DEFINITION of 'Debt Assignment'

A transfer of debt, and all the rights and obligations associated with it, from a creditor to a third party. Debt assignment may occur with both individual debts and business debts. The company assigning the debt may choose to do so in order to improve its liquidity and/or to reduce its risk exposure.

BREAKING DOWN 'Debt Assignment'

The debtor must be notified when a debt is assigned so that he or she will know who to make payments to and where to send them. If the debtor sends payments to the old creditor after the debt has been assigned, it is likely that the payments will not be accepted, which could cause the debtor to unintentionally default. Also, when a debtor receives such a notice, it is a good idea for him or her to verify that the new creditor has recorded the correct total balance and monthly payment for the debt owed.

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