What is a claims assignment? (with photo)

A claims assignment may be in order after an accident.

A claims assignment is a legal and financial process that allows one party to transfer or “assign” a claim to another person, provided the other party has full knowledge of the assignment and agrees with it. In this process, the party transferring the claim is called the assignor, and the party to whom the claim is transferred is called the assignee. Essentially, this situation grants the transferee the rights previously held by the transferor, in accordance with the credit or contract. Assignment of claims, however, may also involve the transfer of certain legal obligations and responsibilities to the assignee.

There are many situations where assignment of claims may apply, such as in insurance claims, bankruptcies and damages to compensate for an accident or injury. In the United States, companies comply with the “Assignment of Claims Act of 1940” to perform an assignment of claim when a contract between said company and a customer expires or is about to expire. One of the conditions of the law is that there is an amount of $1,000 or more involved in the contract; if the sum is less than this, an assignment may not be fulfilled.

The company can only assign the claim to an assignee of a “financing institution”, such as banks, government-funded credit bureaus, or trust companies or corporations. This condition ensures that the assignee can assume the responsibilities involved in the claim, especially in financial aspects. The existing contract between the assignor and another party must also not indicate any problem with the assignment of the credit to a new assignee; otherwise, the party with whom the transferor has a contract may sue the transferor for breach of contract. Another condition would be that the assignor could only assign the credit to an assignee, and that the assignee could not assign the credit to another party.

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Many cases require the assignment to be formally registered, especially when dealing with high-value property, such as a large sum of money, land, or forms of collateral. Courts generally do not need to investigate why an assignment was filed, but require filing primarily for documentation purposes. In this process, another contract must be drawn up, informing that the credit will be transferred from the assignor to the assignee. Once the contract has been agreed and the two parties have voluntarily signed it, the assignment of the credits is completed and a novation is made, making the assignee the new holder of the credit.

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