The assignment explained in simple terms


the Assignment is a form of collateral that credit institutions often require from borrowers. If a borrower fails to pay his or her installments, the bank can secure itself with a Assignment secure claims against the borrower. In the case of land charge loans in particular, the Assignment of the land charge to a new bank play a major role when switching financing.

Definition: The recipient of the assignment (assignee) becomes the new creditor of the third-party debtor. The assignee takes over the claim and it then belongs to his assets.

The BGB defines assignment as follows:

A creditor may transfer a claim to another creditor by concluding a contract with the latter (assignment). Upon conclusion of the contract, the new creditor takes the place of the previous creditor.

German Civil Code (BGB) § 398 Assignment

Most often, as part of a loan agreement, a borrower signs a Declaration of assignment or one Assignment agreement. In this declaration, the borrower assigns to the bank claims to certain benefits, such as part of his salary from his employer or claims to social benefits.

If a borrower fails to pay his monthly loan installments despite reminders, the bank may not Assignment disclose to the employer. The employer then pays a portion of the salary directly to the bank to settle the borrower's debt. As soon as the borrower again regularly transfers his installments to the bank, this procedure is discontinued.

It is important to know that a Assignment is a serious matter and can have an impact on the borrower's finances and future. It is therefore advisable to think carefully about whether to take out a Assignment signs and to consult an expert in case of doubt.

What happens in the event of an assignment?

In case of assignment a claim is transferred from the old creditor to a new creditor. The assignment is also called cession. The previous creditor is called the assignor, the new creditor is the assignee. Thus, the assignment is a transfer of a claim or a claim from one person to another. The basic prerequisite for an assignment is that a claim to be assigned exists. 

What can be ceded?

There are hardly any restrictions on the question of what can be assigned. As long as the receivables can be clearly determined, they can usually be assigned. For example, you can assign land charge, life insurance policies or receivables securing bank loans. However, the law also provides for cases in which assignment is not possible. For example, in the case of a construction financing It can happen that the loan agreement contains an exclusion of assignment. The lender must then first obtain the borrower's consent before it may assign the receivable.

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