Transfer of Claim Rights: Creditor’s Rights and Debtor’s Protection
The creditor has the right to assign a claim to another person. The creditor may assign the entire claim or a part of it to another person without the debtor’s consent, provided that this does not contradict the law or the contract, and that the claim is not personally related to the creditor. The assignment of the claim must not infringe the debtor’s rights or make their obligation more burdensome.
The purchaser acquires all associated security rights and additional entitlements. Future claims may also be transferred.
Under the laws of the Republic of Lithuania, claim rights may be transferred in the following cases:
- upon general succession of the creditor’s rights;
- by a court decision, where provided by law;
- if a guarantor or a pledgor (who is not a party to the secured obligation) performs the obligation for the debtor;
- if the rights pass to an insurance company by subrogation in the event of an insured loss;
- in other cases established by Lithuanian law.
Cases when the transfer of a claim is prohibited:
- when the claim is unenforceable;
- if the transferee is a judge, prosecutor, or attorney involved in the case concerning the claim;
- if the claim is inseparable from the identity of the creditor (e.g., alimony, compensation for injury or death).
Transfer of Documents
The transferring creditor must hand over to the new creditor all documents that prove the claim and any associated rights, including the right to interest.
If the transferred claim is secured by a pledge (or mortgage), the respective entry must be made in the Mortgage Register of the Republic of Lithuania. Both the former and new creditors are required to take action to ensure this registration.
If all claim rights are transferred, the original creditor must also deliver the pledged property to the new creditor.
Unless agreed otherwise, the costs of document transfer are borne by the new creditor.
For bearer debt securities, transfer occurs by physically handing over the document. The debtor must perform the obligation in favor of the document holder. The debtor may not raise objections, except those based on document invalidity.
Liability of the Transferring Creditor
The original creditor is liable to the new creditor for the invalidity of the assigned claim, but is not liable for the debtor’s failure to fulfill the claim, except in cases where the original creditor guarantees the debtor’s performance to the new creditor.
If the claim is transferred without consideration, it is presumed that the transferring creditor confirms that the claim exists and belongs to them, even if such confirmation is not stated in the contract (statutory warranty), unless the new creditor acquires the claim at their own risk or knew or should have known about the uncertain nature of the claim at the time of the transfer.
If the claim is transferred for consideration, the original creditor is liable only for the debtor’s insolvency existing at the time of transfer and only up to the amount received for the transfer.
Transfer of Debt
A third party may, under an agreement with the creditor, assume the debtor’s obligations and rights. The debtor may transfer their debt to another person only if the creditor agrees. Such consent is given only after the debtor and the transferee notify the creditor of the intended debt transfer. Until this consent is received, the parties may amend or terminate the agreement. Once the creditor’s consent is obtained, the agreement between the original and the new debtor may no longer be altered.
If the creditor does not consent to the transfer of the debt, the debt is considered not to have been transferred. If the debtor and the transferee set a deadline for the creditor to give consent, the consent may be granted within that period. If consent is not received within the specified period, it is deemed that the creditor does not agree to the debt transfer. Until the creditor expresses either consent or refusal, the transferee is liable to the debtor for fulfilling the obligation to the creditor.
The debt transfer agreement must be in writing. The new debtor has the right to raise any defenses against the creditor that are based on the legal relationship between the creditor and the original debtor. However, the new debtor may not request a set-off of a claim that belongs to the original debtor. Nor may the new debtor raise objections against the creditor based on the relationship between themselves and the original debtor that formed the basis for the debt transfer.