What is Acknowledgement of Debt?
Acknowledgement of debt is a document through which the debtor, accepts their debt towards the creditor. It must comply with certain conditions that are mentioned below-
- The written document must be signed and dated by the debtor.
- The acknowledgement of debt must mention the identity of the debtor as well as that of the creditor. This means the full name; date of birth and other details of the debtor and the creditor must be mentioned in the document.
- The amount of debt must be mentioned in the document in the figure as well as words. In case, there is a difference in the figure and words, then the amount mentioned in words will be considered.
The acknowledgment of debt can also mention the payment terms, due date, and interest rate if applicable.
You may want to know: Overview And Necessity Of A Declaration Of Debt In UAE
Format of acknowledgement of debt-
The format of the acknowledgement of debt can be as a notarized or private deed.
Why acknowledgement of debt is necessary?
Debt acknowledgement through the drafting and signing of the acknowledgement is important in the UAE. It helps the debtor in holding legal proof of a debtor accepting liability before the expiration date. It is a document that is issued to confirm that the debtor owes a certain amount to the creditor and it has to be paid within a specified period of time at the pre-discussed rate of interest. The acknowledgement letter of debt has to be notarized by the public notary in Dubai for it to be validated for use in the UAE.
It is generally advised that a lawyer must be appointed for drafting the acknowledgement letter for debt. This is because they are having the knowledge and are professionals in this field. They will simplify the process for you and you will be in safe hands when it comes to declaring your dues to someone. Writing this legal document may not seem to be very difficult but it must include all sorts of technical details. Some jargon or terms specific to a situation may have to be included in the deed, which may be linked to the local legalization processes.
Since the acknowledgement of declaration is a formal document, it must be error-free. All relevant information that must be there in the document have been listed below-
- Debtor’s full name (with the latest address)
- Creditor’s full name and details
- The amount that the debtor owes to the creditor
- A statement specifying the agreed terms and conditions of the payment of the debt by the debtor to the creditor
- The applicable interest rate
- Reference number if any of the transaction
- Creditor’s bank account details, if needed
- Terms and conditions of debt
- Consequences of failure if the said terms and conditions are not complied to
- Signature of the involved parties
The tone of the acknowledgment of debts should be formal and professional. Every detail regarding the due should be mentioned on the document. In case there is any concern regarding the debt, that should also be mentioned on the document.
Difference between promissory note and acknowledgement of debt
The promissory note is a legal document issued by a debtor to its creditor. The terms and conditions mentioned on the promissory note are negotiable. One party can change the terms and conditions and these changes are not objectionable by the creditor. It serves a different purpose though it may seem to be similar to that of a promissory note.
Situations where acknowledgement of debts are needed-
An acknowledgement of debts notarized by the notary public Dubai is supposed to be presented in the following situation-
- When a company or business has an account with some other service provider.
- When a debtor is not in a position to pay the dues, becomes financially unstable to pay the debt
- If the debtor is under the defaulter’s category, or have paid their dues mostly late
- When the creditor doesn’t want any confusion in terms of the terms and conditions of the payment in the future
- If the debtor fails to make the payment on the earlier agreed date of payment (in this case the acknowledgement letter of the debts will help in stating the amount, terms and conditions and rate of interest of the debt)
The debt acknowledgement letter can be signed by two or more debtors. It’s illegal to force someone to sign the debt acknowledgement letter in the UAE. in that case, therefore, it is best to approach the Notary public Dubai for getting all the formalities of this document in place. They also ensure that the document is not being signed under any pressure or any threat.