Group 5 Bad Debt Handling: Can You Get a Loan?

Bad debt is a common roadblock for individuals seeking loans. In Vietnam, bad debt is classified into five groups, with Group 5 representing debts most likely to be unrecoverable. This article from NT International Law Firm delves into Group 5 bad debt handling, the possibility of obtaining loans with such debt, and practical steps to avoid falling into this category.

Group 5 Bad Debt Handling: Can You Get a Loan?

What is Group 5 Bad Debt?

Group 5 bad debt encompasses debts unlikely to be recovered due to extended overdue periods, failed restructuring attempts, or severe legal violations. The specific criteria are outlined in Circular 11/2021/TT-NHNN:

• Debts overdue for more than 360 days
• Restructured debts overdue for 91 days after the initial adjustment or subsequent rescheduling
• Debts violating credit institution regulations under Articles 126, 127, and 128 of the Law on Credit Institutions
• Debts exceeding the recovery period by 60 days after inspection or examination conclusions
• Debts arising from customer contract breaches and exceeding the 60-day recovery period
• Debts of credit institutions under special control or with frozen assets

Legal basis:

• Circular 11/2021/TT-NHNN on asset classification and use of provisions to handle risks in credit activities
• Decree 53/2013/ND-CP on the sale of bad debts of credit institutions to asset management companies
• Law on Credit Institutions (amended and supplemented)

Can You Borrow with Group 5 Bad Debt?

Obtaining loans with Group 5 bad debt is highly challenging due to the perceived unrecoverability of the debt. Banks prioritize minimizing their risk and prioritize applicants with better credit histories.

However, two exceptions exist:

• After bad debt write-off: Upon complete settlement of debts, information is removed from the Vietnam National Credit Information Center (CIC) after five years. If you maintain a good credit history in the intervening period, lenders may consider your loan application.
• Selling bad debt to asset management companies: Debts can be sold to specialized companies under Decree 53/2013/ND-CP. If eligible (collateralized, legal, and borrower still exists), your loan application may be reconsidered after selling the debt.

Checking Your Bad Debt Status:

Two methods can help determine your bad debt status:

• Directly inquire at the lending bank or credit institution.
• Access your credit information through the State Bank’s credit center. Both methods involve fees.

Alternatives to Group 5 Bad Debt

Alternatives to Group 5 Bad Debt:

Instead of struggling with Group 5 bad debt, consider these preventive measures:

• Adhere to loan repayment schedules to avoid delays and interest charges.
• Evaluate your repayment capacity before borrowing and limit monthly payments to 50% of your income.
• Maintain a clear credit history for at least two years before applying for new loans.
• Settle existing debts before applying for new ones.
• Seek financial guidance if facing debt repayment difficulties.

Conclusion:

Group 5 bad debt presents significant challenges for obtaining loans. However, understanding the classification criteria, available options (written-off debt/selling to asset management companies), and the importance of proactive credit management can empower individuals to navigate this situation effectively. Remember, responsible financial decisions are key to avoiding bad debt and ensuring loan accessibility in the future.

NT International Law Firm is Here to Help You

NT International Law Firm is Here to Help You

NT International Law Firm has addressed the question of what group 5 bad debt is and how to deal with it. If you have any further questions or concerns regarding civil law, please contact our law firm immediately for expert legal advice.

If you require any legal assistance, please feel free to reach out to us via phone at 090 252 4567 or through email: info@ntpartnerlawfirm.com. At NT INTERNATIONAL LAW FIRM, our team is committed to offering you prompt and personalized advice.

You also might be interested in:

• The 2015 Civil Code in English
• The 2015 Civil Procedure Code in English