Assignment of a debt claim

The assignment of a debt claim is the mechanism by which a creditor (the assignor) assigns to a third party (the assignee) a claim, of which they are the holder, with regards to their debtor (the assigned).

Many examples in our private relationships with banks involve this mechanism, such as:

• For a mortgage loan
• For issuing a credit card
• For a financing loan
• For signing a lease

In most of these cases, the banker (the assignee) will ask the client (the assignor) to transfer claims they hold with regards to a third party (the assigned).

The most common example of this mechanism is the salary assignment. By doing that, the banker obtains collateral in case of negligence on the part of their debtor. They can use the assignment mechanism to directly obtain reimbursement from their debtor’s employer.

In terms of debt collection, the assignment of debt claims is a very useful mechanism.

• Debt collection is generally processed based on a mandate, where the creditor asks the collector to obtain payment from the debtor. In such scheme, the creditor remains the owner of its debt claim throughout the process.
• However, certain companies want to close out their accounts receivable before all of the debt claims are actually paid. They agree on a price with a collection company and sell their debt claims. The new owner of the debt claim may then collect what can be collected for their own account.

The assignment of debt claims is only done for large volumes of debt claims. It is necessary for the debt claim buyer to be able to assess the chances of recovery based on statistics. Buying only one or a few claims is placing a bet. Buying thousands of claims is statistical work.

Definitions provided under this section refer to the Belgian situation; unless specified otherwise. The texts are meant to summarize concepts in daily language and should not be considered as comprehensive or definite. We welcome suggestions for modifications or additions at glossary@tcm.be.