Long-lasting debts are a problem not only for the consumer, who brings debt collectors and the risk of bailiff enforcement. It is also a big trouble for a creditor who may be in financial trouble for some debts. However, the debt may change the “owner”. To do this in the majesty of the law, the law provides for something called assignment of claims. What exactly is it and how to write an application?
Arrears on the payment of financial receivables may arise in various circumstances, sectors and industries. Debts may arise due to non-payment of e.g. rent, payday loans, loans or bank loans. The same can be called not paying fines, subscription fees or invoices. Although we regularly hear about the consequences of non-payment of obligations from various media, for warning and caution, problems with arrears to creditors are still commonplace.
There is a lot of talk about the negative effects of non-payment from a consumer perspective. Rightly – many people are unaware of the scale of the consequences that may result from defaulting on debt. This often brings deplorable results, such as contact with debt collectors, prompts or urgent calls. There is also a situation that surprised debtors are quickly embraced by bailiff’s actions, whose intervention is usually asked by impatient creditors. Non-payment of obligations is not only a problem for the debtor, but above all – the creditor’s trouble.
Arrears are a big problem for many creditors
A counterparty who fails to comply with the obligation set out in the relevant contract for timely repayment of the debt in a specified installment or in full, exposes him to financial losses. While in the case of large loan companies or banks, it is a drop in the sea, entrepreneurs (especially the smaller ones) may be seriously affected by one-off problems with obtaining the financial resources due, e.g. from an invoice. Instead of focusing on the day-to-day operations, the creditor must make provision for action to remind the debtor of the debt.
This also involves costs associated with sending letters, phone calls, hiring a debt collector, etc. Fact, art. 10 of the Act on payment deadlines in commercial transactions 1, the creditor may charge the debtor with the costs of recovery in the amount of the current equivalent of EUR 40 (from the last business day of the previous month). These costs are added to the flat-rate debt. Many creditors also specify in so-called default interest, which is also intended to compensate for the costs and time spent claiming reimbursement.
However, many creditors simply do not have time to do so. There are also concerns about how protracted and time-consuming the recovery of funds may be. In such a situation, the creditor is not without a way out. The solution we further characterize is at the heart of today’s guide.
Assignment of receivables – what is it?
Under this rather mysterious sounding wording lies the name of the procedure, which consists in selling the debt to a third party. The word “assignment” is derived from the Latin expression “cessio”, which can be translated as a yield. If the creditor is not interested in any further or any other investigation regarding the acquisition of funds due, he may enter into a debt resale contract with a third party. For the amount agreed on both sides, he sells not only the debt but also the rights to these funds.
As the provisions of art. 509 of the Civil Code 2, the creditor has the right without the knowledge of the debtor to transfer the debt and the right to redress without the knowledge of the consumer, unless otherwise provided in the previous contract. In the case of the aforementioned contract for the sale of debt rights, there are two parties. The existing creditor is referred to as assignor. In turn, the person who becomes the new owner of the rights to dispose of the debt is an assignee.
At the time of signing the assignment agreement, the creditor should be aware of the total loss of rights to continue to dispose of the debt. For the agreed amount of sale, he is no longer a creditor and cannot claim the resale of the resold debt or part of it covered by the arrangements.
When can the assignment of receivables be carried out?
Any creditor who intends to assign his claim should consider some important aspects at the beginning.
- Debt disposal method.
Assignment of receivables may cover both the entire debt and only a specific part of it. It is worth assessing at the beginning whether you want to sell a completely specific claim or only part of it.
- Contents of the contract of commitment that has become debt.
As mentioned earlier, the assignment of receivables can only be carried out in a situation where an earlier agreement, e.g. a transaction or private loan, has not ruled out. Assignment is no longer possible if the contract stipulates, for example, a ban on changing the creditor in the event of a possible debt.
Which debts can be sold?
An interested third party, e.g. another entrepreneur or business entity, can be sold virtually any type of debt. If the law does not say otherwise or if the contract originally concluded between the creditor and the consumer does not exclude it, the law gives a lot of freedom. It is worth remembering that in the case of debt, e.g. a mortgage, the creditor may also sell a mortgage related to the debt. We are talking here about, for example, a situation when the original debt was incurred for a house. The creditor can sell the whole “package”, at the same time – not being able to separate it, eg by selling only a mortgage. Art. 79 of the Act on Land and Mortgage Registers and Mortgage 3.
It’s still not everything. The Civil Code allows 4 what we call the assignment of future claims. The creditor may sell to someone an obligation that arises in the future and there are documented grounds for doing so. Therefore, it may not exist at the time when the assignment of receivables is concluded, but some legal basis is required.
Assignment of receivables and the nature of the debtor
It is also worth characterizing how the debtor should be treated in completing the formalities related to the assignment of claims. Although the contract, which we characterize below, is intertwined with the debtor every now and then, he is not a party to the contract. It cannot therefore affect the arrangements, not to mention the fact that the law does not impose an obligation to inform him that an assignment is taking place at all. The debtor is therefore in a very uncomfortable situation here. It is up to the creditor’s good will and what he has agreed with the person taking over the debt whether he finds out about the whole situation.
What must the assignment agreement contain?
Although it is not legally required, we recommend that you draw up an assignment agreement in writing. This will not only clearly specify all the details that are the subject of the agreement. It will also document all provisions. In this way, both what the disposing claim has agreed to and the one who will now have it will be concluded in writing. It secures the interests of both parties. You can never be sure if there will be any misunderstandings in the future. The agreement should resolve such conflicts quickly.
To this end, it is worth completing it taking into account the following guidelines. Often misunderstandings arise, so it should be sufficiently legible and precise. The information provided should be completed in the presence of both parties to the contract, consulting all subsequent parameters on an ongoing basis. Here they are.
- In the first place, the contract must include the title, or simply – the assignment of receivables.
- It should specify which claim the arrangements relate to and what part of it – selected or total.
- It is also necessary to characterize the current value of the debt. Specify the amount to be paid by the debtor and the additional costs resulting from the delay (e.g. interest).
- The template should be enriched with a claim basis, e.g. a loan agreement, invoice, etc.
- Provide the debtor’s personal details.
- Although not legally required, it is worth informing the debtor that the creditor will now be someone else. We encourage you to determine in writing which page will deal with this.
- It is also necessary to clarify how the claim is regulated. It can be a bank transfer. Let’s not forget to specify the final repayment date.
- There can also be details of the disposing receivable and the one who assumes it.
- The date and place of the contract must be provided.
- The document should have a legible signature of both sides.
Assignment agreement – a specimen
Knowing the most important information about what should be included in the contract documenting the assignment of receivables, it’s time to present a free template. It is ready to download and complete in an electronic version. You can also print it by entering the data manually.
If not the assignment of receivables, then fiduciary assignment or debt exchange
In addition to the classic assignment of receivables, there is also another type of transaction related to a given debt. The existing creditor with a third party may also enter into a so-called fiduciary assignment. This is a temporary transfer of someone’s rights to enforce receivables, without disposing of the rights to funds from debt. For a mutually agreed fee, someone decides to take action to return the debt, and then passes it on to the original creditor. That is how debt collectors can do. It’s a solution that can work in case of serious difficulties with refunds.
An alternative solution for people who do not want to use any of the available variants of assignment at all may be the so-called debt exchange. It is a convenient way available on the internet today, for selling debt, offering to buy in public places. There is a lot of competition in this sector, allowing consumers to choose from many different exchanges offering debt trading.