Debt purchase involves the transfer of the right to claim a loan or other debt to a third party. As a result, the creditor changes, but the debt itself remains. The borrower continues to fulfil their obligations, but now to the new owner of the debt. This is currently a standard tool for dealing with overdue loans, particularly when it comes to the purchase of non-performing debt, which is difficult or time-consuming to recover through the courts.
What is debt purchase?
Debt purchase is a legal procedure that involves:
- the sale of the right of claim to a new creditor;
- the execution of an assignment agreement;
- the transfer of all documents relating to the debt;
- a change in the party entitled to demand payment.
In this process, it is important to understand that the debt is not cancelled; only the creditor changes.
How does the purchase of non-performing debt work?
The procedure depends on the type of debt, but the logic is usually the same:
- recording of arrears or non-performance of obligations;
- assessment of the debt and documents;
- agreement on the terms of the transfer of the right of claim;
- conclusion of an agreement between the parties;
- notification of the debtor regarding the change of creditor.
After this, the new creditor receives all rights regarding recovery. There are several options:
- debt purchase for legal entities – when a company has overdue obligations to banks;
- debt purchase for individuals in cases of loans and microloans.
Debt purchase for legal entities: when a business needs a solution
Debt purchase for legal entities is used when a company has overdue liabilities and cannot settle them through standard channels. This may include loans, factoring, or debts owed to counterparties or financial institutions.
In such situations, it is important not to delay. Debt affects:
- the company’s credit history;
- the ability to obtain financing;
- the risk of legal proceedings;
- asset freezing.
Debt buyout allows you to change creditors. And quite often, it also allows you to renegotiate the repayment terms.
How does debt buyout for legal entities work? The process usually looks like this:
- analysis of the company’s financial position;
- review of contracts and grounds for the debt;
- negotiations with the creditor;
- preparation of the assignment agreement;
- transfer of the claim to the new creditor.
As a result, the problematic debt is purchased without interrupting business operations.
Svarog Law Firm supports such transactions to minimise risks to the business and ensure documents are correctly drawn up.
Purchase of debts owed by individuals: loans, MFOs, court claims
The purchase of debts from individuals most often concerns bank loans, microfinance organisations or overdue obligations that have already been transferred to debt collectors. The aim of the procedure is to find a solution that allows the debt to be settled without additional pressure or penalties. Key features:
- the debt may be sold to a third party;
- the creditor changes, but not the amount of the debt;
- repayment terms are sometimes made more flexible;
- the financial burden may be reduced.
How does the procedure work? In simplified terms:
- consultation with a lawyer;
- analysis of the loan agreement;
- negotiations with the creditor or factoring company;
- preparation of documents;
- conclusion of an agreement on the assignment of claims.
In some cases, debt buyback in Ukraine allows you to avoid legal enforcement or halt its progression.
Insurance debt buy-out: how to get paid faster
Insurance debt buy-out is used when an insurance company delays payment or refuses to fulfil its obligations. In such cases, the claim may be assigned to a third party, which takes over the subsequent work of recovering compensation. This solution is used when:
- payment is delayed for months;
- there is a dispute regarding the insured event;
- the client does not want to wait for legal proceedings;
- funds are required urgently.
Once the claim has been transferred, the new creditor handles the recovery of compensation from the insurance company.
How does the purchase of insurance debts work in Ukraine? The process involves several stages:
- verification of the insurance policy and the claim;
- assessment of the prospects of receiving a payout;
- preparation of the agreement on the transfer of the right of claim;
- signing of the agreement;
- transfer of documents to the new creditor.
As a result, the client can receive funds more quickly than under the standard insurance settlement procedure.
Support for debt buyouts from the Svarog law firm
We provide support for debt buyouts at all stages. We work with banks, MFIs, insurance companies and businesses. As part of the service, we:
- analyse the situation and documents;
- identify possible debt purchase options;
- negotiate with the creditor;
- prepare the contractual framework;
- support the transfer of the right of claim.
This approach helps to minimise risks and avoid errors in the documentation. The main advantages of working with Svarog:
- individual analysis of each situation;
- handling of various types of debt;
- support from consultation through to the final outcome;
- focus on practical solutions rather than formalities;
- transparent legal procedure.
So, if you need debt buyout or advice on a specific situation, please contact the Svarog law firm. We will help you assess the debt and the prospects for its purchase. We will then prepare the documents and negotiate with the creditor. As a result, the agreement is concluded on the best terms.
Questions and Answers
What is debt purchase?
It is the transfer of the right to claim the debt to another party through an assignment agreement.
How does the purchase of non-performing debt work?
The debt is assessed and sold to a new creditor, who acquires the right to demand its repayment.
Can the debt of a legal entity or an individual be sold?
Yes, provided they are not the debtor or a guarantor under the agreement.
What documents are required for debt purchase?
The loan agreement, debt documentation, court orders (if any), and financial calculations.
How does debt purchase differ from debt recovery?
Debt purchase involves a change of creditor, whereas debt recovery is the compulsory or voluntary repayment of the debt.
How much does legal support for debt purchase cost?
The cost depends on the amount of the debt, the complexity of the case and the number of parties involved in the transaction.