What is a debt forgiveness agreement and when to use it

A debt forgiveness agreement is a legal act where the creditor waives the debtor’s obligation.
If the debtor does not reject it promptly, the debt is considered cancelled.

Common use cases:

• forgiving personal or family loans,

• commercial write-offs of small or uncollectible debts,

• compassionate waivers due to illness or hardship.

Legal framework

Governed by Section 1995 of the Czech Civil Code.
A debt is discharged if:

• the creditor clearly waives it,

• and the debtor does not refuse in due time.

Key elements of a debt forgiveness agreement

• Parties (creditor and debtor)

• Description of the debt

• Statement of forgiveness

• Effective date and space for debtor’s response

• Signatures and date

• Optional clause: full and final waiver

Common mistakes

• No written proof of waiver

• Incomplete description of the debt

• Misunderstanding as a gift (especially for tax purposes)

• Assuming acceptance without legal clarity

• No clause covering all legal consequences

Recommendations

Creditor:

• Put the waiver in writing

• Be clear about whether it’s full or partial forgiveness

Debtor:

• Respond quickly if you don’t agree

• Understand the legal and financial effects

Practice tip

Forgiveness is not charity – it can be a strategic decision.
Always document clearly to protect yourself against future claims or misunderstandings.

Debt forgiveness contract template – available for a symbolic fee

I offer a simple Czech-English debt forgiveness agreement template.

Useful for family loans, business write-offs or private settlements.

Contact me via e-mail or form – fast and legally sound.

FINAL THOUGHTS – WHAT NOW?

A debt forgiveness agreement isn’t just a formality – it’s a legal shield, if drafted properly. And a trap, if not.

Do you want to be sure your contract will hold up even in a crisis? Get in touch and let’s schedule a meeting. I am a specialist on contract law – more information here.