Notice of Debt Assignment
Most of the time, when customers and clients owe money to a company, the company or the creditor collects all the debts by him but sometimes in special situations and particular circumstances, the creditor has the legal right to assign his accounts receivable to a third party. This means that after assignment, the assignee will receive the payments from the debtors on behalf of the creditor. This process is known as debt assignment.
Introduction to the Notice of Debt Assignment:
In case a creditor has decided to go with debt assignment i.e. selling his accounts receivable to a third party, he is legally required to inform the debtors about the change of the situation and advise them to redirect their payments to the assignee. It is not required by the law that the assigner first gets consents from his debtors before assigning his debt to a third party but he is legally obligated to inform them about this change. On the contrary, even if the creditor decides of not telling the debtors about the situation, the assignee has the legal obligation and responsibility of informing his debtors about the change and asking them to send the payments to him instead of the assigner or actual creditor. The notification letter that is sent for this purpose is known as the notice of debt assignment.
Brief description of Notice of Debt Assignment:
There are many situations and circumstances in which a creditor assigns his debt or accounts receivable to a third party. For example, the creditor agreed to receive his debt after a year but he needs urgent cash for his business and as according to the agreement, he can’t ask his debtors to pay before expiration, he has the legal right of assigning his debt to a third party and get paid from them in advance. Another situation is when a company wants dissolve the business and end all the operations but as the debtors will pay the company long after the business is closed, the business partners assign their debt to a third party and get paid instantly from the assignee without waiting for months to be paid.
Key elements to include in the Notice of Debt Assignment:
- Name of the person who is assigning his debt to a third party i.e. assigner with complete address
- Name of the third party who has been assigned with debt i.e. assignee with complete address
- Date when the notice of assignment is being sent to the debtors
- Reasons of assigning the debt to the assignee as explained by the assigner (not necessary)
- Date from which the debtors are advised to redirect their queries and payments to the assignee
- Details of the payments each debtor is asked to redirect to the assignee
- Duration of assignment or expiration of the assignment (if applicable)
- Details of responsibilities, rights and obligations of the assignee towards the receivers or debtors of the notice
- Signature of the sender of the notice i.e. assigner or assignee
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