Debt Discharge

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Debt Discharge
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Debt discharge - cancellation of all or part of a debt under a contractual agreement between the creditor and the debtor, when the debtor justifies the inability to pay the liability by appropriate arguments. If the creditor remits the debt, the debtor is free of any repayment, i.e. the creditor no longer has any right to demand future repayment from the debtor[1].


It is envisaged that the creditor may submit a declaration of the waiver of debt, which under the said provision is treated in the light of the law as an offer. The conditions for such an operation are acceptance of the debtor's statement. Regarding the form of this declaration, no regimes are envisaged, however, for the purposes of evidence, it is wise to draw up a written contract. If the statement is accepted by the debtor, this will result in his release from the debt, and thus all collateral for the claim (pledge, mortgage, surety) will expire[2].

Another type of debt cancellation is withdrawal of the summons and waiver of the claim sought. In this case, it is not necessary to obtain the debtor's consent. As a result, such redemption results in revenue for the debtor. Such income (main claim) is taxable[3].

Debt assumption

A separate possibility of freeing oneself from debt is its assumption, which consists in the fact that a third party takes the place of the debtor. The effect of taking over the debt by another person is the expiry of the liabilities incurred towards the current debtor.

The benefit is still ongoing and remains unchanged. The creditor is no longer able to demand anything from his first debtor. It is important that the form of conclusion of the debt assumption contract is in writing, otherwise it will be invalid and will not have any legal effects[4].

Benefits of Debt discharge

Although the discharge of the debt may show that it does not bring any benefit to the creditor, on the contrary, he incurs losses, many ask the question of the sense of such a solution. This is justified when the debtor is on the verge of bankruptcy and the process drags on for years without success. It also exposes the creditor to costs. In such a situation, debt cancellation can be paradoxical, bringing more benefits than maintaining debt enforcement.

Debt cancellation always applies to the amount borrowed as well as interest accrued.

To sum up, the creditor benefits are as follows[5]:

  • no need to incur costs in enforcement proceedings
  • saving time that would be spent on conducting enforcement proceedings
  • possibility of crediting the debt against tax deductible costs


  1. Lewis L., (2018), p. 22
  2. Newton W. G., (2012), p. 4
  3. Sheinfeld M. M., (2018), p. 31-33
  4. Skarbec Q.R., (2014), p. 31
  5. Ysidro E. F., (2019), p. 28 - 29



Author: Monika Sojka