Debt cancellation - what are the benefits of it?

The discharge of debt is tantamount to discharge from debt, which results in the termination of the obligation. In the event that the creditor cancels the debt, the debtor is free from any repayment, ie the creditor no longer has any right to demand future repayment from the debtor. Do you know the benefits of debt relief?

When can the debt be canceled?

The discharge of debt is tantamount to discharge from debt, which results in the termination of the obligation. In the event that the creditor decides to cancel the debt, the debtor is free from any repayment, i.e. the creditor no longer has any right to demand future repayment from the debtor

The Civil Code provides for the possibility for the creditor to submit a declaration of waiver of claims, which under the aforementioned provision is treated in the light of the law as an offer (until the declaration is accepted by the debtor). The condition for performing such an operation is the acceptance of the debtor's declaration. As for the form of this declaration, the act does not provide for any regimes, however, for evidentiary purposes it is most reasonable to draw up the agreement in writing. If the declaration is accepted by the debtor, it will result in his release from the debt, and thus all security of the debt (pledge, mortgage, surety) will expire.

Another type of debt cancellation is the withdrawal of a lawsuit and the waiver of a claim pursued by a lawsuit. In this case, it is not necessary to obtain the debtor's consent. As a result, such redemption results in the creation of income for the debtor. This income (principal) is taxable.

Other Debt Relief Opportunities

A separate possibility of freeing yourself from debt is its assumption, which consists in the fact that the debtor is replaced by a third party. The effect of taking over the debt by another person is the expiry of the obligations incurred towards the current debtor. The benefit continues and remains unchanged. The creditor is no longer able to demand anything from his first debtor. It is important that the form of concluding the debt assumption agreement is in writing, otherwise it will be invalid and will not have any legal effects.

Debt Relief and Benefits

At first glance, it may seem that the cancellation of the debt does not bring any benefits to the creditor, on the contrary, he thus incurs only losses. Probably some people will now ask themselves the question: what is the point of using such a solution? Well, often the debtor from whom we are trying to collect our receivables is on the verge of bankruptcy. The whole process takes years without any effect, and only still exposes the creditor to bear the costs of conducting the proceedings. Paradoxical debt cancellation may bring more benefits in this case than further debt enforcement. For example, the rightness of debt cancellation is supported by the fact that the creditor may count the debt towards tax deductible costs.Keep in mind that the debt relief concerns the basic amount that the debtor has borrowed as well as the interest accrued.