After bankruptcy proceedings are initiated, the company is obligated to settle its debts. Secured debts will be paid off first, followed by unsecured debts. This article provides guidance on handling secured debts after initiating bankruptcy proceedings according to the provisions of the 2014 Bankruptcy Law.
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Photo 1: Guidelines Handling Secured Debts After Initiating Bankruptcy Proceedings_Hotline: 097 211 8764
Once bankruptcy proceedings are opened, the handling of secured debts (debts backed by collateral) must comply with the legal regulations on bankruptcy, ensuring the protection of secured creditors' rights and the fair and reasonable processing of debts.
Article 53 of the 2014 Bankruptcy Law provides the guidelines for handling secured debts after initiating bankruptcy proceedings as follows:
- After the bankruptcy process is opened, the bankruptcy trustee or the asset management and liquidation enterprise shall propose to the judge regarding the handling of secured debts that have been temporarily suspended under the provisions of Clause 3, Article 41 of the 2014 Bankruptcy Law. The judge will review and specifically handle the matter as follows:
+ If the collateral is to be used to restore business operations, its handling will be based on the resolution of the creditors' meeting.
+ If business rehabilitation procedures are not being carried out or the collateral is not necessary for such procedures, the handling will be according to the terms specified in the contract for secured debts that have matured. For contracts with secured debts that have not matured, before declaring the bankruptcy of the company or cooperative, the court will suspend the contract and handle the secured debts according to the provisions of Clause 3, Article 53 of the 2014 Bankruptcy Law.
- In cases where the collateral is at risk of being destroyed or significantly losing its value, the bankruptcy trustee or the asset management and liquidation enterprise shall request the judge to immediately handle the collateral in accordance with Clause 3, Article 53 of the 2014 Bankruptcy Law.
- The handling of collateral in accordance with Point b, Clause 1, and Clause 2 of Article 53 of the 2014 Bankruptcy Law will be conducted as follows:
+ For secured debts established before the court accepts the bankruptcy petition, these debts will be settled using the collateral.
+ If the value of the collateral is insufficient to cover the debt, the remaining debt will be paid during the liquidation of the company's or cooperative's assets. If the value of the collateral exceeds the debt, the excess will be added to the company's or cooperative's asset value.
Handling secured debts in bankruptcy proceedings requires strict adherence to legal provisions, safeguarding the rights of secured creditors while ensuring fairness for other creditors. This procedure helps effectively liquidate the company’s assets, minimize losses, and protect the legitimate interests of all parties involved.
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