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Debt Cancellation Agreement for the United Kingdom

Debt Cancellation Agreement Template for England and Wales

A Debt Cancellation Agreement is a legally binding document under English and Welsh law that formally terminates and releases a debt obligation between parties. The agreement documents the creditor's intention to cancel the debt, releases the debtor from future payment obligations, and includes provisions to protect both parties' interests. It can be used for both consumer and commercial debts, ensuring compliance with relevant legislation including the Consumer Credit Act 1974 and the Limitation Act 1980.

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Debt Cancellation Agreement

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What is a Debt Cancellation Agreement?

The Debt Cancellation Agreement Template is essential when parties wish to formally terminate a debt obligation under English and Welsh law. It's commonly used in situations where a creditor agrees to forgive a debt, whether fully or partially, often as part of a settlement negotiation or financial restructuring. The agreement should clearly identify the original debt, specify the terms of cancellation, and include appropriate releases and warranties. It must comply with relevant legislation, including the Law of Property Act 1925 and the Insolvency Act 1986, particularly regarding preferences in case of subsequent bankruptcy.

What sections should be included in a Debt Cancellation Agreement?

1. Parties: Identifies and defines the creditor and debtor

2. Background: Details of the original debt and circumstances leading to cancellation

3. Definitions: Defines key terms used throughout the agreement

4. Debt Details: Specific information about the debt being cancelled

5. Cancellation Terms: Clear statement of debt cancellation and its conditions

6. Release: Mutual release of claims related to the cancelled debt

7. Governing Law: Specifies applicable law and jurisdiction

What sections are optional to include in a Debt Cancellation Agreement?

1. Partial Payment Terms: Used when debt cancellation is conditional on partial payment

2. Confidentiality: Provisions regarding confidentiality of the agreement

3. Tax Provisions: Addresses tax implications of debt cancellation

4. Installment Provisions: Details any remaining payment schedule

What schedules should be included in a Debt Cancellation Agreement?

1. Original Debt Documentation: Copies of original loan agreements or debt instruments

2. Payment History: Record of payments made and outstanding balance

3. Security Release Documents: Documents releasing any security held against the debt

Authors

Alex Denne

Head of Growth (Open Source Law) @ ¶¶Òõ¶ÌÊÓÆµ | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

England and Wales

Document Type

Cancellation Letter

Sector

Sales

Cost

Free to use
Relevant legal definitions



















Clauses



















Industries

Law of Property Act 1925: Primary legislation governing formal requirements for releasing interests in property and debt under English law

Limitation Act 1980: Legislation concerning time limits for bringing claims related to debt, ensuring the debt being cancelled isn't already statute-barred

Consumer Credit Act 1974: Regulations regarding consumer debt and requirements for cancellation of regulated credit agreements, applicable if the debt involves consumer credit

Insolvency Act 1986: Legislation ensuring the cancellation doesn't constitute a preference if either party is near insolvency, and rules regarding debt write-offs in relation to bankruptcy

Doctrine of Consideration: Common law principle ensuring the agreement is legally binding and addressing any nominal consideration requirements

Deed Execution Rules: Common law and statutory rules regarding the proper execution of deeds, which may be relevant if the agreement is to be executed as a deed

Income Tax Legislation: Tax regulations as debt cancellation might be treated as income for tax purposes

Value Added Tax (VAT) Legislation: Tax considerations if the original debt was related to business transactions subject to VAT

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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