Debt Assumption Agreement Template for Germany

A Debt Assumption Agreement transfers an existing debt obligation from one party to another under German civil law (BGB). When a new party steps in to take over someone else's debt, this contract makes the switch official and binding. Common in corporate restructuring, mergers, and family business transfers, it requires the creditor's explicit consent under §415 BGB.

German courts recognize these agreements as powerful tools for debt restructuring, but they look closely at the new debtor's ability to pay. The original debtor typically gets fully released from their payment obligations, though some agreements keep them as a backup guarantor. Banks and financial institutions often require additional security measures when approving these transfers.

Use a Debt Assumption Agreement when restructuring company debts or transferring business ownership in Germany. This agreement proves especially valuable during corporate mergers, where the acquiring company takes over existing loan obligations, or in family business successions when the next generation assumes company liabilities.

The agreement becomes crucial during real estate transactions where buyers take over existing mortgages, or in group companies reorganizing their internal debt structure. German law (BGB §415) requires these agreements for clean debt transfers, making them essential for protecting all parties' interests and maintaining clear financial responsibilities. Many banks specifically request them during refinancing or when changing borrowers.

• Complete Assumption: Transfers the entire debt obligation to the new debtor, fully releasing the original debtor from liability under German law
• Cumulative Assumption: New debtor joins the debt obligation while the original debtor remains liable as a co-debtor or guarantor
• Conditional Assumption: Transfer becomes effective only when specific conditions are met, like obtaining bank approval or reaching performance targets
• Partial Assumption: Covers only a portion of the total debt, commonly used in business divisions or partial asset sales
• Internal Group Assumption: Specialized version for debt transfers between affiliated companies, often with simplified creditor consent requirements

• Original Debtor: The party seeking to transfer their debt obligations, often a business owner selling their company or a corporation restructuring its finances
• New Debtor: The party taking over the debt responsibilities, typically a corporate buyer, successor, or affiliated company within a group
• Creditor: Banks or financial institutions who must explicitly approve the debt transfer under German law before it becomes valid
• Legal Counsel: German attorneys who draft and review the agreement to ensure compliance with BGB requirements
• Financial Advisors: Professionals who assess the new debtor's creditworthiness and structure the transfer terms

• Debt Details: Gather complete information about the original debt, including loan agreements, payment schedules, and current balance
• Party Information: Collect legal names, registration details, and contact information for all involved parties
• Financial Assessment: Document the new debtor's creditworthiness and ability to fulfill the debt obligations
• Creditor Consent: Secure written approval from the creditor as required by §415 BGB
• Transfer Terms: Define specific conditions, timing, and any security arrangements for the debt transfer
• Documentation: Prepare supporting documents like financial statements and corporate resolutions

• Party Identification: Complete legal names and addresses of original debtor, new debtor, and creditor
• Debt Description: Detailed specification of the debt being transferred, including amount, interest rates, and payment terms
• Transfer Terms: Clear statement of debt assumption conditions and effective date under §415 BGB
• Creditor Consent: Explicit written approval from the creditor, as mandated by German law
• Release Provisions: Terms specifying the original debtor's release from obligations
• Governing Law: Clear reference to German law (BGB) as the controlling jurisdiction
• Signatures: Designated spaces for all parties' legally binding signatures and dates

A Debt Assumption Agreement differs significantly from a Debt Settlement Agreement in German law. While both deal with debt obligations, they serve distinct purposes and have different legal effects under the BGB.

• Purpose and Effect: Debt Assumption transfers existing debt obligations to a new debtor, keeping the original terms intact. In contrast, a Debt Settlement modifies or reduces the debt amount, often ending in partial payment as full satisfaction
• Creditor Involvement: Assumption requires explicit creditor approval under §415 BGB before transfer. Settlement typically involves direct negotiation between creditor and existing debtor only
• Original Obligation: Assumption maintains the original debt structure but changes the responsible party. Settlement usually terminates or modifies the original obligation
• Timing: Assumption typically occurs during business transfers or restructuring, while Settlement happens when a debtor cannot meet the original payment terms