Nowadays, we increasingly encounter the concept of assignment of receivables, but are we sure we know what it means? In this article we will introduce you to this topic, explaining its definition and mechanisms of operation.
What is an assignment of receivables? Definition of the concept
Assignment of receivables is a type of civil law contract, by which an existing creditor, called the assignor, transfers its rights under a claim to another entity. In practice, this means that the person or company that had the right to demand payment from the debtor transfers this right to another person or company.
What is the assignment of receivables?
Assignment of receivables is the process of transferring the rights associated with a claim from one entity to another. In practice, this means that a person or company that had the right to demand payment from a debtor transfers this right to another person or company. There are various forms of assignment, including trust assignment, which is an alternative to the “typical” assignment contract. Its main purpose is to collect the claim from the debtor. Assignment of receivables is regulated by the Code of Civil Procedure and the Civil Code, which guarantees its proper functioning under the law.
It is also worth noting that the assignment does not change the amount of the debt or its other terms – only the entity that has the right to collect it. In practice, debt assignment is often used in situations where the original creditor is unwilling or unable to assert its rights against the debtor on its own. This may be due, for example, to a lack of adequate resources or a desire to minimize the risks associated with an unpaid debt. In such cases, an assignment allows you to transfer the responsibility for collecting the debt to another entity that is better equipped for the task.
Assignment of receivables – what does it contain?
The contract of assignment of receivables should contain, first of all, the data of both parties – the assignor and the assignee, as well as a precise description of the receivable that is the subject of the assignment. It is also important to specify whether the assignment is free of charge, or whether it involves a specific benefit on the part of the assignee. It is also worthwhile to include in the contract information about possible collateral for the debt and whether the debtor was informed of the assignment.
Assignment of receivables – what can be the subject?
The subject of a debt assignment can be both an individual and a legal entity. This means that the rights associated with the receivable can be transferred to another company as well as to an individual. However, it is important that the assignee is capable of incurring obligations and has full legal capacity.
Assignment of receivables summary
Assignment of receivables is the process of transferring rights related to a claim from one entity to another. It allows creditors to effectively manage their receivables and transfer them to other entities for collection. It is a tool often used in business practice, which allows for flexible debt management.