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Assignment of Debt UK – All You Need to Know

Assignment of Debt

For free and impartial money advice and guidance, visit MoneyHelper, to help you make the most of your money.

Have you recently heard of something called a “notice of assignment of debt” or “assigned debt” but aren’t sure what it is?

If so, you’ve come to the right place! I’ve compiled a comprehensive guide to explain to you what it is and what it entails. I’ve added an FAQ section at the end for further clarity.

Let’s get right into it!

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What Does ‘Assignment of Debt’ Mean?

To put it simply, it means that your original creditor has decided to assign your debt to a third party, usually called the “assignee”, who then has the right to proceed with court action, if they deem necessary, to recover money from you.

There are two commonly known types, as you’ll find out in the next few sections.

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Legal Assignment vs Equitable Assignment

Legal assignment means that another company takes over both the benefit of a debt from a creditor as well as the right to enforce it, namely, the right to pursue court action over the loan.

In contrast, equitable assignment only transfers the benefit of a loan to a third party, but not the right to pursue court action over the loan. 

So, if the assignee wants to take the debtor to court, they may only actively collaborate with the original creditor once the original creditor decides to take the borrower to court, but do not hold power to initiate court action themselves.

assignment of debt

Assignment vs Novation

For assignments, the party that assigns still keeps performing the obligations associated with the loan, but the assignee is now entitled to the benefits of the loan.

To put this in perspective, let’s say you assign an amount a debtor owes you to another organization. In this frame of reference, you still hold some rights and obligations over the loan, most notably the right to pursue legal action in court.

On the other hand, novation entails a full transfer of both rights and obligations. For instance, in our original scenario, this would mean that a creditor gives the assignee company full power over both the rights and obligations associated with the loan.

Does an Assignment Need to be a Deed?

No, it doesn’t need to be a deed.

Even if it is just an agreement, that is usually fine. Deeds were utilized commonly quite a while ago, and today’s court operations hardly require a deed as part of most assignments.

As for exceptions, there are a few cases where assignments might need to be deeds. For instance, when the original loan contract was signed as a deed, you do need a deed to be able to assign it or to novate it.

Otherwise, a deed is not usually needed as assignments have three parties by default, and it is highly unlikely that any of them tamper with the agreement, since all of them have separate interests.

What are Absolute Assignments?

Absolute assignments, as the name indicates in part, entail the complete transfer of all the rights, obligations, policy ownerships, and interests related to a loan to another company.

Unlike collateral assignments, which are usually limited in terms of payments or obligations, these assignments are absolute in more ways than one.

What is Assignment of Receivables?

This is an agreement by which the debtor has to assign accounts receivable to the creditor, or the lending company.

This means that if the debtor is unable to pay the loan back, this agreement dictates that the creditor should collect the assigned receivables as collateral payment.


How long before debt is written off in the UK?

Under UK law, the limitation period is six years, after which debt collectors won’t likely hound you for payment. For mortgage loans, however, this period is twelve years.

So if your creditor has not contacted you for six years (or twelve years if you owe a mortgage loan), you can take the matter to court and attempt to have your loan written off.

This includes payday loans, personal loans, credit cards, and some other types of loans.

What happens when a mortgage is assigned?

When a mortgage is assigned, the new lender takes on the obligations and rights of the mortgage loan. 

In specific situations, even borrowers may assign their mortgage to another party, but this happens far less frequently than creditor assignments.

Lastly, when mortgage assignments happen, they are recorded with the county recorder’s office, which is the office responsible for storing and maintaining records of titles that affect deeds.

How does it affect my credit report?

When it comes to the specifics, your credit report will be updated to reflect the new company and the new terms of the loan, if any.

For one, you will see a new name on your credit record in place of an old one. The name of your previous company will be replaced, and the new company’s name will be entered.

Also, when you’ve started making repayments and default on a payment, your new creditors will inform the Credit Reference Agencies of this circumstance. 

All in all, it entails an update of information on your credit report.

You can check your credit score on Equifax or Experian.

What is a notice of assignment?

Under the Property Act 1925, this is a notice that is used to formally inform a borrower that another company has bought or acquired their debts from their original creditor.

 Creditors are required to formally inform borrowers through a notice if it’s a legal assignment.

What happens after a notice is issued?

Once a notice is issued, the due process for legal assignments dictates that the benefits and obligations of the lender are transferred to the company that purchases the debt.

After this, the usual debt collection procedures ensue, with the new creditor having the choice of hiring a collection agency, adopting in-house collection procedures, or other means.

 Their aim likely is to recover the amount from you and avoid court action as much as possible since it can end up costing them a pretty penny as well.

Why do people assign their debt?

People may assign their debts when they don’t want to go through the trouble of collecting them themselves, or when they don’t have the resources to pursue court action against a debtor themselves or both. Debt collection can be quite a hassle at times.

In general, if a third party, such as a debt collection agency, can do the job of repayment collection more efficiently than a creditor can themselves, it’s probably a good idea to let them do it.

Final Thoughts

It can be initially confusing when you’re informed that your debt has been “assigned” to a different creditor.

You must know what you’re in for and what you can do to best manage your situation. 

If you need any more help debt, feel free to reach out!

Are you struggling with debt?

Affordable repayments

Reduce pressure from people you owe

Stop interest and charges from soaring

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Are you struggling with debt?
Are you struggling with debt?
  • Affordable repayments
  • Reduce pressure from people you owe money to
  • Stop interest and charges from soaring