Debt Assignment in Queensland ' A complete guide

• Published date: 20 September 2023
• Law Firm: Stonegate Legal
• Author: Mr Wayne Davis

Article Summary

A debt assignment is an agreement where a debt, along with all its associated legal rights and responsibilities, is transferred from the original creditor to a third-party purchaser. Once verified, the third party, now termed the assignee, becomes the official owner of the debt and has the right to collect it.

A "chose in action" or a "thing in action" is a legal term referring to a personal or proprietary right in intangible personal property, enforceable through litigation. This is different from "chose in possession", or a "thing in possession" which refers to tangible items one can physically possess, like a book or car.

The legislation in Queensland, specifically the Property Law Act 1974 (Qld), provides for assignments of things in action.

An absolute debt assignment refers to the unconditional transfer of property or rights, ensuring the original owner retains no interest. The assignment should be complete for clarity between the debtor and the new creditor.

Before the new creditor can collect the debt, a formal notice must be issued to the debtor. This ensures the debtor knows they have a new creditor. Requirements for a valid notice include it being in writing, signed by the assignor, and containing clear identification of the assignor, assignee, and the debt.

The responsibility of ensuring a valid notice falls on the assignee. Several guidelines and legal cases have highlighted the importance of serving the notice in a manner that is most likely to bring it to the debtor's attention. This could involve registered post or personal delivery.

Once the debt is effectively assigned and the debtor notified, the assignee can collect the debt and undertake any necessary legal actions. Often, debts that are assigned come with their own challenges, as many are sold precisely because they are problematic.

Legal avenues like court proceedings, enforcement warrants, or bankruptcy can be pursued. Challenges may arise due to misunderstandings by the debtor, disputes about the validity of the assignment, or challenges proving effective delivery of the notice to the debtor.

Are you a creditor in Queensland who is struggling with debt assignment and is looking for a way to effectively manage the assignment of their debts?

Dealing with debt can sometimes be a lot for creditors to manage. Between the multiple debts that their business will likely manage and potential problem debtors who don't seem to want to pay their debt, debts can sometimes spiral out of control!

If this is the case for you or your business, it may be time to consider assigning your debt.

The assignment of a debt occurs when the creditor of a debt sells their debt to a third-party buyer. This process can be complicated to understand, so it is important that you perform due diligence and research before engaging in this process.

Typically seen with banks and credit card companies, creditors will sometimes package their debts into debt books or tranches and sell them, rather than collecting them.

In this article our debt recovery lawyers will discuss the basics of debt assignment in Queensland so that you, as a creditor, can better understand this process.

What is a Debt Assignment?

The first question that is to be asked about debt assignment is what it is and how it works?

A debt assignment is an agreement that transfers a debt, and all of the legal rights and responsibilities associated with it, from the creditor to a third-party purchaser.

This provides the third party with the right to collect the debt, while the creditor can no longer engage in the debt recovery process with the debt assigned.

Once an assignment of debt is verified, the rights will be transferred to the assignee and they will be the official owner of the debt, meaning that they can collect the debt for the money it is worth.

Chose in Action (Thing in Action)

The right to recover a debt is a "thing in action" or a "chose in action".

A "chose in action" (often referred to as a "thing in action") is a legal term that denotes a personal right without possession, or a proprietary right in personal property that is intangible and not in one's possession, but enforceable through litigation.

Common examples of choses in action include debts, shares in a company, and other rights to receive something or have something done.

Contrast this with "chose in possession" which refers to something tangible that one can physically possess, like a book, a car, or money.

The phrase "chose in action" originates from old French and the term "chose" means "thing".

In Queensland, the assignments of things in action are provided for in legislation, particularly at section 199 of the Property Law Act 1974 (Qld) ("the PLA").

Section 199 of the Property Law Act

Section 199(1) of the PLA states:

(1) Any absolute assignment by writing under the hand of the assignor (not purporting to be by way of charge only) of any debt or other legal thing in action, of which express notice in writing has been given to the debtor, trustee or other person from whom the assignor would have been entitled to claim such debt or thing in action, is effectual in law (subject to equities having priority over the right of the assignee) to pass and transfer from the date of such notice'

(a) the legal right to such debt or thing in action; and

(b) all legal and other remedies for the same; and

(c) the power to give a good discharge for the same without the concurrence of the assignor.

This part of the section means that a the right to recover a debt (being a thing in action) can be legally assigned. This assignment must be absolute and the debtor should receive a written notice, and obtaining the debtor's consent for this assignment is not mandatory.

Section 199(2) of the PLA states:

(2) If the debtor, trustee or other person liable in respect of such debt or thing in action has notice'

(a) that the assignment is disputed by the assignor or any person claiming under the assignor; or

(b) of any other opposing or conflicting claims to such debt or thing in action;

the debtor may, if the debtor thinks fit, either call upon the persons making claim to the debt or other thing in action to interplead concerning the same, or pay the debt or other thing in action into court under and in conformity with the provisions of the Act s relating to relief of trustees.

This part of the section says that if the debtor knows of disputes or conflicting claims regarding...