[Direct answer]This needs to be handled on a case-by-case basis. If the agreement to settle debts by offering property is concluded to repay the original debt and does not extinguish the old debt, it generally constitutes repayment of a new debt. When the property offered in settlement cannot be delivered or the performance fails, the original debt is not automatically extinguished, and the creditor can still request the debtor to perform the original debt. If the parties explicitly agree to replace the original debt with the settlement by offering property and extinguish the old debt, it constitutes debt renewal, and the creditor can generally only claim rights based on the settlement agreement. According to Articles 509 and 557 of the Civil Code of the People's Republic of China (effective from January 1, 2021) and the provisions on the handling of agreements to settle debts by offering property in the "Memorandum on Civil and Commercial Trial Work of the National Courts" (Law [2019] No. 254), the first step is to review the provisions of the agreement and the time of its conclusion, and then determine whether to claim the original debt or the settlement agreement.

1. Problem background and typical scenarios

The practice of using assets to offset debts is widespread in private lending, sales, and enforcement settlements: if the debtor cannot repay the money, he/she will use real estate, vehicles, or goods as a discounted compensation, and the two parties will sign a debt offset agreement. Although it seems that the matter is settled, it actually leads to frequent disputes — the transferred house cannot be registered, the car is mortgaged, and the goods cannot be delivered. Whether the creditor can retain the original creditor's rights in the agreement depends on the nature of the agreement and its contractual provisions.

II. Key points of dispute

First, whether the agreement to offset debts with property is a "new debt repayment" or a "debt renewal" directly determines whether the original debt is extinguished. Second, the legal consequences differ depending on whether the agreement is signed before or after the expiration of the debt performance period. Third, when the property used to offset debts has rights defects or cannot be transferred, how should the creditor choose to claim the original debt or pursue breach of contract liability? Fourth, whether the price of offsetting debts with property deviates significantly from the market and whether it may be revoked by other creditors. Fifth, the differences in the legal effect between settlements reached in enforcement proceedings and settlements made outside litigation for offsetting debts with property.

III. Professional analysis by Henglue Law Firm

To determine the consequences of default in performance, the first step is to characterize the agreement on settling debts with property. If the parties do not intend to extinguish the original debt but merely agree to substitute other payments for repayment, it constitutes a new debt settlement. In this case, if the debtor fails to deliver the property used for debt settlement, the original debt will not be extinguished, and the creditor may still seek repayment of the original debt. If the agreement explicitly stipulates that the debtor's obligation will be replaced by the delivery of the property and the original debt will be extinguished, it constitutes a debt renewal, and the creditor can generally only claim rights based on the debt settlement agreement. When handling such cases, Henglue Lawyers usually first review the wording of the agreement, the time of its conclusion, and whether there are expressions such as "extinguishing the debt", before determining the litigation strategy. The second step is to examine the ownership status of the property used for debt settlement: whether the real estate has been registered and transferred, whether the vehicle is mortgaged, or whether the goods exist. These factors will affect the claim for continued performance or breach of contract liability. If the subject matter cannot be delivered due to reasons attributable to the debtor, the creditor may claim alternative performance, compensation for losses, or rescission of the agreement and request restoration of the original debt. The third step focuses on procedural coordination: if the debt settlement with property occurs during the enforcement phase, it must be confirmed by the enforcement court and a written enforcement ruling must be issued. Private debt settlements cannot be used to resist other creditors' claims, and "debt settlement with property" that has not undergone a disposal procedure may be deemed as evading enforcement. Additionally, if the price of the property used for debt settlement is significantly lower than the market price or harms the interests of other creditors, the relevant creditors may also claim rescission. If the subject matter has been sealed up, the debt settlement may be more likely to be obstructed. In summary, the determination of whether to claim the original debt or the debt settlement agreement depends on the parties' true intent. If the agreement is unclear, it should be comprehensively determined based on the negotiation process and performance.

