To write a debt cancellation agreement, state that the lender intends to release the borrower from debt, and include the names of all related parties, including the lender, borrower and witnesses, according to LegalMatch. Mention the specific amount the debtor owes and the amount the lender agrees to forgive.
State the date of lending the money and the date when the cancellation takes effect, LegalMatch instructs. Have all involved parties sign the document, and write the date of signing. After drafting the agreement in writing, have a lawyer review the contract to ensure it complies with the law and contains accurate information.
The debt cancellation agreement is legally binding once the lender and borrower sign the document, notes LegalMatch. The lender cannot oblige the debtor to pay any debts that have been cancelled through the contract. The debtor may present the debt cancellation agreement as evidence in court proceedings if the lender attempts to pursue his debts.
Debt cancellation, also called discharge of indebtedness, occurs when money is owed, explains LegalMatch. A debt cancellation agreement becomes helpful when typical options, such as filing for bankruptcy, do not allow for immediate release from debt. It is essential to consult a lawyer when writing a debt cancellation agreement; the contract should meet particular requirements mandated by state laws to be valid.