Acknowledgment of debt: What is it for?

When managing a debt, there are a series of key factors that must be taken into account in order to achieve recovery. Not only should a prior analysis of the debt be conducted, but there must also be an initial contact with the debtor, an agreement (or disagreement)... And among these elements is the acknowledgment of debt by the debtor.

The acknowledgment of debt is a useful legal tool in situations where a person or entity acknowledges that they owe a sum of money to the other party. To highlight its importance in case of debt, we have prepared this comprehensive guide that not only explains what it is, but also its purpose for investors.

What is an acknowledgment of debt?

An acknowledgment of debt is a legal document through which a person or company confirms that they have an outstanding debt with another party. Unlike other documents, such as loan agreements or promissory notes, this act does not necessarily involve the transfer of money at the time of signing, although it serves as proof of an already existing debt.

With this document, the debtor, who is the signatory, acknowledges the existence of a debt with a specific creditor. By doing so, they affirm that the debt is enforceable, expressing as a debtor their intention to pay it and their commitment to settle it. However, it should be understood that this is not a document that implies payment at the time of signing, or even that payment will be immediate.

What is the purpose of an acknowledgment of debt?

It should be clarified that this document will only bear the debtor's signature and does not constitute a contract between both parties nor does it establish reciprocal obligations. This means that, once the debt is settled, the document, along with the obligation derived from it, is extinguished.

At the same time, it should be noted that, once the debtor signs the document, they cannot later oppose it, except in very specific circumstances. Therefore, the acknowledgment of debt serves to:

• Legal security - The primary objective of the acknowledgment of debt is to offer legal security to both the debtor and the creditor. For the creditor, it ensures that the debt is formally recognized, while for the debtor, it establishes clear terms of the obligation, avoiding potential misunderstandings.
• Avoid legal conflicts - By clearly and precisely establishing the details of the debt (such as the amount, deadlines, payment terms...), the chances of future conflicts are reduced. Both parties have a document that can be used as evidence in case a dispute arises over payment.
• Facilitate collection processes - If the debtor fails to meet their payment obligation, the acknowledgment of debt can be used in a judicial process to claim the owed amount. As a legally binding document, it speeds up collection procedures, avoiding the need to prove the existence of the debt.

When is an acknowledgment of debt necessary?

The acknowledgment of debt is useful in various situations, such as:

• Personal loans - When someone lends money without intermediaries, it is advisable to use this document to ensure the payment commitment.
• Business agreements - In relationships between companies, it is common to resort to this type of acknowledgment to formalize debts between suppliers or clients.
• Non-payments - If a client has not paid for services or products, the acknowledgment of debt can serve to establish an agreement on the pending payment.

Key elements of an acknowledgment of debt document

For an acknowledgment of debt to be valid, it must include a series of essential elements:

• Identification of the parties - The document must clearly specify who the debtor and the creditor are. It is essential to include the personal information of both parties (full name, ID or tax ID number, address, among others).
• Debt amount and payment deadlines - It is crucial that the document details the exact amount of the debt and establishes the payment deadlines. It may include a payment schedule or a single due date, depending on the agreement between the parties.
• Payment terms - Payment terms should be defined, including aspects such as the method of payment (bank transfer, check…), as well as what would happen if the debtor defaults (penalties, late interest…).

To properly prepare such a document, it is best to seek help, especially from a specialist in the matter. In this case, on platforms like Inversa, you will have the assistance of an advisor who will guide you through the process and, of course, ensure that you obtain the maximum protection for your investment.

What happens if the acknowledgment of debt is not fulfilled?

If the debtor does not comply with what was agreed upon in the acknowledgment of debt, the creditor has the right to initiate a judicial claim process. This process can lead to garnishments as well as other measures to recover the owed amount.

When taking the matter to court, this document acts as solid evidence before the court and can even speed up the judicial process.

Is it advisable to use an acknowledgment of debt?

The acknowledgment of debt is a very useful tool to formalize and provide legal security for an existing debt. Whether in a personal or business context, this document prevents misunderstandings and facilitates collection in the event of default. On platforms like Inversa, we ensure that, when financing companies, you have all the necessary protection to guarantee the safety of your investment.

Therefore, considering the points mentioned above, it is advisable to use an acknowledgment of debt, especially when a significant amount of money is involved, as it can save you problems in the future.