes. Creditors of an insolvent Vietnamese enterprise may petition the people’s court regardless of nationality. They participate in the creditors’ meeting and share in distribution under the statutory priority.

What is the automatic stay?

A US statutory freeze (11 U.S.C. 362) that takes effect the moment a bankruptcy petition is filed, stopping most lawsuits, foreclosures and collection efforts. It is one of the most powerful features of the US system and has no direct equivalent in Vietnamese law.

Can management stay in control in Vietnam like in Chapter 11?

Not in the same way. Vietnamese proceedings place supervision with the asset management officer and the court; the debtor-in-possession model is a US Chapter 11 feature.

What happens to contracts in bankruptcy?

Both systems allow the estate to assume or reject executory contracts, but the mechanics differ: Vietnam routes this through court and creditor-meeting supervision, the US through motion practice and the business-judgment standard.

Does Vietnam recognise a US bankruptcy order?

There is no dedicated cross-border recognition chapter in Vietnamese bankruptcy law; recognition runs through general civil-procedure rules and treaties on a case-by-case basis. Plan enforcement accordingly.

Insolvency is a race for procedure. Contact FLAT Law Firm to choose the right forum and protect creditor or debtor interests on both sides.

This article has been quality-reviewed by the FLAW AI Legal Council