Legal Definitions - assigned account

An assigned account refers to a financial right or interest, such as a debt owed, a receivable, or a contractual payment, that has been legally transferred from its original owner (the assignor) to a new owner (the assignee). Once assigned, the assignee gains the legal right to collect, manage, or benefit from that account.

• Example 1: Business Selling Receivables (Factoring)

  Imagine "Tech Innovations Inc.," a software development company, has several clients who owe them money for recently completed projects. These outstanding invoices represent Tech Innovations' accounts receivable. To improve its immediate cash flow, Tech Innovations decides to sell these invoices to a financial firm, "Capital Advance Solutions," at a slight discount.

  In this scenario, Tech Innovations assigns its legal right to collect payment from its clients to Capital Advance Solutions. The outstanding client invoices become assigned accounts for Capital Advance Solutions, which now has the legal authority to collect the payments directly from Tech Innovations' clients.

• Example 2: Loan Collateral

  "Green Energy Projects," a company specializing in solar panel installations, secures a large business loan from "Apex Bank" to fund a new, multi-year government contract. As part of the loan agreement, Green Energy Projects pledges its right to receive future payments from this specific government contract as security for the loan.

  Green Energy Projects legally assigns its interest in the future payments from the government contract to Apex Bank. This means that if Green Energy Projects were to default on its loan, Apex Bank would have the legal right to directly claim those payments from the government. The future payments from the government contract are now assigned accounts, serving as collateral for Apex Bank.

• Example 3: Healthcare Billing (Assignment of Benefits)

  When a patient, Mr. Henderson, receives medical treatment at "City General Hospital," he has health insurance that covers a portion of the costs. Rather than Mr. Henderson paying the full bill and then seeking reimbursement from his insurance company, the hospital prefers to bill the insurer directly.

  Upon admission, Mr. Henderson signs a form that includes an "assignment of benefits" clause. By signing this, he assigns his right to receive payment from his health insurance company for the medical services directly to City General Hospital. The hospital now holds an assigned account, giving it the legal standing to bill and collect payment directly from Mr. Henderson's insurance provider.