A change in debt ownership occurs when the original creditor enters into an agreement with a third party to become the legal owner of a debt. The terms of the debt do not change, this can include credit cards, personal loans, secured loans, disconnected utilities. The third party becomes the assigned creditor, taking on full responsibility and rights of the debt.
The assignee will now be responsible for collecting repayments, and can take the same legal action as the original creditor if they choose to take action against you. This can occur with both personal and business debt.
Creditors may assign debt in this way for financial reasons, such as to increase liquidity or reduce risks, or in some circumstances may transfer the credit to a debt collection agency.
A debt assignment can have a negative outcome on the debtor as the purchasing (assigned creditor) does have the right to charge an interest rate that can differ from the original rate. An assigned creditor may also choose to expedite collection action, this may include legal action including garnishee orders.
It is also wise to check the overall balance and total monthly repayments at the point of debt transfer, so that you can see that your credit hasn’t changed in any way.
A debt assignment can come as a surprise to debtors, but they are usually nothing to worry about.
If you need help understanding debt assignment, or you have any problems at all with your finances, contact Debt Negotiators today. Our financial experts can provide immediate relief in the form of impartial advice, and we can facilitate a number of debt solutions according to your situation.