What is debt assignment and what happens when a debt is assigned?

Assigning a debt means transferring your legal right to collect to another party. The most common form is placing an account with a collections agency on contingency. The agency gains the right to collect and keeps a percentage of what it recovers. A more permanent form is selling the debt outright to a debt buyer, who pays cents on the dollar and then collects the full amount for their own account. Either way, the original business gives up control of the collection process.

From the debtor's perspective, a debt assignment changes who they hear from but not the underlying obligation. After assignment to a collections agency, the debtor receives communications from the agency rather than the original business. The debt itself (amount, original date) doesn't change. Third-party collectors are subject to the FDCPA, which gives the debtor additional rights they didn't have when dealing directly with the original creditor.

Before assigning a debt, think about the relationship. Once an invoice goes to a third-party agency, that agency communicates with your customer using its own scripts and procedures, which may look very different from how you would handle the situation. For customers with ongoing value, the relationship damage from a third-party collections call can outweigh the recovered balance. First-party collection through your own follow-up process (or an AI-assisted service that identifies as calling on your behalf) preserves the relationship in a way assignment does not.