Can the right to debt collection be assigned or not?

Whether the right to debt collection can be assigned is a legal issue that concerns many creditors during the process of managing and recovering debts. Pursuant to the 2015 Civil Code, the debt collection right is a form of property right that may be transferred to a third party if the statutory conditions are met. The assignment of such a right not only affects the legal status of the parties involved but also has a direct impact on their respective rights and obligations in a civil transaction. This article by TNTP provides an analysis of the legal aspects of assigning the right to debt collection.

1. Legal basis for debt collection rights

Under the 2015 Civil Code, every civil obligation involves two fundamental parties: the entitled party (creditor) and the obligated party (debtor). The entitled party is the one who benefits from a material advantage or has the right to require the other party to perform certain acts as agreed upon, within the scope permitted by law. Conversely, the obligated party is the one required to deliver or provide material value or perform specific work for the entitled party in accordance with the established agreement.

The right to debt collection is a property right arising from a civil obligation between the parties, attached to the legal status of the creditor and protected by law. It represents the creditor’s right to require the debtor to perform a specific act – typically the payment of a sum of money or another asset.

As a general principle of civil law, property rights in general, and the right to collect debts in particular, may be transferred if such a transfer does not violate prohibitions of law or the parties’ contractual restrictions. This matter is specifically governed by Article 365 of the 2015 Civil Code.

2. Assignment of debt collection rights

The debt collection right is the right to require the debtor to make payment. According to Article 365 of the 2015 Civil Code, the entitled party may transfer this right to a assignee, provided that the assignment does not fall within the following prohibited cases:

• Rights relating to maintenance or compensation for harm to life, health, honor, dignity, or reputation;
• Cases where the parties have agreed, or the law prescribes, that the right may not be transferred.

The debtor’s consent is not required for the assignment of the right to collect a debt. However, the assignor must notify the debtor in writing of the transfer. If the failure to provide such notice results in costs incurred by the debtor, the assignor must bear those costs. Additionally, Article 369 of the Civil Code provides that the debtor may refuse payment if no notification was made and the assignee fails to prove the validity of the assignment.

Example: A lends B VND 200 million under a loan contract. Upon maturity, B fails to repay. A decides to assign the right to collect the debt to C. Once A notifies B in writing of the assignment from A to C, C becomes the new creditor and is fully entitled to demand that B repay the VND 200 million and any agreed interest under the original loan contract, without requiring A’s further consent.

The legal consequence of the assignment of the entire right to claim is that the assignee becomes the new creditor, fully entitled to demand that the obligated party (the debtor) perform the payment obligation with respect to the debt. At the same time, the assignor ceases to hold any right to claim against the debtor, and all rights and obligations related to the debt are entirely transferred to the assignee.

Accordingly, the right to debt collection may be transferred to a third party provided that the statutory conditions for such transfer are satisfied.

3. Practical implications and considerations

In business practice, assigning the right to debt collection has become increasingly common, allowing creditors to manage finances more flexibly and handle outstanding debts efficiently. However, the assignment is not merely a “handover” of a claim – it entails specific legal consequences and obligations for all parties involved. Therefore, each party should observe the following key considerations to ensure that the assignment is lawful and effective.

For the Assignor (Original creditor): 

When carrying out the assignment of debt collection rights, the assignor should take note of the following matters:

• Execute a written assignment contract clearly specifying the rights, obligations, and value of the transferred claim.
• Ensure that the claim is not among those prohibited from transfer under the law.
• Provide written notice to the debtor regarding the assignment of the debt collection

For the Assignee (New creditor):

When receiving the assignment of the debt collection right, the assignee should take note of the following matters:

• Evaluate the recoverability of the debt and the debtor’s financial situation before accepting the assignment.
• Verify the legality and supporting evidence of the debt before acknowledging the assignment, to ensure that the assigned right of debt collection is lawful, undisputed, and properly supported by documentation evidencing the assignor’s right.
• When collecting the debt, comply strictly with legal provisions, avoiding any unlawful collection practices that may result in criminal liability or civil damages.

For the Debtor:

When becoming aware that the creditor’s right of debt collection has been assigned to a third party, the debtor should take note of the following matters:

• Upon proper notification, must make payment to the new creditor.
• Is entitled to request both the former and the new creditor to prove the legality of the assignment before making payment, in order to safeguard their legitimate rights and interests.

The right to debt collection may be assigned if all statutory conditions are met. While such an assignment enhances flexibility in debt management, it requires the parties to strictly comply with legal procedures and conduct careful due diligence to ensure legality, transparency, and protection of all parties involved.

This article by TNTP aims to provide clarity on the question “Can the right to debt collection be assigned?” We hope this analysis proves helpful to our readers. Should you require further assistance, please do not hesitate to contact us.

Sincerely,