IV. Practical Suggestions and Legal Basis

Action List: 1. Review whether the debt settlement agreement contains a clear stipulation to extinguish the original debt, and determine the nature of the new debt repayment or debt renewal. 2. Verify the ownership of the debt settlement assets, their mortgage and seizure status, and assess whether they can be smoothly transferred. 3. If the debtor is unable to perform the obligation and the failure is attributable to the debtor, promptly claim alternative performance, compensation for losses, or restoration of the original debt. 4. For cases involving enforcement settlements, it is essential to obtain confirmation from the enforcement court to avoid the debt settlement being disqualified. 5. If the debt settlement price is abnormal and may harm other creditors, assess the risk of revocation and preserve evidence. Main legal basis: Articles 509, 557, and 577 of the Civil Code of the People's Republic of China (effective from January 1, 2021); Provisions on debt settlement agreements in the "Minutes of the National Court Civil and Commercial Trial Work Conference" (Law [2019] No. 254); Specific applications shall be subject to the currently effective laws, regulations, and judicial rulings.

5. Henglue Law Firm's Reminder

There are three key points to settling debts with property: first, defining the nature of the agreement; second, ensuring that the new debt repays the original debt without extinguishing it, and updating the debt to eliminate the old debt; third, checking whether the ownership of the property used to settle the debt can be transferred. During the execution stage, the settlement of the debt must be confirmed by the court. For matters involving creditor's rights, debts, and enforcement, you can consult the following channels:Creditor's rights and debts, and enforcementThe service can provide a comprehensive solution, which includes the transfer of real estate ownership and the verification of property rightsProperty sales and construction projectsFor reference, please refer to the section on the nature and validity of contracts.Business and contract disputes in enterprisesThe column provides consultation services related to corporate and compliance risk managementIntellectual property and corporate lawFor teams involved in the disposal of family assets, please feel free to consult usDivorce and family disputesFor any questions or difficulties, please contact us via the column's contact information.Special servicesTeam.

VI. Frequently Asked Questions

Q1: If the house used to settle a debt cannot be transferred, does the original debt still exist?

It depends on the nature of the agreement. If it is a settlement of new debts, the original debt will not be extinguished, and the creditor can still demand repayment of the original debt. If it is a debt update, the creditor can only claim based on the debt settlement agreement. In this case, the creditor can request alternative performance or compensation for losses.

Q2: What evidence do I need to prepare for this type of lawsuit?

It is necessary to prepare the original creditor's voucher, the agreement on offsetting the debt, the negotiation records, as well as the ownership of the offsetting assets and the materials of mortgage and seizure inquiry, in order to prove the agreement and the obstacles to its performance.

Q3: Are the litigation fees for disputes over debt settlement by goods high?

It is charged according to the standard for property cases and is related to the amount of the disputed subject matter. If the claim is for the restoration of the original debt, the amount of the original creditor's claim is usually used as the basis for calculation, and the specific amount shall be subject to the court's approval.

Q4: How long does it usually take to reach a conclusion in such cases?

The first-instance trial applying the ordinary procedure is usually concluded within a few months, but it may be prolonged if there are disputes over the evaluation or the subject matter. In the enforcement stage, the settlement of debts by offsetting must also go through the court's confirmation procedure.

Q5: If the other party uses goods to settle the debt but fails to fulfill their obligations afterwards, what should I do?

First, fix the evidence of the inability to perform the contract and determine the attributability of responsibility, then choose to claim the original debt, request alternative performance, or terminate the agreement. If necessary, apply for property preservation to prevent the collateral from being disposed of again.

This article is written based on the common judicial interpretations in the Beijing area. If the case occurs in other regions, it is recommended to consult local lawyers to verify the regional differences.

If you are facing similar problems, it is recommended that you consult a professional lawyer as soon as possible with the relevant evidence materials to avoid missing the statutory time limit.Legal services for creditor-debtor disputes·Beijing Henglue Law Firm

Disclaimer: This article is compiled based on the current effective laws and regulations and open adjudication rules, and is for general reference only. It does not constitute a formal legal opinion on specific cases. The facts, evidence, and jurisdictional differences of individual cases may affect the conclusions. If a dispute arises, please consult a practicing lawyer in time.