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A Debt Assumption Agreement transfers existing debt obligations from one party to another, with the new party taking full responsibility for repaying the loan. These agreements are common in Hong Kong's corporate restructuring, mergers, and property transactions, where buyers often take over sellers' outstanding mortgages or business loans.

Under Hong Kong law, all parties - the original debtor, the new debtor, and the creditor - must consent to this transfer. The agreement needs to clearly outline the debt amount, payment terms, and each party's rights and obligations. Banks and financial institutions typically require additional security or guarantees when approving such transfers.

Consider using a Debt Assumption Agreement when buying a business or property in Hong Kong where taking over existing loans makes more financial sense than arranging new financing. This approach works particularly well for commercial real estate deals where assuming the seller's mortgage can speed up the transaction and reduce fees.

The agreement proves essential during corporate restructuring, when subsidiaries merge, or when parent companies need to take over their subsidiaries' debts. It's also valuable in family business transfers, where the next generation assumes business loans while maintaining existing banking relationships and favorable interest rates.

• Simple Assumption: Basic agreement for straightforward debt transfers between parties, typically used in smaller transactions or family business transfers
• Novation-Style: Comprehensive version that completely releases the original debtor, commonly used in Hong Kong corporate restructurings
• Conditional Assumption: Contains performance triggers or milestone-based transfers, popular in phased business acquisitions
• Secured Assumption: Includes additional collateral or guarantee provisions, required by most Hong Kong banks for large commercial debts
• Multi-Party: Complex version involving multiple debtors or creditors, often used in joint venture restructuring

• Original Debtor: The party transferring their debt obligations, such as a property seller or company being acquired
• New Debtor: The party assuming responsibility for the debt, typically a property buyer or acquiring company
• Creditor: Banks or financial institutions that must approve the debt transfer and may require additional security
• Corporate Lawyers: Draft and review Debt Assumption Agreements to ensure compliance with Hong Kong banking regulations
• Financial Advisors: Guide clients through the debt transfer process and negotiate terms with creditors

• Debt Details: Gather complete loan documentation, including current balance, interest rates, and payment schedules
• Party Information: Collect registration details and financial statements from both original and new debtors
• Creditor Approval: Secure written consent from the lending institution before drafting begins
• Security Documents: List all existing collateral and prepare new security arrangements if required by Hong Kong banks
• Draft Review: Use our platform to generate a customized agreement that meets Hong Kong legal requirements and banking regulations

• Parties Section: Full legal names and registration details of original debtor, new debtor, and creditor
• Debt Description: Precise details of the assumed debt, including principal amount, interest rates, and payment terms
• Transfer Terms: Clear statement of debt transfer and assumption of obligations under Hong Kong law
• Creditor Consent: Explicit approval from the lending institution for the debt transfer
• Security Provisions: Details of any collateral or guarantees required by the creditor
• Governing Law: Specification that Hong Kong law governs the agreement and its interpretation

A Debt Assumption Agreement differs significantly from a Debt Settlement Agreement in both purpose and effect. While both deal with debt obligations, they serve distinct functions in Hong Kong's financial landscape.

• Primary Purpose: Debt Assumption transfers existing debt obligations to a new party, keeping the original terms intact. Debt Settlement reduces or resolves the debt amount through negotiated payment terms
• Creditor Role: In assumption agreements, the creditor must approve the transfer but maintains their original rights. Settlement agreements modify the creditor's rights and often reduce the amount owed
• Legal Effect: Assumption maintains the original debt structure with a new debtor. Settlement typically terminates the original debt obligation once the agreed terms are met
• Common Usage: Assumptions are frequent in business sales and property transfers, while settlements often resolve financial distress situations