By Jason Bettles
Subrogation is defined as "the substitution of one
claim for another, especially the transfer of the right to receive
to payment of a debt to someone other than the original
creditor"
Almost all readers of this e-Update would know that when a
guarantor pays out all of the debt of the lender that guarantor is
entitled to stand in the shoes of the lender. After payment in full
not only is the guarantor able to claim against the borrower but he
or she is also entitled to whatever security the lender held. All
of this happens by operation of law and needs no separate agreement
to be effective.
But quite regularly we come across situations when a third party
(that is a non guarantor) pays a debt on behalf of another, on the
assumption that by doing so they will automatically qualify to
claim against the original debtor. The true position is that in the
absence of a suitable agreement the payment by a non guarantor
third party gives no automatic right
