Updated June 22, 2023
A debt assignment agreement allows a person who owes money to assign the debt to someone else who assumes its obligation. This is common when a person takes possession of an asset where the seller still owes money. The buyer will purchase the asset and assume the debt.
Lender’s Approval
In most loan agreements and notes, the lender will be required to approve the new debtor. This can be done with a signed waiver or statement by the lender.
Sample Debt Assignment Agreement
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ASSIGNMENT AND ASSUMPTION OF DEBT WITH RELEASE
I. THE PARTIES. This Assignment and Assumption of Debt with Release (“Agreement”) is effective and created on [DATE] (“Effective Date”) is by and between:
Debtor: [DEBTOR’S NAME], with a mailing address of [DEBTOR’S MAILING ADDRESS] (“Debtor”),
Assuming Party: [ASSUMING PARTY’S NAME], with a mailing address of [ASSUMING PARTY’S ADDRESS] (“Assuming Party”),
Creditor: [CREDITOR’S NAME], with a mailing address of [CREDITOR’S NAME] (“Creditor”),
The Debtor, Assuming Party, and Creditor shall each be referred to herein as a “Party” and collectively as the “Parties.”
II. ASSIGNMENT OF DEBT. It is known that the Debtor is indebted to the Creditor, under a separate agreement, for the current principal sum of $[CURRENT DEBT AMOUNT], plus any interest (“Debt”).
Under this Agreement, the Assuming Party agrees to assume: (choose one)
☐ – All of the Debt.
☐ – Portion of the Debt. The Assuming Party agrees to assume $[PORTION OF DEBT AMOUNT].
The Debt shall continue its repayment in accordance with the terms located in a separate agreement between the Debtor and Creditor.
III. CONSENT FROM CREDITOR. For this Agreement to be legally valid: (choose one)
☐ – Consent is Required from the Creditor. This Agreement is contingent upon the Creditor approving and consenting to its terms and conditions. The Creditor shall be required to grant their consent within [#] days of the Effective Date. If the Creditor does not consent or rejects this Agreement, it shall be considered void.
☐ – Consent is Not Required from the Creditor. This Agreement is not contingent upon the Creditor to approve its terms and conditions.
IV. ASSUMPTION OF LIABILITIES. The Assuming Party agrees to assume the Debt, which may or may not include, further legal or financial liability. If the Debtor is subject to legal or financial liability, the Assuming Party shall assume its liability, including but not limited to, attorney’s fees and damages.
V. DEBTOR’S RELEASE. This Agreement shall release the Debtor from all liabilities in relation to the Debt, the Creditor, and the Assuming Party.
VI. SEVERABILITY. If any term, covenant, condition, or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remainder of the provisions shall remain in full force and effect and shall in no way be affected, impaired, or invalidated.
VII. PARTIES’ REPRESENTATIONS. This Agreement can be considered void, at any time, if evidence is presented that any Party was not honest, untruthful, or did not negotiate in good faith (“Fraudulent Practices”). Furthermore, if any Party’s actions are considered Fraudulent Practices, they may be subject to legal and financial penalties to the fullest of the law.
VIII. GOVERNING LAW. This Agreement shall be governed under the laws located in the State of [STATE] (“Governing Law”).
IX. ADDITIONAL TERMS. [ADDITIONAL TERMS & CONDITIONS]
X. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement between the Parties. No modification or amendment of this Agreement shall be effective unless in writing and signed by both Parties.
Debtor Signature: ______________________________ Date __________
Print Name: ______________________________
Assuming Party Signature: ______________________________ Date __________
Print Name: ______________________________
Creditor Signature (if required): ______________________ Date __________
Print Name: ______________________________
How to Write
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Section 1 The Parties
(1) Effective Assignment Date. This agreement must clearly establish the calendar date when the assignment of the debt to the Assuming Party becomes active.
(2) Debtor Name And Mailing Address. The current Holder of the debt should be identified as the Debtor in this agreement. To this end, record the Debtor’s name and address.
(3) Assuming Party. The name of the Party that will be charged with paying the debt will be the Assuming Party. Furnish the Assuming Party’s entire name and mailing address.
(4) Creditor Name And Address. Naturally, it will be important that the debt is properly defined. This requires that the Creditor is named and that his or her mailing address is presented. If this is a Business then its legal Company Name must be used to identify the Creditor properly.
Section 2 Assignment Of Debt
(5) Sum Of Debt. The amount of money required by the debt being discussed is needed to complete the statement made in Section 2. This must be the total dollar amount that the Creditor expects the Debtor to pay.
(6) Assuming All Debt. The debt that is being transferred requires definition. If the total amount of the debt owed by the Debtor will be transferred to the Assuming Party, then the “All Of The Debt” checkbox should be selected.
(7) Assignment Of Portion Of Debt. If the Assuming Party will only take on part of the concerned debt then select the “Portion” checkbox. In addition to this selection, supply the dollar amount that the Assuming Party will pay to the Creditor to satisfy the part of the debt held by Debtor.
Section III Consent From Creditor
(8) Creditor Consent Required. In some cases, the Creditor must be informed of this assignment and provide consent for the Debtor and Assuming Party’s actions in this document. If so, then select the first checkbox statement from Section III. Additionally, supply the number of days before the effective date when the Creditor consent must be provided.
(9) No Consent Of Creditor Required. Select the “Not Required” checkbox to indicate that the Creditor’s consent is not needed for this contract’s execution.
Section VIII Governing Law
(10) Governing Law. Identify the State where this agreement will be effective and be enforceable.
Section IX. Additional Terms
(11) Additional Terms. Any agreements between the Debtor and the Assuming Party or conditions placed by the Creditor that should be considered part of this assignment should be documented in Section IX.
(12) Debtor Signature. The Debtor must approve of the information defining this assignment. For this task, he or she must sign and date this document upon satisfactory review. The Debtor should attend the first line presented in the signature area by signing his or her name on it.
(13) Debtor Signature Date.
(14) Debtor Printed Name.
(15)Assuming Party Signature. The Assuming Party must submit his or her signature to participate in this contract.
(16) Signature Date Of Assuming Party. The date when the Assuming Party signed this agreement must be noted.
(17) Printed Name Of Assuming Party.
(18) Creditor Signature And Date. In order for the Creditor to approve of this agreement, he or she must sign it or a Signature Representative appointed by the Creditor must supply this approving signature.
(19) Creditor Signature Date. Upon the signing, the Creditor’s Signature Party must define the current date.
(20) Printed Name Of Creditor. The printed name of the Creditor’s Signature Party is expected.
